| INCOME TAXES | INCOME TAXES The components of pretax income (loss) from continuing operations for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands): Year Ended December 31, 2022 2021 2020 United States $ (65,256) $ 60,875 $ (55,699) International (126,714) 27,150 (238,367) Income (loss) from continuing operations before provision (benefit) for income taxes $ (191,970) $ 88,025 $ (294,066) The Provision (benefit) for income taxes for the years ended December 31, 2022, 2021 and 2020 consisted of the following components (in thousands): Year Ended December 31, 2022 2021 2020 Current taxes: U.S. federal $ 161 $ 2,354 $ (180) State 704 1,629 1,719 International (7,554) (2,321) (1,942) Total current taxes (6,689) 1,662 (403) Deferred taxes: U.S. federal 31,132 (15,254) 32 State 20,307 (16,864) 114 International (2,340) (1,867) (7,247) Total deferred taxes 49,099 (33,985) (7,101) Provision (benefit) for income taxes (1) $ 42,410 $ (32,323) $ (7,504) (1) Amounts included in the Provision (benefit) for income taxes related to continuing operations. The items accounting for differences between the income tax provision (benefit) from continuing operations computed at the U.S. federal statutory rate and the Provision (benefit) for income taxes for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands): Year Ended December 31, 2022 2021 2020 U.S. federal income tax provision (benefit) at statutory rate $ (40,314) $ 18,485 $ (61,805) Foreign income and losses taxed at different rates (1) 9,035 5,000 8,608 State income taxes, net of federal benefits, and state tax credits 4,133 4,897 6,487 Change in valuation allowances 64,328 (50,695) (4,474) Effect of income tax rate changes on deferred items 443 815 618 Adjustments related to uncertain tax positions (13,062) 2,588 (15,518) Non-deductible stock-based compensation expense 2,191 2,727 3,803 Tax (windfalls)/shortfalls on stock-based compensation awards 2,741 (1,762) 3,876 Federal research and development credits, net of adjustments (812) (396) 6,043 Forgiveness of intercompany liabilities 1,468 (62) (2,863) Tax attribute expiration 5,519 — 19,962 Goodwill impairment 7,213 — 23,202 Observable price change on an other equity investment — (17,955) — Non-deductible or non-taxable items (473) 4,035 4,557 Provision (benefit) for income taxes $ 42,410 $ (32,323) $ (7,504) (1) Tax rates in foreign jurisdictions were generally lower than the U.S. federal statutory rate through December 31, 2022. This resulted in an adverse impact to the Provision (benefit) for income taxes in this rate reconciliation for the years ended December 31, 2022, 2021 and 2020 prior to the impact of valuation allowances, due to the net pretax losses from continuing operations in certain foreign jurisdictions with lower tax rates. The deferred income tax assets and liabilities consisted of the following components as of December 31, 2022 and 2021 (in thousands): December 31, 2022 2021 Deferred tax assets: Accrued expenses and other liabilities $ 37,397 $ 45,532 Operating lease obligation 5,602 10,890 Stock-based compensation 3,886 4,014 Net operating loss and tax credit carryforwards 135,743 140,787 Intangible assets, net 19,139 20,357 Investments 20,360 20,581 Convertible senior notes 4,638 5,929 Unrealized foreign currency exchange losses — 1,078 Capitalized research and development costs (1) 9,994 — Other 312 244 Total deferred tax assets 237,071 249,412 Less: Valuation allowances (204,462) (145,105) Deferred tax assets, net of valuation allowance 32,609 104,307 Deferred tax liabilities: Prepaid expenses and other assets (11,983) (14,605) Property, equipment and software, net (1,470) (9,511) Right-of-use asset (679) (7,293) Deferred revenue (8,027) (12,755) Total deferred tax liabilities (22,159) (44,164) Net deferred tax asset (liability) $ 10,450 $ 60,143 (1) The 2017 Tax Cuts and Jobs Act amended Internal Revenue Cost Section 174 to require taxpayers to capitalize certain research and experimental expenditures. This regulatory change is effective for amounts paid or incurred in tax years beginning after December 31, 2021. A new deferred tax asset has been established in relation to this law change and the capitalized Section 174 costs must be amortized over five years. We recognize deferred tax assets to the extent that they will be realizable through future reversals of existing taxable temporary differences, through taxable income in carryback years for the applicable jurisdictions or based on projections of future income for those jurisdictions that have achieved sustained profitability. In evaluating the need for a valuation allowance, management considers both positive and negative evidence that could affect its view of the future realization of deferred tax assets and places greater weight on recent and objectively verifiable current information. As of December 31, 2022, we were in a cumulative pre-tax loss position, adjusted for certain permanent items, in the U.S. Additionally, we do not have any sources of income that support utilization of our U.S. deferred tax assets. In analyzing all available evidence, management determined that it is not more likely than not that the U.S. deferred tax assets will be realized due to the significant negative evidence outweighing the positive evidence. As a result, for the year ended December 31, 2022, we recognized a valuation allowance against all U.S. federal and state deferred tax assets, which resulted in a $51.9 million charge to income tax expense. We continue to maintain a valuation allowance against substantially all of our foreign deferred tax assets. At December 31, 2021, we had demonstrated profit, which was considered to be a source of positive evidence. In analyzing all available evidence at the time, management determined there was sufficient positive evidence outweighing negative evidence to conclude that it was more likely than not that a portion of the U.S. deferred tax assets were realizable. As such, for the year ended December 31, 2021, we released $57.7 million of the valuation allowance against a portion of our U.S. federal and state deferred tax assets, resulting in a $50.3 million reduction to expense, and a $7.4 million adjustment to equity. We had $19.9 million of federal net operating loss carryforwards as of December 31, 2022 which will begin expiring in 2027. We had $82.3 million of state net operating loss carryforwards as of December 31, 2022, which will begin expiring in 2023. As of December 31, 2022, we had $533.1 million of foreign net operating loss carryforwards, a significant portion of which carry forward for an indefinite period. We are subject to taxation in the United States, state jurisdictions and foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording the related income tax assets and liabilities. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not criterion, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table summarizes activity related to our gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2022, 2021 and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 Beginning Balance $ 49,502 $ 48,960 $ 64,361 Increases related to prior year tax positions — 5,105 8,389 Decreases related to prior year tax positions (124) (3,138) (22,541) Increases related to current year tax positions 3,028 1,887 1,994 Decreases based on settlements with taxing authorities (109) — — Decreases due to lapse of statute limitations (12,410) (2,530) (5,640) Foreign currency translation (715) (782) 2,397 Ending Balance $ 39,172 $ 49,502 $ 48,960 The total amount of unrecognized tax benefits as of December 31, 2022, 2021 and 2020 that, if recognized, would affect the effective tax rate are $9.8 million, $18.7 million and $19.9 million. We recognized $0.8 million, $1.0 million and $1.0 million of interest and penalties within Provision (benefit) for income taxes on our Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020. Total accrued interest and penalties as of December 31, 2022 and 2021 were $2.1 million and $5.6 million, and are included within Other non-current liabilities in our Consolidated Balance Sheets. We are currently under audit by several foreign jurisdictions. It is likely that the examination phase of some of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control, which influence the progress and completion of those audits. We recognized income tax benefits of $12.5 million, $3.2 million and $8.9 million for the years ended December 31, 2022, 2021 and 2020, as a result of new information that impacted our estimates of the amounts that are more likely than not of being realized upon settlement of the related tax positions and due to expirations of the applicable statutes of limitations. We are subject to claims for tax assessments by foreign jurisdictions, including a proposed assessment for $113.5 million, inclusive of estimated incremental interest from the original assessment. We believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend ourselves in that matter. In addition to any potential increases in our liabilities for uncertain tax positions from the ultimate resolution of that assessment, we believe that it is reasonably possible that reductions of up to $11.5 million in unrecognized tax benefits may occur within the 12 months following December 31, 2022 upon closing of income tax audits or the expiration of applicable statutes of limitations. In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations or remit such earnings in a tax-efficient manner. Additionally, an actual repatriation from our non-U.S. subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the related deferred tax liabilities recognized as of December 31, 2022 and 2021 are immaterial, we do not intend to distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution. Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting |
