During the year ended December 31, 2017, as a result of the Tax Act, we recorded provisional estimates related to the revaluation of our net deferred tax assets at the lower U.S. corporate income tax rate and the additional tax expense associated with the deemed repatriation tax. During the year ended December 31, 2018, we recorded measurement period adjustments related to the provisional estimates. While we consider our accounting for the Tax Act to be complete, we continue to evaluate new guidance and legislation as it is issued. We have not changed our indefinite reinvestment assertion, and we have elected to account for the impact of global intangible low tax income based on the period cost method.

During the three months ended December 31, 2020, we completed an intra-entity transfer of certain intellectual property rights primarily to align with current and future international operations. This transaction was executed using transfer pricing guidelines issued by the relevant taxing authorities. Significant estimates and assumptions were required to compute the valuation of this transaction. These estimates and assumptions include, but are not limited to, estimated future revenue growth and discount rates, which by their nature are inherently uncertain therefore may ultimately differ materially from our actual results.

We have recorded certain tax reserves to address potential differences involving our income tax positions. These potential tax liabilities result from the varying application of statutes, rules, regulations and interpretations by different taxing jurisdictions. While our tax position is not uncertain, because of the significant estimates used in the value of certain intellectual property rights, our tax reserves contain assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the costs of the ultimate tax liability or benefit from these matters may be materially more or less than the amount that we estimated.

net of a reserve for uncertain tax positions of $197.0 million, and further reduced by a valuation allowance of $167.8 million. Based on available objective evidence, management believes that $167.8 million of the deferred tax asset, to the extent not offset by reserves for uncertain tax positions, is not more-likely-than-not to be realizable as of December 31, 2020 and, therefore, is offset by a valuation allowance. As such, a net deferred tax asset of $127.7 million was recognized along with a corresponding foreign deferred income tax benefit.


	Year Ended December 31,
	2020		2019		2018
	(in thousands)
Income before taxes:
U.S.	$	133,574	$	58,822	$	10,088
Foreign	73,405		60,500		55,069
Total income before taxes	$	206,979	$	119,322	$	65,157
Income tax expense (benefit):
Current income taxes:
U.S. federal	$	698	$	1,284	$	1,156
U.S. state	6,577		1,427		246
Foreign	211,904		13,373		12,359
Total current income taxes	219,179		16,084		13,761
Deferred income taxes:
U.S. federal	529		(10,249)		276
U.S. state	(2,381)		(3,579)		—
Foreign	(323,209)		(2,431)		683
Total deferred income taxes	(325,061)		(16,259)		959
Total income tax expense (benefit)	$	(105,882)	$	(175)	$	14,720


	Year Ended December 31,
	2020				2019				2018
	(in thousands)
Income tax expense and rate attributable to:
Federal income tax rate	$	43,466	21.0	%	$	25,058	21.0	%	$	13,683	21.0	%
State income tax rate, net of federal benefit	7,231		3.5	%	5,983		5.0	%	1,271		2.0	%
Foreign income tax rate differential	(6,060)		(2.9)	%	1,994		1.7	%	7,630		11.6	%

GILTI, net	7,515		3.6	%	7,585		6.4	%	3,443		5.3	%
Non-deductible / non-taxable items	6,871		3.3	%	6,727		5.7	%	3,602		5.5	%
Change in valuation allowance	143,012		69.0	%	(33,691)		(28.2)	%	(5,304)		(8.1)	%
Foreign tax credits	(15,904)		(7.7)	%	(11,907)		(10.0)	%	(7,214)		(11.1)	%
Uncertain tax positions	200,571		96.9	%	278		0.2	%	(1,696)		(2.6)	%

Share-based compensation	(1,303)		(0.6)	%	(2,715)		(2.3)	%	764		1.2	%
Intra-Entity IP Transfer	(492,470)		(237.9)	%	—		—	%	—		—	%

Other	1,189		0.6	%	513		0.4	%	(1,459)		(2.2)	%
Effective income tax expense and rate	$	(105,882)	(51.2)	%	$	(175)	(0.1)	%	$	14,720	22.6	%


	December 31,
	2020		2019
	(in thousands)
Non-current deferred tax assets:
Share-based compensation expense	$	1,934	$	2,218
Accruals, reserves, and other expenses	16,905		13,726
Net operating loss	26,842		29,997
Intangible assets	493,701		990


Foreign tax credit	38,948		64,355
Operating lease liabilities	41,391		36,996
Other	5,601		4,467
Valuation allowance	(226,655)		(79,023)
Total non-current deferred tax assets	$	398,667	$	73,726
Non-current deferred tax liabilities:
Unrealized gain on foreign currency	$	(506)	$	(529)
Property and equipment	(13,583)		(13,713)
Right-of-use assets	(33,769)		(34,470)
Other	(25)		(267)
Total non-current deferred tax liabilities	$	(47,883)	$	(48,979)

During 2020, valuation allowances recorded against deferred tax assets increased by $147.6 million. The change in the valuation allowance includes $143.0 million related to income tax benefit and $4.6 million that does not impact the tax provision because this amount reflects the cumulative impact of unrecorded tax attributes related to changes in cumulative translation adjustments. During 2019, valuation allowances decreased by $34.2 million. The change in the valuation allowance includes $33.7 million related to income tax expense and $0.5 million that does not impact the tax provision because this amount reflects the impact of unrecorded tax attributes related to changes in cumulative translation adjustments.

Our valuation allowances are primarily the result of uncertainties regarding the future realization of tax attributes recorded in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. In assessing our valuation allowance we considered all available evidence, including the magnitude of recent and current operating results, the duration of statutory carryforward periods, our historical experience utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these jurisdictions, and our assessment regarding the sustainability of their profitability. The weight we give to any particular item is, in part, dependent upon the degree to which it can be objectively verified. Certain jurisdictions, for which we have historically recorded significant valuation allowances, have sufficient history of sustained profitability as of December 31, 2020. During 2020, valuation allowances recorded against deferred tax assets, not associated with the intra-entity intellectual property rights transfer, decreased by $20.2 million.

In certain other jurisdictions, we recorded additional attributes, primarily driven by operational losses recognized based on local tax accounting requirements. These carryforwards were generated in jurisdictions where results indicate it is not more likely than not the deferred tax assets would be realized. We maintain a valuation allowance against the majority of these balances.

We have included in the table above deferred tax assets related to U.S. federal tax carryforwards, including foreign tax credits and other tax credits, which expire at various dates between 2026 and 2040 of $5.8 million and $39.7 million as of December 31, 2020 and 2019, respectively. We have included in the table above deferred tax assets related to U.S. state tax net operating loss carryforwards, some of which expire at various dates beginning in 2022 and some of which do not expire, of $3.6 million and $6.7 million at December 31, 2020 and 2019, respectively. We have recorded deferred tax assets related to foreign tax carryforwards, including foreign tax credits and net operating losses, which expire starting in 2021 and those which do not

The transition tax in the Tax Act imposed a tax on undistributed and previously untaxed foreign earnings at various tax rates. This tax largely eliminated the differences between the financial reporting and income tax basis of foreign undistributed earnings. Furthermore, as of December 31, 2020, foreign withholding taxes have not been provided on unremitted earnings of subsidiaries operating outside of the U.S. as these amounts are considered to be indefinitely reinvested.


	Year Ended December 31,
	2020		2019		2018
	(in thousands)
Unrecognized tax benefit as of January 1	$	4,613	$	4,511	$	6,204
Additions in tax positions taken in prior period	519		631		250
Reductions in tax positions taken in prior period	(340)		(1,532)		(690)
Additions in tax positions taken in current period	200,947		1,786		461
Settlements	(294)		(391)		(621)
Lapse of statute of limitations	(258)		(368)		(1,045)
Cumulative foreign currency translation adjustment	1,022		(24)		(48)
Unrecognized tax benefit as of December 31	$	206,209	$	4,613	$	4,511

We recorded a net expense of $200.6 million related to increases in 2020 unrecognized tax benefits combined with amounts effectively settled under audit. Unrecognized tax benefits as of December 31, 2020 relate to tax years that are currently open under the statute of limitation. The primary impact of uncertain tax benefits on the rate reconciliation includes audit settlements, net increases in position changes, and accrued interest expense.

Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Our assessments are based on estimates and assumptions using the best available information to management. However, our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible change related to our uncertain tax positions, and such changes could be significant.

Interest and penalties related to income tax liabilities are included in ‘Income tax expense (benefit)’ in the consolidated statements of operations. For the years ended December 31, 2020, 2019, and 2018, we recorded approximately $0.6 million, $0.4 million, and $0.2 million, respectively, of penalties and interest. During the year ended December 31, 2020, we released $0.1 million of interest from settlements, lapse of statutes, and change in certainty. The cumulative accrued balance of penalties and interest was $1.2 million, $0.7 million, and $0.6 million, as of December 31, 2020, 2019, and 2018, respectively.