Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

	Three Months Ended						Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(in thousands, except percentages)
Provision for income taxes	$	240,776		$	315,406		$	568,563		$	402,209
Effective tax rate	15		%	30		%	16		%	22		%

The effective tax rates for the three and six months ended June 30, 2021 differed from the Federal statutory rate primarily due to the impact of international provisions of the Tax Cuts and Jobs Act and recognition of excess tax benefits of stock-based compensation. The effective tax rates for the three and six months ended June 30, 2020 differed from the Federal statutory rate primarily due to the establishment of a valuation allowance on the California Research and Development (“R&D”) credit that was partially offset by recognition of excess tax benefits of stock-based compensation.

The decrease in effective tax rates for the three and six months ended June 30, 2021, as compared to the same period in 2020 was primarily due to the establishment of a valuation allowance on the California R&D credit in the quarter ended June 30, 2020, partially offset by markedly reduced excess tax benefits related to stock-based compensation as of June 30, 2021. For the three and six months ended June 30, 2021, the Company recognized a discrete tax benefit related to the excess tax benefits from stock-based compensation of $19 million and $66 million, respectively, compared to the three and six months ended June 30, 2020 of $92 million and $157 million, respectively.

Gross unrecognized tax benefits were $177 million and $140 million as of June 30, 2021 and December 31, 2020, respectively. The gross unrecognized tax benefits, if recognized by the Company, will result in a reduction of approximately $109 million to the provision for income taxes thereby favorably impacting the Company’s effective tax rate. As of June 30, 2021, gross unrecognized tax benefits of $38 million were classified as “Other non-current liabilities” and $139 million as a reduction to deferred tax assets which was classified as "Other non-current assets" in the Consolidated Balance Sheets. The Company includes interest and penalties related to unrecognized tax benefits within the "Provision for income taxes" on the Consolidated Statements of Operations and “Other non-current liabilities” in the Consolidated Balance Sheets. Interest and penalties included in the Company’s “Provision for income taxes” were not material in any of the periods presented.

Deferred tax assets of $378 million and $589 million were classified as “Other non-current assets” on the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. In evaluating its ability to realize the net deferred tax assets, the Company considered all available positive and negative evidence, including its past operating results and the forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. The Company has a valuation allowance of $326 million and $250 million as of June 30, 2021 and December 31, 2020, respectively. The valuation allowance is related to the California R&D credits and certain foreign tax attributes that the Company does not expect to realize.

The Company files U.S. Federal, state and foreign tax returns. The Company is currently under examination by the IRS for 2016 through 2018 and is subject to examination for 2019. The 2015 through 2019 state tax returns are subject to examination by various state tax authorities. The Company has no significant foreign jurisdiction audits underway. The years 2015 through 2020 generally remain subject to examination by foreign tax authorities.

Given the potential outcome of the current examinations, as well as the impact of the current examinations on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. At this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.