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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of our income (loss) before income taxes were as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  |
United States | $ | 17,707 |  |  | $ | (31,972) |  |  |
Foreign | 1,605 |  |  | 1,377 |  |  |
Income (loss) before income taxes | $ | 19,312 |  |  | $ | (30,595) |  |  |
The federal, state and foreign income tax provision (benefit) is summarized as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  |
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  |
State | (177) |  |  | 68 |  |  |
Foreign | 254 |  |  | 221 |  |  |
Total current | 77 |  |  | 289 |  |  |
Deferred: |  |  |  |  |
Federal | 7,573 |  |  | (2,164) |  |  |
State | 1,605 |  |  | (506) |  |  |
Foreign | — |  |  | — |  |  |
Total deferred | 9,178 |  |  | (2,670) |  |  |
Provision for (benefit from) income taxes | $ | 9,255 |  |  | $ | (2,381) |  |  |
The effective tax rate of our provision for (benefit from) income taxes differs from the federal statutory rate as follows:
| Year Ended December 31,
| 2024 |  | 2023 |  |
Statutory rate | 21.0 | % |  | 21.0 | % |  |
State income taxes, net of federal benefit | 4.4 |  |  | 2.8 |  |  |
Stock-based compensation shortfalls, net | 11.0 |  |  | (6.8) |  |  |
Non-deductible stock-based compensation | 7.4 |  |  | (4.7) |  |  |
Non-deductible lobbying expenses | 1.4 |  |  | (0.9) |  |  |
Research and development credits | (3.3) |  |  | 1.7 |  |  |
Changes in valuation allowance | 1.6 |  |  | (2.0) |  |  |
Foreign income tax and income inclusion | 0.8 |  |  | (1.5) |  |  |
Prior period adjustment | 3.4 |  |  | — |  |  |
Other permanent differences | 0.2 |  |  | (1.8) |  |  |
Effective tax rate | 47.9 | % |  | 7.8 | % |  |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, together with operating losses and tax credit carryforwards. The tax effects of significant items comprising our deferred taxes as of December 31, 2024 and 2023 were as follows (in thousands):
| December 31, 2024 |  | December 31, 2023
Deferred tax assets: |  |  |
Net operating losses | $ | 160,610 |  |  | $ | 154,607 |
Intangible assets | 25,242 |  |  | 21,232 |
Research and development credits carryovers | 13,466 |  |  | 12,493 |
Operating lease liabilities | 6,912 |  |  | 8,458 |
Accruals and reserves | 6,442 |  |  | 6,352 |
Fixed assets | 982 |  |  | 1,069 |
Stock-based compensation | 759 |  |  | 1,283 |
Other | 2,809 |  |  | 2,279 |
Total deferred tax assets | 217,222 |  |  | 207,773 |
Valuation allowance | (5,206) |  |  | (4,888) |
Total deferred tax assets net of valuation allowance | 212,016 |  |  | 202,885 |
Deferred tax liabilities: |  |  |
Commissions receivable | (248,038) |  |  | (227,242) |
Right-of-use assets | (2,848) |  |  | (5,330) |
Total deferred tax liabilities | (250,886) |  |  | (232,572) |
Net deferred tax liabilities | $ | (38,870) |  |  | $ | (29,687) |
Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. As of December 31, 2024, a valuation allowance of $5.2 million was recorded against California net deferred tax assets. The valuation allowance was recorded as a result of increased uncertainty regarding our future taxable income and a lack of sources of other taxable income to realize our net deferred tax assets in California. The remaining deferred tax assets are supported by the reversal of deferred tax liabilities. The change in our valuation allowance is summarized as follows for the years ended (in thousands):
Deferred Tax Assets - Valuation Allowance |  | Balance at beginning of year |  | Provision for income taxes |  | Write-offs and Deductions |  | Balance at end of year
December 31, 2024 |  | $ | 4,888 |  |  | $ | 361 |  |  | $ | (43) |  |  | $ | 5,206 |
December 31, 2023 |  | 4,287 |  |  | 643 |  |  | (42) |  |  | 4,888 |
The net operating loss and tax credit carryforwards as of December 31, 2024 are summarized as follows (in thousands):
|  | Amount |  | Expires
Net operating losses, federal (with expiration) |  | $ | 39,166 |  |  | 2034-2037
Net operating losses, federal (without expiration) |  | 608,904 |  |  | Indefinite
Net operating losses, state (with expiration) |  | 433,374 |  |  | 2025-2044
Tax credits, federal |  | 12,346 |  |  | 2025-2044
Tax credits, state |  | 12,854 |  |  | n/a
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code and similar state provisions. These ownership change limitations may limit the amount of net operating loss carryforwards and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  |
Beginning balance | $ | 10,639 |  |  | $ | 9,875 |  |  |
Reductions for tax positions of prior years | (363) |  |  | — |  |  |
Lapse of statute of limitations | (91) |  |  | (36) |  |  |
Additions based on tax positions related to the current year | 948 |  |  | 800 |  |  |
Ending balance | $ | 11,133 |  |  | $ | 10,639 |  |  |
As of December 31, 2024, the total amount of gross unrecognized tax benefits was $11.1 million, of which $9.8 million, if recognized, would affect our effective tax rate. As of December 31, 2023, the total amount of gross unrecognized tax benefits was $10.6 million, of which $9.4 million, if recognized, would affect our effective tax rate. We record interest and penalties related to unrecognized tax benefits in benefit from income taxes. As of December 31, 2024, the amount accrued for estimated interest related to uncertain tax positions was immaterial. We did not record an accrual for penalties. As of December 31, 2024, we had an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions and income tax exams will close within the next 12 months. We are subject to taxation in various jurisdictions, including federal, state and foreign. Our federal and state income tax returns are generally not subject to examination by taxing authorities for fiscal years before 2005 due to our credit carryforwards.

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