Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income tax provision included the following components:

	Year Ended December 31,
(in thousands)	2021		2020		2019
Domestic	$	460,395	$	465,382	$	448,271
Foreign	54,959		28,543		74,312
Total	$	515,354	$	493,925	$	522,583

The provision for income taxes was composed of the following:

	Year Ended December 31,
(in thousands)	2021		2020		2019
Current:
Federal	$	44,805	$	26,855	$	44,824
State	6,626		12,738		9,554
Foreign	43,786		51,377		31,421
Deferred:
Federal	(32,449)		(12,203)		(8,833)
State	(1,691)		(2,119)		(965)
Foreign	(350)		(16,610)		(4,713)
Total	$	60,727	$	60,038	$	71,288

The reconciliation of the U.S. federal statutory tax rate to the consolidated effective tax rate was as follows:

	Year Ended December 31,
	2021		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
Nondeductible expenses	2.8		0.7		0.5
State income taxes, net of federal benefit	0.6		1.6		1.5
Foreign rate differential	0.6		0.4		0.8
Valuation allowance release	—		(0.8)		(1.3)
Benefit from tax planning and entity structuring activities	(1.3)		(1.5)		—
Research and development credits	(3.1)		(3.2)		(2.2)
Foreign-derived intangible income deduction	(4.0)		(2.8)		(3.8)
Stock-based compensation	(5.4)		(3.6)		(3.1)
Other	0.6		0.4		0.2
	11.8	%	12.2	%	13.6	%

The components of deferred tax assets and liabilities are as follows:

	December 31,
(in thousands)	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	47,235	$	47,551
Uncertain tax positions	35,574		18,565
Operating lease liabilities	30,634		34,803
Stock-based compensation	25,578		24,738
Employee benefits	12,902		13,290
Research and development credits	5,393		9,847
Allowance for doubtful accounts	3,522		3,193
Other	1,960		6,856
Valuation allowance	(14,936)		(15,398)
Total deferred tax assets	147,862		143,445
Deferred tax liabilities:
Other intangible assets	(173,895)		(147,960)
Operating lease right-of-use assets	(29,296)		(33,304)
Deferred revenue	(19,521)		(26,839)
Property and equipment	(5,785)		(6,052)
Accounting method change	(34)		(10,781)
Total deferred tax liabilities	(228,531)		(224,936)
Net deferred tax liabilities	$	(80,669)	$	(81,491)

The net decrease in the valuation allowance was primarily due to currency fluctuations on balances relating to foreign jurisdictions, partially 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, 2021, we had federal net operating loss carryforwards of $14.8 million, which are subject to limitations of their utilization. Losses totaling $13.4 million are not currently subject to expiration dates, while the remaining $1.4 million of losses expire between 2025 - 2037. Deferred tax assets of $2.2 million have been recorded for state operating loss carryforwards. These losses expire between 2031 - 2042, and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of $173.2 million, of which $141.3 million are not currently subject to expiration dates. The remainder, $31.9 million, expires between 2025 - 2037. We had tax credit carryforwards of $6.6 million, of which $1.1 million are subject to limitations on their utilization. Of these tax credit carryforwards, $1.0 million are not currently subject to expiration dates. The remainder, $5.6 million, expires in various years between 2023 - 2041.

In general, it is our intention to permanently reinvest all earnings in excess of previously taxed amounts. Substantially all of the pre-2018 earnings of our non-U.S. subsidiaries were taxed through the transition tax imposed as part of the Tax Cuts and Jobs Act of 2017 and post-2018 current earnings are taxed as part of global intangible low-taxed income tax expense. These taxes increase 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 $70.0 million, and we would anticipate the tax effect on those earnings to be immaterial.

The following is a reconciliation of the total amounts of unrecognized tax benefits:

	Year Ended December 31,
(in thousands)	2021		2020		2019
Unrecognized tax benefit as of January 1	$	24,075	$	49,085	$	22,827
Gross changes—acquisitions	—		(24,963)		26,914
Gross increases—tax positions in prior period	10,183		1,572		207
Gross decreases—tax positions in prior period	(2,281)		—		(1,743)
Gross increases—tax positions in current period	13,223		1,281		3,563
Reductions due to a lapse of the applicable statute of limitations	(3,226)		(3,502)		(2,230)
Changes due to currency fluctuation	(912)		994		(453)
Settlements	(1,421)		(392)		—
Unrecognized tax benefit as of December 31	$	39,641	$	24,075	$	49,085

We believe that it is reasonably possible that $3.5 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, 2021 were to be recognized, a benefit of $16.4 million would impact the effective tax rate.

We recognize interest and penalties related to income taxes as income tax expense. We recorded penalty expense of $1.8 million, $0.2 million and $0.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. We recorded interest income of $0.2 million for the year ended December 31, 2021 and interest expense of $0.3 million and less than $0.1 million for the years ended December 31, 2020, and 2019, respectively. As of December 31, 2021, we accrued a liability for penalties of $7.2 million and interest of $5.2 million. As of December 31, 2020, we accrued a liability for penalties of $5.5 million and interest of $5.4 million.

We are subject to taxation in the U.S. and various states and foreign jurisdictions. In the U.S., our only major tax jurisdiction, the 2018 - 2021 tax years are open to examination by the Internal Revenue Service.