Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

The components of pretax income are summarized as follows (in millions):

	Years Ended December 31,
	2022		2021		2020
Domestic	$	509.5	$	264.6	$	204.2
Foreign	26.8		45.5		61.0
Total pretax income	$	536.3	$	310.1	$	265.2

The provision (benefit) for income taxes is summarized as follows (in millions):

	Years Ended December 31,
	2022		2021		2020
Current provision (benefit):
Federal	$	223.6	$	63.4	$	73.4
States	23.9		15.9		20.3
Foreign	36.2		48.2		(21.6)
Total current provision (benefit)	283.7		127.5		72.1
Deferred (benefit) provision:
Federal	(199.3)		(54.3)		(58.7)
States	(13.6)		(4.1)		(6.6)
Foreign	(10.3)		(11.7)		0.6
Total deferred (benefit) provision	(223.2)		(70.1)		(64.7)
Total provision for income taxes	$	60.5	$	57.4	$	7.4

The provision (benefit) for income taxes differs from the amount computed by applying the federal statutory tax rate of 21% to pretax income for each of the years presented as follows (in millions):

	Years Ended December 31,
	2022		2021		2020
Expected provision at statutory rate	$	112.7	$	65.1	$	55.7
State taxes, net of federal benefit	12.0		6.5		8.7
Foreign income at different tax rates	(18.1)		(0.2)		(5.9)
R&D tax credits	(23.6)		(16.6)		(16.4)
Share-based compensation	(7.4)		(2.2)		9.0
Non-deductible compensation	4.0		4.2		3.5
Temporary differences not currently benefited	—		—		(0.9)
Recognition of previously unrecognized tax benefits	(8.1)		—		(63.7)
Cost sharing adjustment - Altera	—		—		20.1
Other	(11.0)		0.6		(2.7)
Total provision for income taxes	$	60.5	$	57.4	$	7.4

In 2020, the Company recorded a $63.7 million benefit, including interest and penalties, related to a multi-year recognition of previously unrecognized tax benefits and a $20.1 million charge, including interest, for a cumulative impact of cost sharing for share-based compensation described below.

On June 7, 2019, the Ninth Circuit Court of Appeals issued an opinion in Altera Corp. v. Commissioner requiring related parties in an intercompany cost-sharing arrangement to share expenses related to share-based compensation. On February 10, 2020, Altera appealed this decision to the U.S. Supreme Court, which on June 22, 2020, declined to review the decision. Based

on the Supreme Court's decision, the Company's share-based compensation is subject to cost sharing, and the Company recorded a $20.1 million charge referenced above during the year ended December 31, 2020.

Deferred income taxes reflect the net tax effects of tax carry-forward items and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's long-term deferred tax assets and deferred tax liabilities are as follows (in millions):

	As of December 31,
	2022		2021
Deferred tax assets:
Net operating loss carry-forwards	$	57.2	$	72.5
Research and other credit carry-forwards	281.3		272.2
Deferred revenue	58.1		47.7
Share-based compensation	17.2		17.9
Capitalized R&D expenditure	293.1		102.0
Reserves and accruals not currently deductible	66.1		61.0
Operating lease liabilities	39.7		45.4
Other	13.2		9.9
Total deferred tax assets	825.9		628.6
Valuation allowance	(310.9)		(300.9)
Deferred tax assets, net of valuation allowance	515.0		327.7
Deferred tax liabilities:
Property and equipment basis differences	—		(1.3)
Purchased intangible assets	(32.3)		(56.5)
Unremitted foreign earnings	(23.7)		(25.5)
Net unrealized gain	(35.8)		(21.0)
Operating lease assets	(36.1)		(39.9)
Total deferred tax liabilities	(127.9)		(144.2)
Net deferred tax assets	$	387.1	$	183.5

As of December 31, 2022 and 2021, the Company had a valuation allowance on its U.S. and foreign deferred tax assets of $310.9 million and $300.9 million, respectively. The balance at December 31, 2022 consisted of $1.7 million, $297.8 million, and $11.5 million against the Company's U.S. federal, state, and foreign deferred tax assets, respectively, which the Company believes are not more likely than not to be utilized in future years. The valuation allowance increased in 2022 and 2021 by $10 million and $39.4 million, respectively, primarily related to the changes in state R&D tax credits.

As of December 31, 2022, the Company had federal, California and other states net operating loss carry-forwards of approximately $150.0 million, $129.1 million, and $138.8 million, respectively. The California net operating loss carry-forwards of $129.1 million are expected to expire unused. The Company also had federal, California, and other state tax credit carry-forwards of approximately $2.4 million, $308.6 million, and $34.2 million, respectively. Unused net operating loss and other state tax credit carry-forwards will expire at various dates beginning in the year 2023. The California tax credit carry-forwards will carry forward indefinitely.

The Company provides deferred tax liabilities for all tax consequences associated with the undistributed earnings that are expected to be repatriated to subsidiaries' parent unless the subsidiaries' earnings are considered indefinitely reinvested. The Company has made no provision for deferred taxes on approximately $118.1 million of cumulative undistributed earnings of certain foreign subsidiaries through December 31, 2022. These earnings are considered indefinitely invested in operations of the subsidiaries, as the Company intends to utilize these amounts to fund future expansion of its operations. If these earnings were distributed to the parent, the Company would be subject to additional taxes of approximately $23.9 million.

As of December 31, 2022, 2021, and 2020, the total amount of gross unrecognized tax benefits was $116.0 million, $113.4 million, and $116.0 million, respectively. As of December 31, 2022, approximately $111.7 million of the $116.0 million gross unrecognized tax benefits, if recognized, would affect the effective tax rate before considering valuation allowance.

A reconciliation of the beginning and ending amount of the Company's total gross unrecognized tax benefits was as follows (in millions):

	Years Ended December 31,
	2022		2021		2020
Balance at beginning of year	$	113.4	$	116.0	$	151.3
Tax positions related to current year:
Additions	5.8		7.7		5.3
Tax positions related to prior years:
Additions	6.9		3.3		18.1
Reductions	(2.5)		(3.6)		(52.0)
Settlements	—		(9.4)		(1.8)
Lapses in statutes of limitations	(7.6)		(0.6)		(4.9)
Balance at end of year	$	116.0	$	113.4	$	116.0

As of December 31, 2022, 2021, and 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of $5.6 million, $8.1 million, and $5.3 million, respectively, as other long-term liabilities in the Consolidated Balance Sheets. Due to the changes in the level of gross unrecognized tax benefits, the Company recognized a (benefit), or expense, for net interest and penalties of $(2.5) million, $2.7 million, and $(20.7) million in its Consolidated Statements of Operations during the years ended December 31, 2022, 2021, and 2020, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. There is a greater than remote likelihood that the balance of the gross unrecognized tax benefits will decrease by up to $1.0 million within the next twelve months due to the completion of tax review cycles in various tax jurisdictions and lapses of applicable statutes of limitation.

The Company conducts business globally and, as a result, Juniper Networks or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such jurisdictions as the Netherlands, U.K., France, Germany, Japan, China, Australia, India, and the U.S. With few exceptions, the Company is no longer subject to U.S. federal, state and local, and non-U.S. income tax examinations for years before 2012.

The Company is currently under examination by the Internal Revenue Service and the India tax authorities for the 2017 through 2018 tax years and the 2012 through 2020 tax years, respectively. The Company regularly assesses the likelihood of an adverse outcome resulting from such examinations. As of December 31, 2022, the Company believes the resolution of the audits is unlikely to have a material effect on its consolidated financial condition or results of operations.

The Company is pursuing all available administrative remedies relative to ongoing matters. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to proposed adjustments and the ultimate resolution of these matters is unlikely to have a material effect on its consolidated financial condition or results of operations; however, there is still a possibility that an adverse outcome of these matters could have a material effect on its consolidated financial condition and results of operations.