Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

Income before income taxes is categorized geographically as follows:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
United States	$	489,395	$	457,830	$	452,793
Foreign	292,824		292,414		305,983
Total income before income taxes	$	782,219	$	750,244	$	758,776

The provision for income taxes consisted of the following:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Current expense (benefit):
Federal	$	97,420	$	(123,933)	$	74,283
State	32,188		10,522		2,069
Foreign, including withholding tax	29,834		29,152		31,385
	159,442		(84,259)		107,737
Deferred expense (benefit):
Federal	3,906		4,348		30,462
State	(200)		17,388		22,899
Foreign	(165,759)		(2,121)		(14,621)
	(162,053)		19,615		38,740
Total income tax (benefit) expense	$	(2,611)	$	(64,644)	$	146,477

The difference between income tax (benefit) expense and the amount resulting from applying the federal statutory rate of 21% to Income before income taxes is attributable to the following:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Income tax expense at federal statutory rate	$	164,266	$	157,551	$	159,343
State taxes, net of federal benefit	25,527		23,167		20,573
Effect of non-U.S. operations	(23,255)		(27,691)		(25,178)
Intercompany non-U.S. intellectual property transfer	(165,517)		—		—
Remeasurement of unrecognized tax benefits	(5,095)		(204,673)		7,365
Stock-based compensation	1,333		(8,643)		(9,204)
Other	130		(4,355)		(6,422)
Total income tax (benefit) expense	$	(2,611)	$	(64,644)	$	146,477

During the fourth quarter of 2021, as part of a legal entity reorganization, the Company completed an internal transfer of certain of its non-U.S. intellectual property which had no book value. This transfer created amortizable tax basis for the receiving entity based on the $1.20 billion fair value of the intellectual property, which resulted in the recognition of a $165.5 million deferred tax asset and a corresponding income tax benefit. During 2020, the Company recognized an income tax benefit as a result of the remeasurement of certain previously unrecognized income tax benefits. The majority of these income tax benefits related to the worthless stock deduction taken in 2013. These remeasurements were based on written confirmations from the IRS, indicating no examination adjustments would be proposed related to the worthless stock deduction or certain other matters reviewed as part of the audit of the Company’s federal income tax returns for 2010 through 2014, and the lapse of statutes of limitations related to other unrecognized income tax benefits. Notwithstanding these written confirmations, the Company’s U.S. federal income tax returns for those years remain under examination by the IRS. Tax years 2015 and 2016 are closed to IRS audit as the statutes of limitations have lapsed.

The Company qualified for a tax holiday in Switzerland until the end of 2019 which lowered tax rates on certain types of income and required certain thresholds of foreign source income. The tax holiday reduced our foreign income tax expense by $17.3 million ($0.15 per share) in 2019. The benefit from the tax holiday is calculated before consideration of any offsetting tax impact in the United States. Effective January 1, 2020, due to Swiss tax law changes, the tax holiday was eliminated, which was partially offset by a lowered statutory tax rate.

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows:

	As of December 31,
	2021		2020
	(In thousands)
Deferred tax assets:
Intellectual property	$	165,517	$	—
Deferred revenues, accruals and reserves	68,574		66,926
Net operating loss carryforwards	4,747		5,623
Tax credit carryforwards	3,514		5,078
Other	1,693		2,379
Total deferred tax assets	244,045		80,006
Valuation allowance	(5,530)		(5,613)
Net deferred tax assets	238,515		74,393
Deferred tax liabilities:
Property and equipment	(6,644)		(4,167)
Other	(1,203)		(2,394)
Total deferred tax liabilities	(7,847)		(6,561)
Total net deferred tax assets	$	230,668	$	67,832

With the exception of deferred tax assets related to certain state net operating loss and foreign tax credit carryforwards, management believes it is more likely than not that the tax effects of the deferred tax liabilities together with future taxable income, will be sufficient to fully recover the remaining deferred tax assets.

As of December 31, 2021, the Company’s deferred tax assets included $75.4 million of state net operating loss carryforwards, before applying tax rates for the respective jurisdictions. The tax credit carryforwards as of December 31, 2021 consisted primarily of foreign tax credit carryforwards. The state net operating loss carryforwards expire in various years from 2022 through 2034. The foreign tax credits will expire in 2028.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

	As of December 31,
	2021		2020
	(In thousands)
Beginning balance	$	23,728	$	231,339
Increases in tax positions for prior years	89		7,138
Decreases in tax positions for prior years	(1,322)		(199,107)
Increases in tax positions for current year	1,115		1,613
Decreases in tax positions due to settlement with taxing authorities	(1,231)		—
Lapse in statute of limitations	(6,384)		(17,255)
Ending balance	$	15,995	$	23,728

As of December 31, 2021, approximately $16.2 million of unrecognized tax benefits, including penalties and interest, could affect the Company’s tax provision and effective tax rate. The Company does not expect the balance of unrecognized tax benefits to change materially during the next twelve months.

In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. These accruals were not material in any period presented.

The Company’s major taxing jurisdictions are the U.S., the Commonwealth of Virginia, and Switzerland. The Company’s U.S. federal income tax returns are currently under examination by the IRS for 2010 through 2014. The U.S. federal statutes of

limitations are closed for the 2015 and 2016 tax years. The Company’s other material tax returns are not currently under examination by their respective taxing jurisdictions. Because the Company has previously used net operating loss carryforwards and other tax attributes to offset its taxable income in income tax returns for the U.S. and Virginia, such attributes can be adjusted by these taxing authorities until the statute of limitations closes on the year in which such attributes were utilized. The open years for examination in Switzerland are the 2012 tax year and forward.