

	Year Ended December 31,
(in thousands)	2019			2018			2017
Current:
Federal	$	44,824		$	58,138		$	112,414
State	9,554			12,888			7,879
Foreign	31,421			30,359			18,843
Deferred:
Federal	(8,833		)	(20,764		)	(7,387		)
State	(965		)	(2,901		)	(584		)
Foreign	(4,713		)	(10,010		)	5,278
Total	$	71,288		$	67,710		$	136,443



	Year Ended December 31,
	2019		2018		2017
Federal statutory tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	1.5		1.5		1.1
Foreign rate differential	0.8		0.8		0.1
Uncertain tax positions	(0.2	)	0.5		0.3
U.S. tax reform enactment	(0.4	)	0.2		4.5
Valuation allowance release	(1.3	)	—		—
Domestic production activity benefit	—		—		(2.6	)
Benefit from entity structuring activities	—		(1.4	)	—
Research and development credits	(2.2	)	(2.3	)	(1.4	)
Stock-based compensation	(3.1	)	(3.3	)	(3.1	)
Foreign-derived intangible income deduction	(3.8	)	(3.9	)	—
Other	1.3		0.8		0.6
	13.6	%	13.9	%	34.5	%

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Reform). Tax Reform made broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time federal income tax on certain unrepatriated earnings of foreign subsidiaries (transition tax); (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) creating a new provision designed to tax global intangible low-taxed income (GILTI) which allows for the possibility of using foreign tax credits (FTCs) and a deduction of up to 50 percent to offset the income tax liability (subject to some limitations); (5) repealing the domestic production activity deduction; (6) creating the foreign-derived intangible income deduction; (7) creating the base erosion anti-abuse tax, a new minimum tax; (8) allowing for full expensing of qualified property through bonus depreciation; and (9) creating limitations on the deductibility of certain executive compensation.

The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provides guidance on accounting for the tax effects of Tax Reform. SAB 118 provided a measurement period that was limited to one year from enactment for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, throughout the measurement period, a company must reflect the income tax effects of those aspects of Tax Reform for which the accounting under ASC 740 was complete in the financial statements. To the extent that a company’s accounting for certain income tax effects of Tax Reform was incomplete, but a reasonable estimate was able to be made, the company must record a provisional estimate in the financial statements. If a company could not determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the tax laws that were in effect immediately before the enactment of Tax Reform.

As further discussed below, we finalized our provisional Tax Reform calculations as of the end of the measurement period, based on guidance and information available as of the reporting date. The U.S. government has not yet issued final guidance related to a portion of the new rules enacted as part of Tax Reform. Subsequent adjustments, if any, will be recorded in the period in which guidance is finalized.

Our accounting for the impact of the reduction in the U.S. federal corporate tax rate on our deferred tax assets and liabilities is complete. Tax Reform reduced the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we recorded a net adjustment to deferred income tax expense of $1.9 million for the year ended December 31, 2017 to revalue our deferred tax assets and liabilities. No further adjustments were recorded for the years ended December 31, 2019 and 2018.

Our accounting for the transition tax is complete. Reasonable estimates of certain effects were calculated and a provisional adjustment of $16.0 million was recorded in the December 31, 2017 financial statements. To determine the amount of the transition tax, we determined, in addition to other factors, the amount of post-1986 earnings and profits (E&P) of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. Based on revised E&P calculations updated during the measurement period, we recognized an additional measurement-period adjustment for the year ended December 31, 2018 of $0.9 million to the transition tax obligation and a corresponding adjustment to tax expense. In February 2019, the U.S. government published final regulations relating to transition tax. In accordance with the final regulations, we recognized a post-measurement period reduction for the year ended December 31, 2019 of $1.8 million to the transition tax obligation and a corresponding adjustment to tax expense, resulting in a final transition tax obligation of $15.1 million. We have elected to pay this liability over eight years; however, in accordance with IRS issued guidance, tax overpayments from the year ended

Our accounting for the indefinite reinvestment assertion is complete. In general, it is our intention to permanently reinvest all earnings in excess of previously taxed amounts. As part of Tax Reform, substantially all of the previous earnings of our non-U.S. subsidiaries were taxed through the transition tax and current earnings are taxed as part of GILTI tax expense. These taxes increased our previously taxed earnings and allow for the repatriation of the majority of our foreign earnings without any residual U.S. federal tax. While we believe that the financial reporting bases may be greater than the tax bases of investments in foreign subsidiaries for any earnings in excess of previously taxed amounts, such amounts are considered permanently reinvested. The cumulative temporary difference related to such permanently reinvested earnings is approximately $32.8 million and we would anticipate the tax effect on those earnings to be immaterial as a result of Tax Reform. During the year ended December 31, 2018, we repatriated $144.3 million of foreign cash. We did not make any adjustments related to our indefinite reinvestment assertion during the years ended December 31, 2019 and 2018.

Our accounting policy choice for GILTI is complete. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the period cost method) or (2) factoring such amounts into the measurement of our deferred taxes (the deferred method). We selected the period cost method and recorded GILTI tax expense of $0.6 million and $0.4 million in the financial statements for the years ended December 31, 2019 and 2018, respectively.



	December 31,
(in thousands)	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	35,044		$	39,290
Operating lease liabilities	26,628			—
Stock-based compensation	24,254			20,464
Uncertain tax positions	19,227			17,823
Employee benefits	9,392			15,048
Research and development credits	5,865			5,951
Other	6,309			4,121
Valuation allowance	(17,524		)	(21,676		)
Total deferred tax assets	109,195			81,021
Deferred tax liabilities:
Other intangible assets	(99,193		)	(38,787		)
Operating lease right-of-use assets	(25,648		)	—
Accounting method change	(21,396		)	(31,626		)
Deferred revenue	(13,744		)	(12,021		)
Property and equipment	(3,780		)	(2,034		)
Total deferred tax liabilities	(163,761		)	(84,468		)
Net deferred tax liabilities	$	(54,566	)	$	(3,447	)

The valuation allowance decreased by $4.2 million for the year ended December 31, 2019. Due to an enacted law change in a foreign jurisdiction during the year ended December 31, 2019, certain expenses will become nondeductible for tax purposes in 2020, resulting in the ability to utilize net operating losses in a jurisdiction where we previously determined utilization was remote. Considering all positive and negative evidence, we determined significant positive evidence exists to release $6.7 million of valuation allowance previously established. This decrease in the valuation allowance is offset by other increases in unrealizable tax assets. As of each reporting date, management considers new evidence, both positive and negative, that could affect the future realization of deferred tax assets. If management determines it is more likely than not that an asset, or a portion of an asset, will not be realized, a valuation allowance is recorded.

As of December 31, 2019, we had federal net operating loss carryforwards of $4.2 million. These losses expire between 2025 - 2037, and are subject to limitations on their utilization. Deferred tax assets of $0.3 million have been recorded for state operating loss carryforwards. These losses expire between 2030 - 2038, and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of $142.0 million, of which $113.2 million are not currently subject to expiration dates. The remainder, $28.8 million, expires between 2024 - 2036. We had tax credit carryforwards of $4.1 million, of which $1.2 million are subject to limitations on their utilization. Approximately $0.6 million of these tax credit



	Year Ended December 31,
(in thousands)	2019			2018			2017
Unrecognized tax benefit as of January 1	$	22,827		$	19,657		$	15,209
Gross increases—acquisitions	26,914			—			—
Gross increases—tax positions in prior period	207			1,229			905
Gross decreases—tax positions in prior period	(1,743		)	(376		)	(765		)
Gross increases—tax positions in current period	3,563			4,014			3,757
Reductions due to a lapse of the applicable statute of limitations	(2,230		)	(994		)	(847		)
Changes due to currency fluctuation	(453		)	(703		)	1,414
Settlements	—			—			(16		)
Unrecognized tax benefit as of December 31	$	49,085		$	22,827		$	19,657

We believe that it is reasonably possible that approximately $8.3 million of uncertain tax positions included in the table above may be resolved within the next twelve months as a result of settlement with a taxing authority or a lapse of the statute of limitations. If the unrecognized tax benefit as of December 31, 2019 were to be recognized, a benefit of $47.3 million would impact the effective tax rate.

We recognize interest and penalties related to income taxes as income tax expense. During the years ended December 31, 2019, 2018 and 2017, we recorded penalty expense of $0.5 million, $0.8 million and $1.1 million, respectively. We recorded interest expense of less than $0.1 million, interest income of $0.1 million and interest expense of $0.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, we accrued a liability for penalties of $11.7 million and interest of $6.6 million. As of December 31, 2018, we accrued a liability for penalties of $4.7 million and interest of $4.0 million.