Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before provision for income taxes were as follows for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	2021		2020		2019
U.S.	$	70,300	$	45,074	$	24,253
Foreign	657,921		571,008		508,228
Income before provision for income taxes	$	728,221	$	616,082	$	532,481

The provision for income taxes consisted of the following for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	2021		2020		2019
Current tax (benefit) provision:
Federal	$	11,824	$	(1,765)	$	(22,704)
State	8,515		5,346		3,835
Foreign	90,026		76,162		71,286
Deferred tax (benefit) provision:
Federal	(33,366)		(19,845)		(13,987)
State	(14,611)		(14,509)		(12,212)
Foreign	(4,358)		(6,023)		4,968
Change in valuation allowance	4,541		6,556		22,164
Total	$	62,571	$	45,922	$	53,350

The Company’s effective tax rate differed from the U.S. federal statutory tax rate as follows for the years ended December 31, 2021, 2020 and 2019:

	2021		2020		2019
U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State taxes	0.7		1.0		1.0
Stock-based compensation	0.1		(0.6)		0.3
U.S. federal, state and foreign research and development credits	(3.7)		(4.4)		(6.0)
Foreign earnings	(7.3)		(7.7)		(6.1)
Nondeductible (nontaxable) foreign items	—		(0.4)		0.7
Release of uncertain tax position reserve	(1.0)		(0.9)		(5.9)
Intercompany sale of intellectual property	—		0.2		1.9
Valuation allowance	0.6		1.1		4.2
Other	(1.8)		(1.8)		(1.1)
	8.6	%	7.5	%	10.0	%

The components of the net deferred tax assets and liabilities and the related valuation allowance as of December 31, 2021 and 2020 were as follows (in thousands):

	2021		2020
Accrued bonus	$	26,261	$	25,480
Deferred revenue	6,683		11,146
Operating lease liability	133,298		141,212
Stock-based compensation	21,507		23,629
NOLs	53,088		25,255
Tax credit carryforwards	88,710		110,254
Convertible senior notes interest	18,552		20,953
Depreciation and amortization	85,438		—
Other	15,679		11,531
Deferred tax assets	449,216		369,460
Depreciation and amortization	—		(6,974)
Acquired intangible assets	(86,567)		(59,128)
Operating lease right-of-use asset	(124,833)		(127,524)
Deferred commissions	(13,468)		(14,952)
Internal-use software development costs capitalized	(59,837)		(58,820)
Deferred tax liabilities	(284,705)		(267,398)
Valuation allowance	(37,143)		(32,602)
Net deferred tax assets	$	127,368	$	69,460

Valuation allowances will be recognized on deferred tax assets if it is more-likely-than-not that some or all of the deferred tax assets will not be utilized. In measuring deferred tax assets, the Company considers all available evidence, both positive and negative, to determine whether a valuation allowance is needed. As of December 31, 2021, the Company recorded a $37.1 million valuation allowance against deferred tax assets related to tax credits and state and foreign NOLs in which it is more-likely-than-not that such attributes will expire prior to utilization. The increase in the valuation allowance during 2021 was $4.5 million.

The table below summarizes the Company's NOL and tax credit carryforwards in U.S. federal, state and foreign jurisdictions as of December 31, 2021 and 2020 (in thousands, except years):

	2021		2020		Expirations at Various Dates Through:
NOL carryforwards:
Federal	$	44,000	$	59,200	2037
State	15,500		24,800		2041
Foreign	180,100		40,800		2035
Federal and state research and development tax credit and other credit carryforwards	113,500		132,800		2037

The Company's U.S. federal and state NOL carryforwards relate to acquisitions completed in 2021, 2019, 2017 and 2012. Foreign NOL carryforwards relate to an acquisition completed in 2021 and losses due to the difference in local tax laws.

As of December 31, 2021, accumulated earnings outside the U.S. totaled $1.2 billion, the majority of which have been taxed due to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings and the tax on global intangible low taxed income required by the U.S. Tax Cuts and Jobs Act ("TCJA"). No provision for U.S. income and foreign withholding taxes has been provided for any remaining undistributed foreign earnings not subject to tax under the TCJA, or any additional basis differences inherent in these entities, as these amounts continue to be indefinitely reinvested. Determination of the amount of the unrecognized deferred tax liability on outside basis differences is not practicable because of the complexity of laws and regulations, the varying tax treatment of alternative repatriation scenarios and the variation due to multiple potential assumptions relating to the timing of any future repatriation.

The following is a roll forward of the Company’s unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	2021		2020		2019
Balance at beginning of year	$	24,105	$	27,359	$	64,892
Gross increases – tax positions of prior periods	4,293		2,539		74
Gross increases – current period tax positions	3,607		1,946		2,006
Gross decreases – tax positions of prior periods	(816)		(3,540)		(5,201)
Gross decreases – lapse of applicable statute of limitations	(8,626)		(4,199)		(28,672)
Gross decreases – settlements	—		—		(5,740)
Balance at end of year	$	22,563	$	24,105	$	27,359

As of December 31, 2021, 2020 and 2019, the Company had $23.1 million, $29.5 million and $32.6 million of unrecognized tax benefits, respectively. Total interest and penalties for unrecognized tax benefits includes $7.2 million, $7.7 million and $7.8 million as of December 31, 2021, 2020 and 2019, respectively. Interest and penalties related to unrecognized tax benefits are recorded in the provision for income taxes and were $0.5 million, $1.2 million and $1.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. The amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate is $23.1 million.

As of December 31, 2021, it is reasonably possible that $4.8 million of unrecognized tax benefits may be recognized within the next 12 months due to the expiration of local statutes of limitations. Certain U.S. state and foreign income tax returns from 2011 through 2020 are currently under audit. The Company has reserved for those positions that are not more-likely-than-not to be sustained.

The Company is also involved in litigation related to certain adverse audit determinations. In the second quarter of 2018, the Company filed an appeal with the Massachusetts Appellate Tax Board contesting the adverse audit findings related to certain tax benefits and exemptions. The appeal hearing was held in late 2019. In July 2020, the Massachusetts Appellate Tax Board ruled in the Company's favor; however the Massachusetts Department of Revenue has appealed the decision in January 2022. The Company has determined that it is more-likely-than-not that it will prevail, and no reserve has been recorded related to these controversies. However, over the next 12 months, the Company's current assumptions and positions could change based on appeal decisions and other events impacting its analysis. Such events, if resolved unfavorably, could significantly impact the Company’s effective income tax rate and results of operations. The Company has estimated that an adverse ruling related to its Massachusetts controversy could result in a gross income tax charge of approximately $49.0 million, which could be partially offset by certain state tax credits of $32.0 million which are not currently benefited as a result of the Company's valuation allowance assessment.