Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of our income tax expense are as follows (in thousands):
The difference between the income tax expense at the federal statutory rate and income tax expense in the consolidated statements of operations is as follows:
The components of our net deferred tax assets (liabilities) are as follows (in thousands):
A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest expense) is as follows (in thousands):
Our effective income tax rates were (11.1)%, 4.4% and 9.5% for the years ended December 31, 2021, 2020 and 2019, respectively. Our effective tax rates were below the statutory rate primarily due to tax windfall benefits from employee stock- based payment transactions, research and development tax credits claimed and foreign derived intangible income deductions, partially offset by the impact of foreign withholding taxes, nondeductible compensation and other nondeductible expenses. We recognize a valuation allowance if, based on the weight of available evidence, both positive and negative, it is more likely than not that some portion, or all, of net deferred tax assets will not be realized. Due to the uncertainty of realization of certain deferred tax assets acquired in 2017 related to our Canadian net operating losses and research and development tax credits, we established a valuation allowance of $0.3 million during the second quarter of 2019, which remained at $0.3 million as of December 31, 2021 and 2020. During 2020, we established a valuation allowance of $1.3 million for state research and development tax credit carryforwards, which remained at $1.3 million as of December 31, 2020. This valuation allowance increased to $1.9 million as of December 31, 2021. We apply guidance for uncertainty in income taxes that requires the application of a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, this guidance permits us to recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is more likely than not to be realized upon settlement. We recorded an increase to the unrecognized tax benefits of $1.4 million, $1.1 million and $0.6 million primarily for research and development tax credits claimed during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021 and 2020, we accrued $0.2 million and $0.1 million of total interest related to unrecognized tax benefits, respectively. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. We are not aware of any events that make it reasonably possible that there would be a significant change in our unrecognized tax benefits over the next twelve months. Our cumulative liability for uncertain tax positions was $5.4 million and $4.2 million as of December 31, 2021 and 2020, respectively, and if recognized, would reduce our income tax expense and the effective tax rate. We file income tax returns in the United States and Canada. Our tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. We are no longer subject to U.S. income tax examinations for years prior to 2018, with the exception that operating loss carryforwards generated prior to 2018 may be subject to tax audit adjustment. We are generally no longer subject to state and local income tax examinations by tax authorities for years prior to 2018. On October 13, 2021, the Internal Revenue Service commenced an examination of our federal income tax return for 2018, which is ongoing. The anticipated completion date of the Internal Revenue Service examination cannot be estimated at this time. As of December 31, 2021, we had gross federal net operating loss carryforwards of $4.2 million, which are scheduled to begin to expire in 2030. As of December 31, 2021, we had state net operating loss carryforwards of $1.9 million, which are scheduled to begin to expire in 2034. As of December 31, 2021, we had federal research and development tax credit carryforwards of $5.9 million, on a more likely than not basis, which are scheduled to begin to expire in 2041. As of December 31, 2021, we had state research and development tax credit carryforwards of $3.8 million, on a more likely than not basis, which are scheduled to begin to expire in 2024. The federal net operating loss carryforward arose in connection with the 2013 acquisition of EnergyHub. Utilization of net operating loss carryforwards may be subject to annual limitations due to ownership change limitations as provided by the Internal Revenue Code of 1986, as amended.
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