XML 44 R25.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income or (loss) from continuing operations before income taxes are as follows:
Year Ended December 31,
202220212020
Domestic$(32,138)$(49,337)$(43,457)
Foreign26,281 19,062 5,991 
Total$(5,857)$(30,275)$(37,466)
The components of income tax (expense) benefit from continuing operations are as follows:
Year Ended December 31,
202220212020
Current:
Federal$(1,611)$6,852 $30,365 
State(108)(78)56 
Foreign(232)(1,257)(3,643)
Deferred:
Federal(30)9 262 
State126 (70)(229)
Foreign(4)1,721 297 
Income tax (provision) benefit$(1,859)$7,177 $27,108 
The Company recognized approximately $1.9 million in related income tax expense and $7.2 million in related income tax benefit during the years ended December 31, 2022 and 2021, respectively. The effective tax rate was approximately (31.7)% for the year ended December 31, 2022, which was lower than the U.S. federal statutory rate primarily due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign jurisdictions and the impact of the U.S. capitalization of research expenses effective January 1, 2022, and the divestiture of the DXP and Activation assets during the second quarter. This decrease was partially offset by loss jurisdictions where full valuation allowances have been recorded and foreign income tax credits generated in the period. The Company’s effective tax rate was approximately 23.7% for the year ended December 31, 2021, which was higher than the U.S. statutory rate primarily due to the benefit of the CARES Act provision allowing for a 5 year carryback of Net Operating Losses arising in 2018, 2019 and 2020, offset by certain unfavorable permanent book-tax differences.
Reconciliations of the statutory tax rates and the effective tax rates from continuing operations for the years ended December 31, 2022, 2021 and 2020 are as follows:
Year Ended December 31,
202220212020
Statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit0.7 %(0.4)%(0.5)%
Effect of rates different than statutory12.3 %2.3 %(2.1)%
Minority interest0.7 %(0.1)%0.2 %
Non-deductible bad debt adjustment— %— %(2.9)%
Stock based compensation(16.8)%(5.1)%(6.1)%
Foreign basis differences18.5 %6.3 %9.8 %
Regulatory matters— %(8.7)%— %
Other permanent adjustments(5.3)%(2.5)%(0.9)%
Federal and foreign tax credits27.7 %0.9 %6.5 %
Change in valuation allowance73.6 %7.7 %(3.2)%
Uncertain tax positions(2.6)%(4.3)%(0.7)%
Other(0.1)%(0.3)%1.1 %
Divestiture of assets(20.4)%— %— %
Global intangible low-taxed income(153.1)%(8.5)%3.9 %
Base Erosion Anti-Abuse Tax and related elections— %— %0.9 %
NOL carryback and other refund claims— %15.4 %45.4 %
Deferred tax adjustments2.5 %— %— %
Return to provision9.6 %— %— %
Effective tax rate(31.7)%23.7 %72.4 %
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
As of December 31,
20222021
Deferred tax assets:
Accrued liabilities$935 $1,290 
Deferred revenue824 3,057 
Bad debts reserve2,219 2,270 
Deferred compensation5,714 6,236 
Federal net operating loss carry forwards5,324 13,419 
State net operating loss carry forwards8,777 9,332 
Foreign net operating loss carry forwards8,045 9,001 
Lease obligations6,696 8,262 
Capital loss carry forwards5,449 6,120 
Intangible assets3,527 6,100 
Basis difference 6,454 6,268 
Credits8,227 9,720 
Fixed assets797 1,281 
Interest limitation26 1,232 
Capitalization of research expenses12,155 — 
Other235 97 
Total deferred tax assets$75,404 $83,685 
Deferred tax liabilities:
Basis difference $(2,880)$(2,621)
Depreciation and amortization(709)(2,109)
Prepaids(466)(604)
Lease assets(3,647)(4,978)
Other(497)(492)
Total deferred tax liabilities(8,199)(10,804)
Less: valuation allowance(67,671)(73,441)
Net deferred income tax (liabilities) assets $(466)$(560)
As of December 31, 2022, the Company has federal and state income tax net operating loss (“NOL”) carryforwards of $25.4 million and $148.5 million, respectively, including NOL carryforwards which will expire at various dates from 2025 through 2041, and NOL carryforwards which do not expire. The Company also has foreign NOL carryforwards in various jurisdictions of $54.5 million that have various carryforward periods. Such NOL carryforwards expire as follows:
YearNOL carryforward
2023$— 
2024— 
2025 - 2041178,993 
Indefinite49,369 
Total$228,362 
As of December 31, 2022, the Company has federal and state income tax credit carryforwards of $6.6 million and $1.5 million, respectively, including credits which will expire at various dates from 2024 through 2039 and credits which do not expire. The Company also has foreign income tax credit carryforwards of $0.5 million which do not expire.

In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results and incorporates assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax-planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying businesses.

The foreign NOL carryforwards in the income tax returns filed included unrecognized tax benefits taken in prior years. The NOLs for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740 are presented net of these unrecognized tax benefits.

The Company continues to evaluate the ability to realize all of its net deferred tax assets at each reporting date and records a benefit for deferred tax assets to the extent it has deferred tax liabilities that provide a source of income to benefit the deferred tax asset. As a result of this analysis, the Company recorded a valuation allowance against the net deferred tax assets of certain foreign jurisdictions as the realization of these assets is not more likely than not, given uncertainty of future earnings in these jurisdictions. The valuation allowance decreased by $5.8 million and by $1.5 million during the years ended December 31, 2022 and December 31, 2021, respectively. The decrease in tax year ended December 31, 2022 is primarily related to a decrease in deferred tax assets including deferred revenue, intangibles and net operating loss, interest expense and tax credit carryforwards, net of capitalization of research expenditures. This decrease was partially offset by a decrease in deferred tax liabilities primarily associated with intangible assets during the period. The decrease in tax year ended December 31, 2021 is primarily related to a decrease in deferred tax assets including deferred revenue, partially offset by a decrease in deferred tax liabilities primarily associated with intangible assets during the period.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2022, the Company’s tax years for 2018 through 2022 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2022, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2017. Additionally, to the extent we utilize our NOL carryforwards in the future, the tax years in which the attribute was generated may still be adjusted upon examination by the tax authorities in the future period when the attribute is utilized.

During 2021 the Internal Revenue Service commenced an audit of certain of the Company’s prior year U.S. federal income tax filings, including the 2013 through 2020 tax years. The audit is currently ongoing and the receipt of the associated refunds would materially improve the Company’s financial position. Due to the ongoing audit, U.S. federal tax returns for years 2013–2020 remain subject to future examination by the tax authorities.

The Company received $4.3 million in federal tax refunds in the second quarter of 2022. There is no change to the Company’s position on the remaining tax refunds.

In 2017, the TCJA included a transition tax based on undistributed, untaxed foreign earnings analyzed in aggregate. The final analysis performed by the Company resulted in an overall untaxed deficit and no transition tax. In addition, no income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Should the Company decide to repatriate the foreign earnings, it would need to adjust its income tax provision in the period it determined that the earnings will no longer be indefinitely invested outside the United States. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts.

In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses. The CARES Act amends the Net Operating
Loss provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to each of the five taxable years preceding the taxable year of loss.

On March 11, 2021 the American Rescue Plan Act ("ARPA") was signed into law. The legislation was aimed at addressing the continuing economic and health impacts of the COVID-19 pandemic. This legislative relief, along with the previous governmental relief packages provide for numerous changes to current tax law. ARPA does not materially impact the Company’s financial statements.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. This legislation includes significant changes relating to tax, climate change, energy and health care. Among other provisions, the IRA introduces a book minimum tax assessed on financial statement income of certain large corporations and an excise tax on share repurchases. The Company does not anticipate these provisions will have a material impact on our results of operations or financial position, when effective.

A reconciliation of the amounts of unrecognized tax benefits excluding interest, are as follows:
Unrecognized tax benefits
Balance at December 31, 2019$3,269 
Decrease related to lapse of Statute of Limitations(262)
Increases for tax positions of current period276 
Balance at December 31, 20203,283 
Decrease related to lapse of Statute of Limitations(827)
Increase for tax positions of current period2,058 
Balance at December 31, 20214,514 
Decrease related to lapse of Statute of Limitations(1,043)
Increase for tax positions of current period966 
Balance at December 31, 2022$4,437 
Included in the balance of unrecognized tax benefits as of the years ended December 31, 2022 and 2021, are $3.9 million and $3.9 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in interest expense. The liability for unrecognized tax benefits excludes accrued interest of $0.4 million, $0.4 million and $0.3 million, for the years ended December 31, 2022, 2021 and 2020, respectively. The Company believes that it is reasonably possible that approximately $0.6 million of its currently unrecognized tax benefits primarily related to research and development credits and uncertain tax benefits in non-U.S. jurisdictions, which are individually insignificant, may be recognized by the end of 2023 as a result of a lapse of the statute of limitations.