Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three months ended March 31, 2024, the Company's effective tax rate was negative 4%. The Company reported a tax charge on an overall pretax loss, with foreign entities reporting losses of $11.1 million. The effective tax rate for the three months ended March 31, 2024, was negatively impacted by excess tax limitations on stock-based compensation expense.

For the three months ended March 31, 2023, the Company's effective tax rate was 25%. The Company's foreign entities reported losses of $7.2 million for the three months ended March 31, 2023.

The Company’s effective tax rate could fluctuate on a quarterly basis due to the occurrence of significant and unusual or infrequent items, such as vesting of stock-based compensation or foreign currency gains and losses. The Company’s effective tax rate could also fluctuate due to changes in the valuation of its deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, the Company is occasionally subject to examination of its income tax returns by tax authorities in the jurisdictions it operates. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

The Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion and Profit Shifting released Pillar Two Model Rules (“Pillar Two”) for a global minimum tax. Many countries have enacted certain aspects of the Pillar Two framework with effective dates in 2024. Entities operating in countries where Pillar Two has been enacted are required to estimate Pillar Two top-up tax obligations beginning in the first quarter of 2024.

For the three months ended March 31, 2024, the Company did not have material Pillar Two top-up tax obligations impacting the Company’s estimated annual effective tax rate. The Company will continue to evaluate the impact of proposed and enacted legislation as new guidance becomes available.

As of March 31, 2024, and December 31, 2023, the amount of unrecognized tax benefits for uncertain tax positions was $20.9 million, excluding related liabilities for interest and penalties of $0.5 million.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $2.2 million, due to the settlement of various audits and the expiration of statutes of limitation.