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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 11: Income Taxes
Income or loss before provision for income taxes consisted of the following (in thousands):
 Year Ended December 31,
 202320222021
US$61,356 $331,009 $390,607 
Foreign(241,620)(20,020)45,934 
Total (loss) income before provision for income taxes
$(180,264)$310,989 $436,541 
The provision for income tax consisted of the following (in thousands):
 Year Ended December 31,
 202320222021
Current expense (benefit):
Federal$59,558 $59,105 $33,582 
State17,677 11,803 5,787 
Foreign4,909 (893)10,600 
82,144 70,015 49,969 
Deferred expense (benefit):
Federal(49,028)8,142 49,512 
State(8,685)6,290 5,904 
Foreign1,797 31,978 (20,045)
(55,916)46,410 35,371 
Provision for income taxes$26,228 $116,425 $85,340 
The reconciliation of federal statutory income tax rate to our effective tax rate was as follows:
 Year Ended December 31,
 202320222021
Federal provision21.0 %21.0 %21.0 %
State provision(3.0)%5.0 %2.3 %
Change in valuation allowance (1)
7.3 %13.2 %(2.3)%
Goodwill impairment (2)
(28.3)%— %— %
Taxable gain (deductible loss) in foreign jurisdiction (3)
2.9 %(2.7)%— %
Forfeit benefit due to merger/liquidations (4)
(14.7)%— %— %
Other
0.3 %0.9 %(1.5)%
Effective rate(14.5)%37.4 %19.5 %
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(1)In 2023, includes reduction in valuation allowance due to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets. In 2022, includes valuation allowance recorded on U.K. deferred tax assets.
(2)During the fourth quarter of 2023, the Company recorded a non-cash goodwill impairment charge of $238.2 million at the Cabot reporting unit. Refer to “Note 15: Goodwill and Identified Intangible Assets” for further details.
(3)In 2023, represents a taxable gain recognized in a foreign subsidiary. In 2022, represents deductible loss recognized in a foreign subsidiary that maintains a full valuation allowance on its deferred tax assets. Accordingly, the deductible loss increased the valuation allowance and did not result in any tax benefit during the year ended December 31, 2022.
(4)Represents the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.
The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2026. The impact of the tax holiday in Costa Rica for the years ended December 31, 2023, 2022 and 2021 was immaterial.
The Company has not provided for applicable income or withholding taxes on the undistributed earnings from continuing operations for certain of its subsidiaries operating outside of the United States. Undistributed net income of these subsidiaries as of December 31, 2023, were approximately $152.9 million. Such undistributed earnings are considered permanently reinvested.
The Company does not provide deferred taxes on translation adjustments of unremitted earnings under the indefinite reinvestment exemption. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practical due to the complexities of a hypothetical calculation. Subsidiaries operating outside of the United States for which the Company does not consider under the indefinite reinvestment exemption have no material undistributed earnings or outside basis differences and therefore no U.S. taxes have been provided.
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands):
December 31,
2023		December 31,
2022
Deferred tax assets:
Net operating losses$50,061 $70,543 
Operating lease liabilities16,938 12,222 
Accrued expenses9,048 10,800 
Difference in basis of bond and loan costs
4,155 — 
Difference in basis of receivable portfolio22,070 23,751 
Stock-based compensation3,916 4,960 
Difference in basis of depreciable and amortizable assets1,957 2,057 
Other5,303 2,396 
Total deferred tax assets113,448 126,729 
Valuation allowance(54,993)(66,625)
Total deferred tax assets net of valuation allowance58,455 60,104 
Deferred tax liabilities:
Accrued expenses(76)(443)
Difference in basis of bond and loan costs(445)(1,003)
Difference in basis of receivable portfolio(56,263)(109,787)
Stock-based compensation— (970)
Right-of-use asset(14,306)(9,794)
Difference in basis of depreciable and amortizable assets(8,596)(16,807)
Prepaid expenses(545)(875)
Other(3,087)(10,206)
Total deferred tax liabilities(83,318)(149,885)
Net deferred tax liability(1)
$(24,863)$(89,781)
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(1)The Company operates in multiple jurisdictions. In accordance with authoritative guidance relating to income taxes, deferred taxes and liabilities are netted for each tax-paying component of the Company within a particular tax jurisdiction, and presented as a single amount in the statement of financial condition.
As of December 31, 2023, certain of the Company’s foreign subsidiaries have net operating loss carry forwards of approximately $197.6 million, which will begin to expire in 2024. Certain of the Company’s domestic subsidiaries have state net operating losses, which will begin to expire in 2035.
Valuation allowances are recorded against deferred tax assets, including certain net operating losses recorded as deferred tax assets, if the Company believes it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2023, valuation allowances decreased by $11.6 million, as compared to December 31, 2022. The decrease in valuation allowance is primarily related to the forfeit of tax benefits on merger or liquidation of foreign subsidiaries that maintained full valuation allowances on their deferred tax assets.
A reconciliation of the beginning and ending amounts of unrecognized tax benefit is as follows (in thousands):
Amount
Balance as of December 31, 2020$6,781 
Decrease related to prior year tax positions(2,034)
Decrease related to expiration of statute of limitations(712)
Increase related to prior year tax positions261 
Increase related to current year tax positions251 
Balance as of December 31, 20214,547 
Decrease related to prior year tax positions(1,296)
Decrease related to settlements with taxing authorities(713)
Decrease related to expiration of statute of limitations(115)
Increase related to prior year tax positions874 
Increase related to current year tax positions691 
Balance as of December 31, 20223,988 
Increase related to prior year tax positions2,302 
Increase related to current year tax positions649 
Decrease related to expiration of statute of limitations(69)
Other91 
Balance as of December 31, 2023$6,961 
The Company had gross unrecognized tax benefits, inclusive of penalties and interest, of $8.2 million, $4.9 million and $4.6 million as of December 31, 2023, 2022, and 2021 respectively. As of December 31, 2023, 2022 and 2021, there was $5.0 million, $2.5 million and $1.6 million, respectively, of unrecognized tax benefit that if recognized, would result in a net tax benefit. During the year ended December 31, 2023, the increase in the Company's gross unrecognized tax benefit was primarily due a prior year position related to a domestic entity. During the years ended December 31, 2022 and 2021, the decreases in the Company's gross unrecognized tax benefit were primarily due to the release of prior year positions related to foreign entities.
The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, it is reasonably possible that certain changes may occur within the next 12 months, which could significantly increase or decrease the balance of the Company’s gross unrecognized tax benefits.
The Company recognizes interest and penalties related to income tax as a component of the provision for income taxes. Interest and penalties expensed during the years ended December 31, 2023, 2022 and 2021 were immaterial. Interest and penalties accrued as of December 31, 2023, 2022 and 2021 were immaterial.
The Company files federal, state and non-U.S. income tax returns in jurisdictions with varying statutes of limitations. The Company is subject to examination of its income tax returns by various taxing authorities, and the timing of the resolution of income tax examinations cannot be predicted with certainty. In general, the Company is subject to examination for tax years after December 31, 2019 for the U.S. federal jurisdiction, after December 31, 2019 for U.S state jurisdictions, and after December 31, 2018 in major foreign jurisdictions.
The Company's management regularly assesses the likelihood of adverse outcomes resulting from examinations, if any, to determine the adequacy of the Company's provision for income taxes. If any issues addressed in the Company's tax examinations are resolved in a manner not consistent with management's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.