Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods. Potential discrete adjustments include tax charges or benefits related to stock-based compensation, changes in tax legislation, settlements of tax audits or assessments, uncertain tax positions and acquisitions, among other items.

The Company’s effective income tax rate was 23.5% and 12.3% for the three months ended March 31, 2023 and 2022, respectively. The higher effective tax rate for the three months ended March 31, 2023 was primarily due to a decrease in the excess tax benefit related to stock-based compensation, an increase in the valuation allowance recorded against tax credits and foreign net operating loss carryforwards (NOLs) and an increase in the revaluation of certain foreign income tax liabilities due to foreign exchange rate fluctuations.

For the three months ended March 31, 2023, the effective income tax rate was higher than the federal statutory tax rate due to tax on global intangible low taxed income, non-deductible stock-based compensation, a shortfall related to stock-based compensation and an increase in the valuation allowance recorded against tax credits and foreign NOLs. These amounts were partially offset by foreign income taxed at lower rates and the benefit of U.S. federal, state and foreign research and development credits.

For the three months ended March 31, 2022, the effective income tax rate was lower than the federal statutory tax rate due to foreign income taxed at lower rates, the excess tax benefit related to stock-based compensation and the benefit of U.S. federal, state and foreign research and development tax credits. These amounts were partially offset by an intercompany sale of intellectual property, the tax on global intangible low taxed income and non-deductible stock-based compensation.