Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of income (loss) before provision for income taxes are as follows (in millions):
The components of income tax (benefit) expense for the years ended December 31, 2022, 2021, and 2020, were as follows:
The tax effects of temporary differences that gave rise to a significant portion of the deferred tax assets and liabilities at December 31, 2022 and 2021, were as follows:
A reconciliation of our effective tax rate to the United States federal income tax rate were as follows:
During the year ended December 31, 2022, we recorded an income tax benefit of $2, which is primarily attributable to a non-recurring benefit of $5 for the release of a portion of our valuation allowance partially offset by U.S. state tax expense, and the tax expense recorded on the earnings of our profitable foreign subsidiaries. The valuation allowance release was due to taxable temporary differences available as a source of income to realize the benefit of certain pre-existing Toast deferred tax assets as a result of the Sling acquisition. Management has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets, which are composed principally of net operating loss, tax credit carryforwards and capitalized research and development costs. Management has determined that it is more likely than not that we will not recognize the benefits of our deferred tax assets and, as a result, a full valuation allowance has been recorded against our net deferred tax assets as of December 31, 2022 and 2021. The valuation allowance increased by $104, $52 and $50 during the years ended December 31, 2022, 2021 and 2020, respectively, primarily due to the operating losses incurred and tax credits generated, for the period ending December 31, 2022. As of December 31, 2022, we had U.S. federal net operating loss carryforwards of $597 which may be able to offset future income tax liabilities. Of the federal net operating loss carryforward $513 has an indefinite carryforward period, and $85 will expire at various dates through 2037. As of December 31, 2022, we had U.S. state net operating loss carryforwards of $573, of which $480 begin to expire in 2032 and the remaining $93 do not expire. As of December 31, 2022, we had U.S. federal tax credit carryforwards of $29 which expire between 2034 and 2042. As of December 31, 2022 we had U.S. state tax credit carryforwards of $17 which expire between 2031 and 2037. Ownership changes, as defined in the Internal Revenue Code Section 382, could limit the amount of U.S. net operating loss and tax credit carryforwards that can be utilized annually to offset future taxable income. Generally, an ownership change occurs when the ownership percentage of 5% or greater stockholders increases by more than 50% over a three-year period. The company's ability to utilize its federal and state tax attributes may be limited by ownership changes that have occurred in the past or may occur in the future. As of December 31, 2022, 2021, and 2020, we had immaterial tax reserves for uncertain tax positions, none of which would impact the effective tax rate if recognized. We will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2022, 2021, and 2020, we have accrued and recognized immaterial interest or penalties related to uncertain tax positions. We file income tax returns in the United States (federal, and various state jurisdictions), as well as various foreign jurisdictions. The federal, state and foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2019 through December 31, 2022. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities until utilized in a future period. As of December 31, 2022, the Company has not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences resulting from unremitted earnings for certain non-U.S. subsidiaries, which are permanently reinvested outside of the U.S. The amount of unrecognized deferred tax liability on these undistributed earnings is not material as of December 31, 2022.
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