Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Taxes

13. TAXES

The components of income tax expense (benefit) were as follows (in thousands):  

	Year Ended December 31,
	2023		2022		2021
Current:
Federal tax	$	—	$	—	$	—
State tax	240		82		153
Foreign tax	850		(9)		7
Total	1,090		73		160
Deferred:
Federal and state tax	33		—		(459)
Foreign tax	—		—		—
Total	33		—		(459)
Income tax expense (benefit)	$	1,123	$	73	$	(299)

U.S. and foreign components of income (loss) before income taxes are presented below (in thousands):

	Year Ended December 31,
	2023		2022		2021
U.S. loss	$	(30,086)	$	(232,148)	$	(79,452)
Foreign income (loss)	6,491		(24,694)		(33,472)
Total loss before income taxes	$	(23,595)	$	(256,842)	$	(112,924)

As of December 31, 2023 and 2022, the Company had cumulative U.S., state and foreign net operating loss ("NOL") carryforwards for income tax reporting purposes of approximately $1.9 billion and $2.0 billion, respectively. The vast majority of these NOL carryforwards were generated prior to 2018 and expire through 2041 (with less than 1% expiring prior to 2027) and the remaining NOL carryforwards do not expire.

The components of net deferred income tax assets (liabilities) were as follows (in thousands):  

	December 31,
	2023		2022
Federal and foreign NOL and credit carryforwards	$	467,282	$	479,884
Property and equipment and other long-term assets	(60,697)		(77,925)
Deferred revenue	28,147		25,774
Reserves and disallowed interest	3,081		8,919
Deferred tax assets before valuation allowance	437,813		436,652
Valuation allowance	(438,142)		(436,948)
Net deferred income tax liability	$	(329)	$	(296)

The deferred revenue tax asset in the table above is related to a portion of the prepayments made under the Service Agreements (see Note 3: Revenue to our Consolidated Financial Statements for further discussion).

The change in the valuation allowance during 2023 of $1.2 million was due to depreciation driven to the difference between tax and book depreciable lives. Due to the limitation on utilization of state NOLs, the Company recorded deferred tax liabilities of $0.3 million as of both December 31, 2023 and 2022.

The actual provision for income taxes differs from the statutory U.S. federal income tax rate as follows (in thousands):   

	Year Ended December 31,
	2023		2022		2021
Provision at U.S. statutory rate of 21%	$	(4,967)	$	(53,951)	$	(23,714)
State income taxes, net of federal benefit	(771)		(4,065)		(867)
Change in valuation allowance	(969)		43,500		15,991
Effect of foreign income tax at various rates	(131)		(133)		176
Permanent differences	5,923		8,229		4,993
Net change in permanent items due to provision to tax return	(731)		1,855		(569)
Adjustment to reserved deferred assets	2,104		4,607		1,969
Adjustment to state deferred rate	170		136		775
Withholding tax	502		—		—
Other	(7)		(105)		947
Total	$	1,123	$	73	$	(299)

Tax Audits 

The Company operates in various U.S. and foreign tax jurisdictions. The process of determining its anticipated tax liabilities involves many calculations and estimates which are inherently complex. The Company believes that it has complied in all material respects with its obligations to pay taxes in these jurisdictions. However, its position is subject to review and possible challenge by the taxing authorities of these jurisdictions. If the applicable taxing authorities were to challenge successfully its current tax positions, or if there were changes in the manner in which the Company conducts its activities, the Company could become subject to material unanticipated tax liabilities. It may also become subject to additional tax liabilities as a result of changes in tax laws, which could in certain circumstances have a retroactive effect.

The Company's Canadian subsidiary is under audit for multiple tax years. The Company is working with the Canada Revenue Agency ("CRA") to complete the audits. The CRA has completed its audit for the years ended October 31, 2016 and 2017 and assessed the Company for additional tax liabilities, which the Company is appealing. The Company's NOL in Canada would largely offset this tax liability to the extent that the Company is unsuccessful in its appeal. The years ended October 31, 2018 through December 31, 2022 remain under examination.

Except for the audit noted above, neither the Company nor any of its subsidiaries is currently under audit by the IRS or by any state income tax jurisdiction in the United States. The Company's corporate U.S. tax returns for 2020 and subsequent years remain subject to examination by tax authorities. State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

In the Company's international tax jurisdictions, numerous tax years remain subject to examination by tax authorities, including tax returns for 2015 and subsequent years in most of the Company's international tax jurisdictions.

There are no unrecognized tax benefits as of December 31, 2023 and 2022.

Other 

As of December 31, 2023, the Company had not provided foreign withholding taxes on approximately $5.2 million of undistributed earnings from certain foreign subsidiaries indefinitely invested outside the U.S.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company elected to account for GILTI tax in the period in which it is incurred and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, the Company recorded a value added tax ("VAT") recoverable, of which the short term portion is included in prepaid and other current assets on its consolidated balance sheet totaling $2.2 million and $1.7 million,

respectively, and the long-term portion is included in intangible and other assets, net, on its consolidated balance sheet totaling $2.3 million and $3.1 million, respectively. This VAT recoverable is related primarily to certain payments for the purchase and importation of gateway equipment in various international jurisdictions in connection with the Company's network upgrade work.