Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income tax provision included the following components:

	Year Ended December 31,
(in thousands)	2022		2021		2020
Domestic	$	504,797	$	460,395	$	465,382
Foreign	70,518		54,959		28,543
Total	$	575,315	$	515,354	$	493,925

The provision for income taxes was composed of the following:

	Year Ended December 31,
(in thousands)	2022		2021		2020
Current:
Federal	$	103,007	$	44,805	$	26,855
State	11,286		6,626		12,738
Foreign	68,028		43,786		51,377
Deferred:
Federal	(94,398)		(32,449)		(12,203)
State	(9,647)		(1,691)		(2,119)
Foreign	(26,671)		(350)		(16,610)
Total	$	51,605	$	60,727	$	60,038

The reconciliation of the U.S. federal statutory tax rate to the consolidated effective tax rate was as follows:

	Year Ended December 31,
	2022		2021		2020
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
Nondeductible expenses	2.3		2.8		0.7
State income taxes, net of federal benefit	0.9		0.6		1.6
Foreign rate differential	—		(0.1)		0.4
Stock-based compensation	(1.5)		(5.4)		(3.6)
U.S. federal tax (benefit) expense on foreign earnings	(2.4)		0.4		(1.7)
Benefit from tax planning and entity structuring activities	(2.5)		(0.8)		(1.5)
Research and development credits	(3.2)		(3.1)		(3.2)
Foreign-derived intangible income deduction	(5.7)		(4.0)		(2.8)
Other	0.1		0.4		1.3
	9.0	%	11.8	%	12.2	%

The components of deferred tax assets and liabilities are as follows:

	December 31,
(in thousands)	2022		2021
Deferred tax assets:
Research and experimentation capitalization	$	85,677	$	—
Uncertain tax positions	41,569		35,574
Net operating loss carryforwards	39,034		47,235
Operating lease liabilities	31,726		30,634
Debt obligation basis difference	28,758		—
Stock-based compensation	27,548		25,578
Employee benefits	13,343		12,902
Research and development credits	5,390		5,393
Allowance for doubtful accounts	4,376		3,522
Other	2,638		1,926
Valuation allowance	(17,336)		(14,936)
Total deferred tax assets	262,723		147,828
Deferred tax liabilities:
Other intangible assets	(192,018)		(173,895)
Operating lease right-of-use assets	(30,308)		(29,296)
Deferred revenue	(8,979)		(19,521)
Property and equipment	(5,029)		(5,785)
Total deferred tax liabilities	(236,334)		(228,497)
Net deferred tax assets (liabilities)	$	26,389	$	(80,669)

The net increase in the valuation allowance was primarily due to $3.2 million net increases in unrealizable tax assets, partially offset by $0.8 million of currency fluctuations on balances relating to foreign jurisdictions. As of each reporting date, management considers new evidence, both positive and negative, that could affect the future realization of deferred tax assets. If management determines it is more likely than not that an asset, or a portion of an asset, will not be realized, a valuation allowance is recorded.

As of December 31, 2022, we had federal net operating loss carryforwards of $15.9 million, which are subject to limitations of their utilization. Losses totaling $15.1 million are not currently subject to expiration dates, while the remaining $0.8 million of losses expire between 2028 - 2037. Deferred tax assets of $1.9 million have been recorded for state operating loss carryforwards. These losses expire between 2031 - 2043, and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of $144.4 million, of which $104.6 million are not currently subject to expiration dates. The remainder, $39.8 million, expires between 2025 - 2038. We had tax credit carryforwards of $7.1 million, of which $0.5 million are not currently subject to expiration dates and $6.6 million expire in various years between 2023 - 2042. Of these tax credit carryforwards, $1.0 million are subject to limitations on their utilization.

In general, it is our intention to permanently reinvest all earnings in excess of previously taxed amounts. Substantially all of the pre-2018 earnings of our non-U.S. subsidiaries were taxed through the transition tax and post-2018 current earnings are taxed as part of global intangible low-taxed income tax expense. These taxes increase our previously taxed earnings and allow for the repatriation of the majority of our foreign earnings without any residual U.S. federal tax. Unrecognized provisions for taxes on indefinitely reinvested undistributed earnings of foreign subsidiaries would not be significant.

The following is a reconciliation of the total amounts of unrecognized tax benefits:

	Year Ended December 31,
(in thousands)	2022		2021		2020
Unrecognized tax benefit as of January 1	$	39,641	$	24,075	$	49,085
Gross changes—acquisitions	—		—		(24,963)
Gross increases—tax positions in prior period	403		10,183		1,572
Gross decreases—tax positions in prior period	(2,780)		(2,281)		—
Gross increases—tax positions in current period	13,905		13,223		1,281
Reductions due to a lapse of the applicable statute of limitations	(3,743)		(3,226)		(3,502)
Changes due to currency fluctuation	(1,654)		(912)		994
Settlements	—		(1,421)		(392)
Unrecognized tax benefit as of December 31	$	45,772	$	39,641	$	24,075

We believe that it is reasonably possible that $3.5 million of uncertain tax positions included in the table above may be resolved within the next twelve months as a result of settlement with a taxing authority or a lapse of the statute of limitations. If the unrecognized tax benefit as of December 31, 2022 were to be recognized, a benefit of $15.1 million would impact the effective tax rate.

We recognize interest and penalties related to income taxes as income tax expense. We recorded penalty expense of $0.7 million, $1.8 million and $0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. We recorded interest expense of $0.1 million for the year ended December 31, 2022, interest income of $0.2 million for the year ended December 31, 2021 and interest expense of $0.3 million for the year ended December 31, 2020. As of December 31, 2022, we accrued a liability for penalties of $7.9 million and interest of $3.0 million. As of December 31, 2021, we accrued a liability for penalties of $7.2 million and interest of $5.2 million.

We are subject to taxation in the United States and various states and foreign jurisdictions. In the United States, our only major tax jurisdiction, the 2017 - 2022 tax years are open to examination by the Internal Revenue Service.