Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following is a geographical breakdown of income (loss) before the provision for income taxes:

	Year Ended December 31,
	2022		2021		2020
	(In thousands)
Domestic	$	369	$	67,103	$	34,714
Foreign	(2,822)		(1,096)		(5,365)
Income (loss) before provision for income taxes	$	(2,453)	$	66,007	$	29,349

The benefit from income taxes consisted of the following:

	Year Ended December 31,
	2022		2021		2020
	(In thousands)
Current:
Federal	$	17,973	$	(7,841)	$	1,874
State	8,024		187		1,733
Foreign	192		(234)		647
Total current income taxes	26,189		(7,888)		4,254
Deferred:
Federal	(25,753)		(2,708)		(3,868)
State	(7,976)		(1,217)		(2,494)
Foreign	(561)		(29)		(737)
Total deferred income taxes	(34,290)		(3,954)		(7,099)
Total benefit from income taxes	$	(8,101)	$	(11,842)	$	(2,845)

The benefit from income taxes differs from the amount computed by applying the statutory federal tax rate as follows:

	Year Ended December 31,
	2022		2021		2020
	(In thousands)
U.S. federal tax provision at statutory rate	$	(515)	$	13,861	$	6,163
State taxes	38		(814)		(601)
Section 162(m) limitation	3,071		6,382		2,550
Non-deductible expenses	102		363		325
Uncertain tax positions	(776)		(835)		(394)
Share-based compensation tax benefit	(3,264)		(20,717)		(6,929)
Research tax credits	(6,948)		(5,170)		(4,038)
Restructuring impact	—		(6,116)		—
Foreign derived intangible income deduction	(753)		(68)		(204)
Global intangible low-taxed income inclusion	960		195		157
Foreign rate differential	186		17		(102)
Foreign branch taxes	(51)		(9)		288
Transaction cost	68		1,097		422
Other	(219)		(28)		(482)
Total benefit from income taxes	$	(8,101)	$	(11,842)	$	(2,845)

The Company has executed various global operational centralization activities and legal entity rationalization in recent years. During the year ended December 31, 2022, the Company underwent legal entity rationalization through tax free reorganizations. During the year ended December 31, 2021, the Company recognized a benefit on the release of previously recorded uncertain tax positions related to the sale of certain intellectual property rights by Aesynt B.V. to Omnicell, Inc. and a gain on the transfer of certain assets to Omnicell Pty Ltd, which resulted in a tax benefit, net of tax expense, of $6.1 million.

On August 16, 2022, the Inflation Reduction Act of 2022, (the “IRA”), was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax for tax years beginning after December 31, 2022, levies a 1% excise tax on net stock repurchases after December 31, 2022, and provides tax incentives to promote clean energy. The Company is in the process of analyzing the potential impacts of the IRA’s provisions on its business. However, these provisions are not currently expected to have a material impact on the Company’s results of operations or financial position.

On March 11, 2021, the President of the United States signed into law the “American Rescue Plan Act of 2021” (the “ARP Act”), which provides additional economic stimulus and tax credits, including the expansion and modification of the employee retention tax credit enacted by the Coronavirus Aid, Relief and Economic Security Act and the refundable tax credits for COVID-related paid sick and family leave enacted by the Family First Act. The ARP Act further expands the “covered employees” definition for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, used in determining the limitation on the deduction for excessive employee remuneration rules to be applicable for taxable years beginning after December 31, 2026. The provisions of the ARP Act did not have a material impact on the Company’s income taxes.

Significant components of the Company’s deferred tax assets (liabilities) were as follows:

	December 31,
	2022		2021
	(In thousands)
Deferred tax assets (liabilities):
Deferred revenues	$	13,514	$	6,892
Share-based compensation	12,064		9,265
Inventory-related items	4,567		4,834
Tax credit carryforwards	12,173		15,311
Reserves and accruals	6,244		8,699
Loss carryforwards	10,255		14,451
Lease liability	12,884		13,179
Convertible debt	15,037		543
Capitalized research and development	30,881		—
Other, net	1,557		1,281
Gross deferred tax assets	119,176		74,455
Valuation allowance	—		—
Total net deferred tax assets	119,176		74,455
Intangibles	(36,357)		(41,158)
Depreciation and amortization	(37,286)		(38,924)
Prepaid expenses	(15,574)		(17,775)
Right-of-use assets	(9,725)		(12,039)
Other, net	—		(381)
Total deferred tax liabilities	(98,942)		(110,277)
Net deferred tax assets (liabilities)	$	20,234	$	(35,822)

Deferred income tax assets (liabilities) are provided for temporary differences that will result in future tax deductions or future taxable income, as well as the future benefit of tax credit carryforwards. The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. As of December 31, 2022 and 2021, the Company does not have a valuation allowance against any of its deferred tax assets.

As of December 31, 2022, the Company had $10.9 million of federal net operating losses and $15.0 million of state net operating loss carryforwards expiring at various dates beginning in 2024, and $22.2 million of foreign net operating losses carried forward indefinitely. For income tax purposes, the Company has no federal research tax credit carryforward and a California research tax credit carryforward of $20.0 million. California credits are carried forward indefinitely to reduce cash taxes payable.

It is the Company’s practice and intention to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of December 31, 2022, the Company has not made a provision for U.S. federal income, withholding, and state income taxes on the outside basis difference related to certain foreign subsidiaries because earnings are intended to be indefinitely reinvested in operations outside the U.S.

The Company files income tax returns in the United States and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities, including major jurisdictions such as the United States, Germany, Italy, France, and the United Kingdom. With few exceptions, as of December 31, 2022, the Company was no longer subject to U.S., state, and foreign tax examinations for years before 2019, 2018, and 2018, respectively.

The aggregate change in the balance of gross unrecognized tax benefit, which excludes interest and penalties, for the years ended December 31, 2022, 2021, and 2020:

	(In thousands)
Balance as of December 31, 2019	$	16,775
Increases related to tax positions taken during a prior period	88
Decreases related to tax positions taken during the prior period	—
Increases related to tax positions taken during the current period	2,294
Decreases related to settlements	—
Decreases related to expiration of statute of limitations	(911)
Balance as of December 31, 2020	18,246
Increases related to tax positions taken during a prior period	40
Decreases related to tax positions taken during the prior period	(8,908)
Increases related to tax positions taken during the current period	1,219
Decreases related to settlements	—
Decreases related to expiration of statute of limitations	(1,636)
Balance as of December 31, 2021	8,961
Increases related to tax positions taken during a prior period	3
Decreases related to tax positions taken during the prior period	(59)
Increases related to tax positions taken during the current period	1,629
Decreases related to settlements	—
Decreases related to expiration of statute of limitations	(1,238)
Balance as of December 31, 2022	$	9,296

The total amount of gross unrecognized tax benefit that, if realized, would favorably affect the Company’s effective income tax rate in future periods, was $9.3 million and $9.0 million as of December 31, 2022 and 2021, respectively. The Company recognizes interest and penalties related to uncertain tax positions in interest and other income (expense), net in the Consolidated Statements of Operations, accruing $0.2 million, $0.3 million, and $0.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. Accrued interest and penalties are included within other long-term liabilities on the Consolidated Balance Sheets. The combined amount of cumulative accrued interest and penalties was approximately $0.2 million, $0.6 million, and $1.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. The Company does not believe there will be any significant changes in its unrecognized tax positions over the next twelve months.