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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income TaxesSignificant components of the provision for income taxes are as follows (in thousands):
 Year Ended December 31,
 202120202019
Current:
Federal$16,006 $6,010 $5,000 
State2,767 2,433 2,724 
Foreign4,281 3,293 1,051 
Total current23,054 11,736 8,775 
Deferred:
Federal(8,285)574 1,570 
State(2,425)171 467 
Foreign(1,952)(2,333)4 
Total deferred(12,662)(1,588)2,041 
Total provision for income taxes$10,392 $10,148 $10,816 
The components of pretax income for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):
 Year Ended December 31,
 202120202019
Domestic$56,299 $36,747 $43,330 
Foreign6,184 3,582 4,611 
Total$62,483 $40,329 $47,941 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2021 and 2020 are as follows (in thousands):
 December 31,
 20212020
Deferred tax assets:
Accrued liabilities$7,044 $1,473 
Operating lease liabilities6,365 7,195 
Allowance for Doubtful Accounts605 273 
Foreign exchange adjustment1,257 — 
Net operating losses118 203 
Deferred compensation liability1,786 2,511 
Interest limitation8,107 — 
Intangible assets— 1,844 
Total deferred tax assets25,282 13,499 
Deferred tax liabilities:
Prepaid expenses1,081 1,216 
Foreign exchange adjustments— 1,828 
Operating lease right-of-use assets5,812 6,909 
Goodwill and intangible assets28,534 23,027 
Fixed assets1,614 1,430 
Total deferred tax liabilities37,041 34,410 
Net deferred tax liability$11,759 $20,911 

Management regularly assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent management believes that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. Management believes it is more likely than not that the Company will generate sufficient taxable income in future years to realize the benefits of its deferred tax assets.

As of December 31, 2021, the Company had U.S. federal tax gross net operating loss carry forwards of approximately $0.5 million that will begin to expire in 2023 if not utilized. Utilization of net operating losses may be subject to an annual limitation due to the “change in ownership” provisions of the Code. The annual limitation may result in the expiration of net operating losses before utilization.
The federal corporate statutory tax rate is reconciled to the Company’s effective income tax rate as follows:
 Year Ended December 31,
 202120202019
Federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit3.2 5.2 4.3 
Effect of foreign operations1.7 0.5 0.2 
Stock compensation(5.2)(0.3)(1.0)
Non-deductible acquisition costs1.0 3.1 0.2 
Research and development tax credit(4.8)(3.9)(1.8)
Other(0.3)(0.4)(0.3)
Effective tax rate16.6 %25.2 %22.6 %

The effective income tax rate decreased to 16.6% for the year ended December 31, 2021 from 25.2% for the year ended December 31, 2020 primarily due to an increase in stock compensation deductions and a decrease in non-deductible transaction costs compared to the prior year.

The undistributed earnings of our foreign subsidiaries are indefinitely reinvested, except in certain designated jurisdictions. We have not recognized a deferred tax liability on the undistributed earnings that are considered indefinitely reinvested. If these earnings were distributed, we would be subject to non-U.S. withholding taxes. As of December 31, 2021, undistributed earnings of approximately $19.5 million were indefinitely reinvested in foreign operations and the unrecognized deferred tax liability on these undistributed earnings was approximately $1.3 million.

As of December 31, 2021, the Company had $17.0 million of gross unrecognized tax benefits, which would have had a $12.2 million impact on the effective rate, if recognized. As of December 31, 2020, the Company had $7.1 million of gross unrecognized tax benefits, all of which have an impact on the effective rate, if recognized.

A reconciliation of beginning and ending amounts of gross unrecognized tax benefits is as follows (in thousands):
 December 31,
 20212020
Balance at beginning of year$7,084 $4,665 
Additions based on tax positions related to current year6,934 1,102 
Additions based on tax positions related to prior years2,970 1,317 
Balance at end of year$16,988 $7,084 

We recognize interest and penalty expense related to unrecognized tax positions as a component of the income tax provision. For the years ended December 31, 2021 and 2020, we recognized interest expense of approximately $0.4 million and $0.3 million, respectively. As of December 31, 2021 and 2020, interest and penalties accrued were $2.1 million and $0.9 million, respectively.

The Company’s 2016-2019 U.S. income tax returns are currently under examination by the IRS. The IRS has sought to disallow research credits of $5.7 million on the Company’s 2011 through 2015 U.S. income tax returns. The Company has exhausted all administrative appeals and formal mediation and has filed suit to resolve this dispute. The Company is awaiting a court date to be set by the U.S. Tax Court for the 2011 through 2013 returns. The Company believes the research credits taken are appropriate and intends to vigorously defend its position. An amount of adjustment, if any, and the timing of such adjustment are not reasonably possible to estimate at this time. The total amount of research credits taken or expected to be taken in the Company’s income tax returns for 2011 through 2021 is $26.9 million.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our federal tax return for tax years 2016 and later remain subject to examination by the IRS. Our state and foreign income tax returns for the tax years 2011 and later remain subject to examination by various state and foreign tax authorities.