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Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes

The provision for (benefit from) income taxes consists of the following (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Current provision:
 
 
 
 
 
Federal
$
391

 
$
(336
)
 
$
(445
)
State
204

 
163

 
137

Foreign
15,657

 
22,204

 
9,512

 
16,252

 
22,031

 
9,204

Deferred provision:
 
 
 
 
 
Federal
(3,481
)
 
(2,026
)
 
(5,934
)
State
(882
)
 
(377
)
 
(886
)
Foreign
(571,402
)
 
(31,948
)
 
1,056

 
(575,765
)
 
(34,351
)
 
(5,764
)
(Benefit from) provision for income taxes
$
(559,513
)
 
$
(12,320
)
 
$
3,440



The components of income (loss) before income taxes by U.S. and foreign jurisdictions were as follows (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
United States
$
(48,558
)
 
$
(153,290
)
 
$
(61,259
)
Foreign
115,743

 
114,266

 
(52,147
)
Total
$
67,185

 
$
(39,024
)
 
$
(113,406
)


The effective income tax rate differs from the federal statutory income tax rate applied to the income (loss) before income taxes due to the following (in thousands): 
 
Year Ended December 31,
 
2019
 
2018
 
2017
Tax computed at U.S. federal statutory rate
$
14,109

 
$
(8,195
)
 
$
(38,558
)
State taxes, net of federal benefit
122

 
98

 
64

Tax rate differential for international subsidiaries
(5,005
)
 
(41,429
)
 
23,532

Stock-based compensation
(108,023
)
 
(93,073
)
 
(116,953
)
Tax credits
(51,237
)
 
(44,695
)
 
(21,038
)
Foreign restructuring and amortization

 
(625,292
)
 
2,794

Non-deductible expenses
21,953

 
9,657

 
2,833

Tax effects associated with Topic 606

 
(23,073
)
 
3,314

Other
448

 
408

 
607

Valuation allowance
(431,880
)
 
813,274

 
146,845

(Benefit from) provision for income taxes
$
(559,513
)
 
$
(12,320
)
 
$
3,440



Significant components of our deferred tax assets are shown below (in thousands). A valuation allowance has been recognized to offset our deferred tax assets, as necessary, by the amount of any tax benefits that, based on evidence, are not expected to be realized.

 
December 31,
 
2019
 
2018
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
734,755

 
$
610,314

Credit carryforwards
171,856

 
120,594

Lease liability
108,224

 

Depreciation and amortization
577,599

 
594,496

Other
96,535

 
103,917

Total deferred tax assets
1,688,969

 
1,429,321

Less valuation allowance
(918,596
)
 
(1,342,981
)
 
770,373

 
86,340

Deferred tax liabilities:
 
 
 
Right of use asset
(101,091
)
 

Other
(73,818
)
 
(67,686
)
Net deferred tax assets
$
595,464

 
$
18,654



The unremitted earnings of our foreign subsidiaries are not considered indefinitely reinvested, except in certain designated jurisdictions in which the resident entity is a service provider that is not expected to generate substantial amounts of cash in excess of what may be reinvested by the local entity. We have not provided for state income or withholding taxes on the undistributed earnings of foreign subsidiaries which are considered indefinitely invested outside of the U.S. The amount of unrecognized deferred tax liability on these undistributed earnings is not material as of December 31, 2019.

As of December 31, 2019, we had U.S. federal net operating loss and federal tax credit carryforwards of approximately $2.9 billion and $125.7 million, respectively. The federal tax credits and a portion of the federal net operating loss carryforwards will begin to expire in 2024 if not utilized. In addition, we had state net operating loss and state tax credit carryforwards of approximately $1.7 billion and $91.7 million, respectively. The state net operating loss will begin to expire in 2020 if not utilized, however the tax effected amount due to expire in 2020 is immaterial. State tax credits and a portion of the federal net operating loss carryforwards can be carried forward indefinitely. Utilization of our net operating loss and credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization.
 
We maintain a full valuation allowance against our U.S. deferred tax assets as of December 31, 2019. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. Due to cumulative losses over recent years and based on all available evidence, we have determined that it is more likely than not that our U.S. deferred tax assets will not be realized as of December 31, 2019. We recognized an income tax benefit of $574.2 million due to the release of the valuation allowance on the Irish deferred tax assets for the year ended December 31, 2019. These Irish deferred tax assets were created primarily as a result of the difference between the tax basis in our Irish subsidiary and the cost reported in our consolidated financial statements resulting from the transfer of intangible assets to the Irish subsidiary as part of our foreign restructuring in 2018. Management applied significant judgment in assessing the positive and negative evidence available in the determination of the amount of deferred tax assets that were more-likely-than-not to be realized in the future. The $424.4 million decrease in the 2019 valuation allowance was primarily attributable to the release of the valuation allowance on the Irish deferred tax assets. The $759.7 million increase in the 2018 valuation allowance was primarily attributable to an increase of approximately $590 million in deferred tax assets that are not realizable related to our foreign restructuring completed during 2018 giving rise to foreign amortizable assets. The $106.9 million decrease in the 2017 valuation allowance was primarily attributable to remeasuring the U.S. net deferred tax assets at the applicable tax rate of 21% in accordance with the Tax Act, offset by increases in deferred tax assets primarily related to net operating losses. To the extent sufficient positive evidence becomes available, we may release a portion, or all, of our valuation allowance in one or more future periods. A release of the valuation allowance, if any, would result in the recognition of certain deferred tax assets and a material income tax benefit for the period in which such release is recorded.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Balance, beginning period
$
27,591

 
$
27,648

 
$
18,440

Tax positions taken in prior period:
 
 
 
 
 
Gross increases
1,516

 
3,721

 
398

Gross decreases

 
(2,896
)
 

Tax positions taken in current period:
 
 
 
 
 
Gross increases
7,682

 
5,796

 
8,810

Lapse of statute of limitations

 
(1,078
)
 

Settlements

 
(5,600
)
 

Balance, end of period
$
36,789

 
$
27,591

 
$
27,648


 
As of December 31, 2019, we had gross unrecognized tax benefits of approximately $36.8 million, of which $6.1 million would impact the effective tax rate, if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. Accrued interest and penalties included in our liability related to unrecognized tax benefits were $0.8 million and $0.3 million at December 31, 2019 and 2018, respectively. The amount of unrecognized tax benefits could be reduced upon expiration of the applicable statutes of limitations. The potential reduction in unrecognized tax benefits during the next 12 months is not expected to be material. Interest and penalties accrued on these uncertain tax positions are recognized as income tax expense and will be released upon the expiration of the statutes of limitations. These amounts are also not material for any periods presented.
 
We are subject to taxation in the United States and foreign jurisdictions. As of December 31, 2019, our tax years 2004 to 2018 remain subject to examination in most jurisdictions.
 
There are differing interpretations of tax laws and regulations, and as a result, disputes may arise with tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We periodically evaluate our exposures associated with our tax filing positions. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations, and we do not anticipate a significant impact to our gross unrecognized tax benefits within the next 12 months related to these years. Although the timing of the resolution, settlement, and closure of any audit is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years that remain subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.