Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 12 – INCOME TAXES

For the three and six months ended June 30, 2023, the Company recorded an income tax expense of $5.1 million and $4.8 million on a pretax loss of $34.3 million and $67.5 million, respectively, which resulted in an effective tax rate of (14.9)% and (7.1)%, respectively. The income tax expense for the three and six months ended June 30, 2023 was primarily related to foreign withholding taxes, foreign income taxes, U.S. federal income taxes, and state income taxes.

For the three and six months ended June 30, 2022, the Company recorded an income tax expense of $8.4 million and $10.5 million on a pretax loss of $22.6 million and $51.0 million, respectively, which resulted in an effective tax rate of (37.2)% and (20.5)%, respectively. The income tax expense for the three months ended June 30, 2022 was primarily related to foreign withholding taxes, U.S. federal income taxes, and state income taxes; whereas for the six months ended June 30, 2022, it was primarily related to foreign withholding taxes and foreign income taxes.

As of June 30, 2023, gross unrecognized tax benefits of $19.3 million decreased by $0.1 million compared to December 31, 2022. Of the $19.3 million, $8.7 million would affect the effective tax rate, if recognized. The Company is unable to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease.

It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company recognized an immaterial amount of interest and penalties related to unrecognized tax benefits for the three and six months ended June 30, 2023, and there was no interest and penalties recognized for the three and six months ended June 30, 2022. Accrued interest and penalties were $0.1 million as of June 30, 2023 and December 31, 2022.

As of June 30, 2023, the Company’s 2018 through 2023 tax years are generally open and subject to potential examination in one or more jurisdictions. In addition, in the United States, any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination.

On July 21, 2023, the U.S. Treasury Department issued Notice 2023-55 announcing temporary relief for taxpayers from certain provisions in the final foreign tax credit regulations released in 2022. The Company expects that the effect of this notice will be a net income tax benefit due to an increase in the Company’s foreign tax credits, partially offset by a decrease of its deductible withholding tax expense for the current year and for the year ended December 31, 2022.