Income Taxes

12 Months Ended

Dec. 31, 2023

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, 2023, 2022 and 2021 (in thousands):

	2023		2022		2021
U.S.	$	20,146	$	61,383	$	70,300
Foreign	632,381		596,620		657,921
Income before provision for income taxes	$	652,527	$	658,003	$	728,221

The provision for income taxes consisted of the following for the years ended December 31, 2023, 2022 and 2021 (in thousands):

	2023		2022		2021
Current tax provision:
Federal	$	23,406	$	49,808	$	11,824
State	6,731		9,214		8,515
Foreign	99,223		172,645		90,026
Deferred tax benefit:
Federal	(18,213)		(73,826)		(33,366)
State	(6,692)		(18,657)		(14,611)
Foreign	(2,536)		(16,595)		(4,358)
Change in valuation allowance	4,454		4,107		4,541
Total	$	106,373	$	126,696	$	62,571

The Company’s effective tax rate differed from the U.S. federal statutory tax rate as follows for the years ended December 31, 2023, 2022 and 2021:

	2023		2022		2021
U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State taxes	1.0		0.7		0.7
Stock-based compensation	3.6		2.0		0.1
U.S. federal, state and foreign research and development credits	(4.7)		(5.1)		(3.7)
Foreign earnings	(6.5)		(6.6)		(7.3)
Nondeductible (nontaxable) foreign items	(0.2)		0.7		—
Global intangible low-taxed income	1.1		2.5		0.5
Release of uncertain tax position reserve	(0.4)		(0.7)		(1.0)
Intercompany sale of intellectual property	0.6		4.0		—
Valuation allowance	0.7		0.6		0.6
Foreign-derived intangible income	(1.1)		(0.8)		(0.5)
Other	1.2		1.0		(1.8)
	16.3	%	19.3	%	8.6	%

The components of the net deferred tax assets and liabilities and the related valuation allowance as of December 31, 2023 and 2022 were as follows (in thousands):

	2023		2022
Accrued bonus	$	3,716	$	21,181
Deferred revenue	14,223		11,925
Operating lease liabilities	116,752		125,567
Stock-based compensation	42,856		19,874
NOLs	19,791		18,172
Tax credit carryforwards	96,020		93,672
Capitalized research and development costs	108,592		43,215
Convertible senior notes interest	111,509		75,603
Depreciation and amortization	66,053		79,595
Other	21,856		28,879
Deferred tax assets	601,368		517,683
Acquired intangible assets	(12,126)		(530)
Operating lease right-of-use assets	(103,392)		(113,118)
Deferred commissions	(14,752)		(12,949)
Capitalized internal-use software development costs	(31,719)		(30,559)
Deferred tax liabilities	(161,989)		(157,156)
Valuation allowance	(45,704)		(41,250)
Net deferred tax assets	$	393,675	$	319,277

As summary of activity in the valuation allowance on deferred tax assets for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

	2023		2022		2021
Beginning balance	$	41,250	$	37,143	$	32,602
Charges to income tax expense	4,814		4,392		4,707
Release of valuation allowance	(360)		(285)		(166)
Ending balance	$	45,704	$	41,250	$	37,143

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, 2023, the Company recorded a $45.7 million valuation allowance against deferred tax assets related to state and foreign tax credits, foreign tax deductions 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 2023 was $4.5 million. The increase in the valuation allowance is primarily related to state tax credits and foreign tax deductions.

The Company's NOL and tax credit carryforwards in U.S. federal, state and foreign jurisdictions as of December 31, 2023 and 2022 were as follows (in thousands, except years):

	2023		2022		Expirations at Various Dates Through:
NOL carryforwards:
Federal	$	32,700	$	30,100	2037
State	33,100		22,400		2043
Foreign	42,600		40,100		2039
Federal and state research and development tax credit and other credit carryforwards	125,200		121,300		2038

A portion of the Company's U.S. federal, state and foreign NOL carryforwards relate to acquisitions completed between 2012 and 2023.

As of December 31, 2023, accumulated earnings outside the U.S. totaled $2.1 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. state income taxes 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 the Company's international subsidiaries, 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 changes in the Company’s unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

	2023		2022		2021
Balance at beginning of year	$	67,958	$	22,563	$	24,105
Gross increases – tax positions of prior periods	2,074		3,880		4,293
Gross increases – current period tax positions	4,091		45,975		3,607
Gross decreases – tax positions of prior periods	(3,685)		(688)		(816)
Gross decreases – lapse of applicable statute of limitations	(1,780)		(3,772)		(8,626)
Balance at end of year	$	68,658	$	67,958	$	22,563

As of December 31, 2023, 2022 and 2021, the Company had $39.1 million, $38.3 million and $23.1 million of unrecognized tax benefits, respectively. Total interest and penalties for unrecognized tax benefits includes $11.0 million, $8.6 million and $7.2 million as of December 31, 2023, 2022 and 2021, respectively. Interest and penalties related to unrecognized tax benefits are recorded in the provision for income taxes and were $2.4 million, $2.0 million and $0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. The amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate is $36.0 million.

As of December 31, 2023, it is reasonably possible that $3.8 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 2015 through 2021 are currently under audit. The Company has reserved for those positions that are not more-likely-than-not to be sustained.