Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income tax provision included the following components:

	Year Ended December 31,
(in thousands)	2024		2023		2022
Domestic	$	544,979	$	458,581	$	504,797
Foreign	173,059		133,557		70,518
Total	$	718,038	$	592,138	$	575,315

The provision for income taxes was composed of the following:

	Year Ended December 31,
(in thousands)	2024		2023		2022
Current:
Federal	$	144,537	$	115,942	$	103,007
State	20,265		11,759		11,286
Foreign	57,947		55,332		68,028
Deferred:
Federal	(78,139)		(79,251)		(94,398)
State	(6,318)		(8,145)		(9,647)
Foreign	4,054		(3,911)		(26,671)
Total	$	142,346	$	91,726	$	51,605

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

	Year Ended December 31,
	2024		2023		2022
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
Nondeductible expenses	3.5		2.1		2.3
State income taxes, net of federal benefit	1.5		0.6		0.9
Foreign rate differential	0.7		0.4		—
Stock-based compensation	0.3		—		(1.5)
U.S. federal tax (benefit) expense on foreign earnings	0.1		(1.2)		(2.4)
Benefit from tax planning and entity structuring activities	—		(0.3)		(2.5)
Research and development credits	(3.0)		(3.2)		(3.2)
Foreign-derived intangible income deduction	(4.2)		(4.1)		(5.7)
Other	(0.1)		0.2		0.1
	19.8	%	15.5	%	9.0	%

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

	December 31,
(in thousands)	2024		2023
Deferred tax assets:
Research and experimentation capitalization	$	211,192	$	148,355
Uncertain tax positions	55,583		52,685
Net operating loss carryforwards	31,304		34,907
Stock-based compensation	29,712		33,473
Operating lease liabilities	24,967		28,380
Debt obligation basis difference	20,289		30,289
Employee benefits	12,066		13,662
Other	13,459		9,752
Valuation allowance	(16,892)		(17,608)
Total deferred tax assets	381,680		333,895
Deferred tax liabilities:
Other intangible assets	(177,270)		(202,404)
Operating lease right-of-use assets	(23,407)		(26,878)
Deferred revenue	(11,367)		(12,080)
Property and equipment	(3,034)		(3,607)
Other	—		—
Total deferred tax liabilities	(215,078)		(244,969)
Net deferred tax assets	$	166,602	$	88,926

The net decrease in the valuation allowance was primarily due to $0.9 million of currency fluctuations on balances relating to foreign jurisdictions, partially offset by a $0.2 million increase 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, 2024, we had federal net operating loss carryforwards of $0.7 million, which are subject to limitations of their utilization and expire between 2036 - 2037. Deferred tax assets of $0.9 million have been recorded for state operating loss carryforwards. These losses expire between 2027 - 2042, and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of $122.3 million, of which $89.1 million are not currently subject to expiration dates. The remainder, $33.2 million, expires between 2030 - 2039. We had tax credit carryforwards of $8.5 million, of which $1.9 million are not currently subject to expiration dates and $6.6 million expire in various years between 2025 - 2044. Of these tax credit carryforwards, $0.7 million are subject to limitations on their utilization.

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 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. Unrecognized provisions for taxes on indefinitely reinvested undistributed earnings of foreign subsidiaries would not be significant.

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

	Year Ended December 31,
(in thousands)	2024		2023		2022
Unrecognized tax benefit as of January 1	$	54,884	$	45,772	$	39,641
Gross changes—acquisitions	—		—		—
Gross increases—tax positions in prior period	146		—		403
Gross decreases—tax positions in prior period	(267)		(1,782)		(2,780)
Gross increases—tax positions in current period	12,302		14,814		13,905
Reductions due to a lapse of the applicable statute of limitations	(2,998)		(3,236)		(3,743)
Changes due to currency fluctuation	(6,516)		(684)		(1,654)
Settlements	—		—		—
Unrecognized tax benefit as of December 31	$	57,551	$	54,884	$	45,772

We believe that it is reasonably possible that $32.2 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, 2024 were to be recognized, a benefit of $13.0 million would impact the effective tax rate.

We recognize interest and penalties related to unrecognized tax benefits as income tax expense. We recorded penalty expense of $0.1 million, $0.7 million and $0.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. We recorded interest income of $0.2 million for the year ended December 31, 2024, interest income of $0.3 million for the year ended December 31, 2023 and interest expense of $0.1 million for the year ended December 31, 2022. As of December 31, 2024, we accrued a liability for penalties of $8.8 million and interest of $2.3 million. As of December 31, 2023, we accrued a liability for penalties of $8.7 million and interest of $2.6 million.

The OECD has introduced a two-pillar approach to address the tax challenges arising from the digitalization of the economy. Pillar Two defines global minimum tax rules and includes a 15 percent minimum tax rate. We have not recorded any income tax provision related to Pillar Two for the year ended December 31, 2024 based on the laws currently enacted in the jurisdictions in which we operate.

We are subject to taxation in the United States and various states and foreign jurisdictions. In the United States, our only major tax jurisdiction, the 2017 - 2024 tax years are open to examination by the Internal Revenue Service.