The domestic and foreign components of income before income taxes for the years ended December 31 (in millions):


	2023		2022			2021
Domestic	$	0.7	$	(13.3	)	$	(15.4	)
Foreign		543.5		427.2			409.0
Total income before provision for income taxes	$	544.2	$	413.9		$	393.6

The components of the income tax provision for the years ended December 31 (in millions):


	2023			2022			2021
Current income tax expense (benefit):
Federal	$	2.3		$	(10.4	)	$	1.0
State		2.4			2.5			1.2
Foreign		138.7			135.3			118.0
Total current income tax expense		143.4			127.4			120.2
Deferred income tax expense (benefit):
Federal		(18.1	)		(3.1	)		(7.8	)
State		(4.8	)		(1.7	)		(2.5	)
Foreign		(2.8	)		(6.2	)		3.1
Total deferred income tax benefit		(25.7	)		(11.0	)		(7.2	)
Income tax provision	$	117.7		$	116.4		$	113.0

The income tax provision differs from the tax provision computed at the U.S. federal statutory rate due to the following significant components:


	2023			2022			2021
Statutory tax rate		21.0	%		21.0	%		21.0	%
Foreign tax rate differential		3.5	%		5.2	%		5.2	%
Permanent differences		2.8	%		1.1	%		1.2	%
U.S. tax on foreign earnings		1.0	%		(0.1	)%		1.6	%
Stock compensation		(0.3	)%		(0.6	)%		(2.5	)%
Tax contingencies		—			3.3	%		2.6	%
Change in tax rates		0.1	%		0.1	%		(0.1	)%
Repatriation of foreign earnings		0.3	%		0.2	%		(0.4	)%
State income taxes, net of federal benefits		(0.6	)%		0.2	%		(0.4	)%
Research and development credits		(2.0	)%		(2.1	)%		(0.9	)%
Tax impact on bargain purchase gain		(5.6	)%
Other		0.1	%		(0.1	)%		1.2	%
Change in valuation allowance for unbenefited losses		1.3	%		(0.1	)%		0.2	%
Effective tax rate		21.6	%		28.1	%		28.7	%

The tax effect of temporary items that give rise to significant portions of the deferred tax assets and liabilities are as follows (in millions):


	2023			2022
Deferred tax assets:
Accrued expenses	$	5.8		$	4.4
Compensation		20.5			15.3
Section 174 capitalization		50.5			15.8
Disallowed interest carryforwards		20.7			9.1
Net operating loss carryforwards		180.5			21.9
Foreign tax and other tax credit carryforwards		16.7			20.3
Unrealized currency gain/loss		18.6			13.1
Inventory		5.5			1.9
Hedge unrealized FX gain/loss		22.5			—
Lease liabilities		22.8			10.5
Other		7.5			4.8
Gross deferred tax assets		371.6			117.1
Less valuation allowance		(13.8	)		(6.6	)
Total deferred tax assets		357.8			110.5
Deferred tax liabilities:
Accounts payable		6.6			7.7
Hedge unrealized FX gain/loss		—			1.3
Deferred revenue		2.6			0.9
Fixed assets		17.2			10.1
Foreign patent reserves		1.8			2.9
Intangibles		64.1			53.8
Accrued expenses		3.1			1.3
Accrued withholding tax		10.2			7.9
Right-of-use asset		21.5			10.5
Other		1.1			—
Total deferred tax liabilities		128.2			96.4
Net deferred tax assets	$	229.6		$	14.1

The Company uses the liability method to account for income taxes. Under this method, deferred income taxes are recognized for the future tax consequences of differences between the tax and financial accounting bases of assets and liabilities at each reporting period. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the period in which these differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the expected realizable amounts.

The Company can only recognize a deferred tax asset to the extent this it is “more likely than not” that these assets will be realized. Judgments around realizability depend on the availability and weight of both positive and negative evidence. Changes in the valuation allowance for deferred tax assets were as follows (in millions):

As of December 31, 2023, the Company has approximately $588.9 million of U.S. federal net operating loss carryforwards, of which $36.4 million begin to expire at various dates beginning in 2031 and the remainder $552.5 million will be carried forward indefinitely. The Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017, limits a taxpayer’s ability to utilize NOL deduction in a year to 80% taxable income for federal NOL arising in tax years beginning after 2017. The Company has approximately $676.6 million of state net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2024. The Company also has approximately $97.9 million of German Trade Tax and Corporate Income Tax net operating losses that are carried forward indefinitely. Additionally, the Company has $28.7 million of other foreign net operating losses that are expected to expire at various times in the future. The Company has U.S. federal foreign tax credit carried forwards in the amount of $3.3 million. The Company also has U.S. federal and state research and development tax credit of $1.2 million and $10.3 million respectively. Utilization of these credits and net operating losses may be subject to annual limitations due to the ownership percentage change limitations provided by the Code Section 382 and similar state provisions. In the event of a deemed change in control under Code Section 382, an annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards. The Company is in the process of finalizing the impact of Section 382 related to the PhenomeX acquisition but believes the provisions will limit the availability of losses to offset future income. Additionally, the Company has $91.4 million of gross interest expense carryforward as provided by Code Section 163(j) that can be carried forward indefinitely.

At December 31, 2023 the Company recorded state income and foreign withholding taxes on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from its foreign subsidiaries to the United States, except for amounts from certain subsidiaries, which the Company has asserted to be indefinitely reinvested. Specifically, the Company asserts that a total of $3.4 billion of unremitted foreign earnings is indefinitely reinvested. This figure is comprised of $2.0 billion in unremitted earnings as well as $1.4 billion of non-cash E&P in all jurisdictions not indefinitely reinvested. If this E&P is ultimately distributed to the United States in the form of dividends the Company would likely be subject to additional withholding tax. The Company estimates the amount of unrecognized deferred withholding taxes on the undistributed E&P to be approximately $95.6 million at December 31, 2023.

The Company had gross unrecognized tax benefits, excluding interest, of approximately $58.5 million as of December 31, 2023, that if recognized, would reduce the Company’s effective tax rate. In the next twelve months it is reasonably possible that the Company will reduce its unrecognized tax benefits by an immaterial amount due to the expiration of statutes of limitations. A tabular reconciliation of the Company’s gross unrecognized tax benefits is as follows (in millions):


Gross unrecognized tax benefits at December 31, 2020	$	22.7
Gross increases—tax positions in prior periods		17.8
Gross increases—current period tax positions		10.9
Gross unrecognized tax benefits at December 31, 2021		51.4
Gross decreases—tax positions in prior periods		(8.2	)
Gross increases—current period tax positions		11.7
Gross unrecognized tax benefits at December 31, 2022		54.9
Gross decreases—tax positions in prior periods		(3.8	)
Gross increases—current period tax positions		7.4
Gross unrecognized tax benefits at December 31, 2023	$	58.5

The Company’s policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense. At December 31, 2023 and 2022, the Company had approximately $5.8 million and $4.2 million, respectively, of accrued interest and penalties related to uncertain tax positions included in other long-term liabilities in the consolidated balance sheets. The Company recorded expense of $1.3 million and $1.1 million for penalties and interest related to unrecognized tax benefits in the provision for income taxes during the years ended December 31, 2023 and 2022, respectively.

The Company files tax returns in the United States, which includes federal, state and local jurisdictions, and many foreign jurisdictions with varying statutes of limitations. The Company considers Germany, the United States and Switzerland to be its significant tax jurisdictions. The majority of the Company’s earnings are derived in Germany and Switzerland. Accounting for the various federal and local taxing authorities, the statutory rates for 2023 were approximately 30.0% and 20.0% for Germany and Switzerland, respectively. The mix of earnings in those two jurisdictions resulted in an increase of 4.2% from the U.S. statutory rate of 21% in 2023.

The Company has been subject to tax examinations for the years 2013-2017 with Germany taxing authorities and for the years 2013-2023 in various taxing authorities.

In 2020, the Company was granted an income tax holiday for the manufacturing facility in Malaysia. The tax holiday allows for tax-free operations through February 28, 2024, and with the option to apply for a 5 year extension if certain conditions are met. The company has applied for an extension of the tax holiday for another 5 years, which is currently under review by the local authorities. The effect of the tax holiday in Malaysia increased the Company's net income by $7.6 million, $2.5 million and $0.0 million and increased the Company's net income per diluted share by $0.05, $0.01 and $0.00 for the years ended December 31, 2023, 2022 and 2021, respectively.

In connection with the Tax Cuts and Jobs Act (“TCJA”) of 2017, the Company recorded a toll charge liability of $35.4 million and the liability decreased to $20.5 million due to its amended 2017 tax return filed in 2023. Of that amount, approximately $19.4 million has already been paid as of December 31, 2023.

In August 2022, the President of the United States signed into law the Inflation Reduction Act of 2022 (the “IRA”), a tax and spending package that introduced several tax provisions, including a 15% corporate alternative minimum tax (“CAMT”) on certain large corporations and a 1% excise tax on certain corporate stock repurchases. The IRA provisions, which became effective for the Company beginning on January 1, 2023, did not have a material impact on the Company during the year ended December 31, 2023. While the full impact of these provisions in the future depends on several factors, including interpretive regulatory guidance, which has not yet been released, we do not believe this legislation will have a material impact on our consolidated financial statements. We will continue to monitor the potential impact of this new legislation as new information and guidance becomes available.

The Organization for Economic Co-operation and Development (OECD) introduced its Pillar Two Framework Model Rules (“Pillar 2”), provides guidance for a global minimum tax. Certain aspects of Pillar 2 took effect on January 1, 2024, while other aspects go into effect on January 1, 2025. The Company is evaluating the potential impact of Pillar 2 on its business, as the countries in which it operates are enacting legislation implementing Pillar 2. While many aspects of the application of Pillar 2 remain to be clarified, the Company does not expect Pillar 2 to materially impact its tax liability.