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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The continuing operations income tax (expense) benefit consisted of the following (in thousands):
 Year ended December 31,
 20232022 2021
Current:
Federal$(29,040)$(42,698)$8,435 
State(8,179)(12,184)248 
Foreign(16,940)(16,066)(15,931)
Total current(54,159)(70,948)(7,248)
 
Deferred:   
Federal20,817 12,667 17,132 
State7,177 (1,577)5,044 
Foreign2,023 1,901 (729)
Total deferred30,017 12,991 21,447 
Income tax (expense) benefit from continuing operations$(24,142)$(57,957)$14,199 
A reconciliation of the statutory federal income tax rate with the Company’s continuing operations effective income tax rate is as follows:
 Year ended December 31,
 202320222021
Statutory tax rate21.0 %21.0 %21.0 %
State income taxes, net6.5 5.0 (1.3)
Foreign rate differential3.1 1.0 (0.3)
Foreign income inclusion6.0 5.4 0.7 
Foreign tax credit(4.7)(5.1)(0.8)
Reserve for uncertain tax positions(5.9)(3.2)(2.4)
Valuation allowance— — (1.7)
Impact on deferred taxes of enacted tax law and rate changes0.6 1.4 (0.5)
Tax credits and incentives(8.4)(5.0)(1.5)
Impairment of goodwill
16.0 — — 
Mark-to market on investment in Consensus— 22.1 (18.0)
Return to provision adjustments
(5.1)1.1 0.5 
Executive compensation2.4 1.5 0.7 
Other0.7 (1.0)(0.4)
Effective tax rates32.2 %44.2 %(4.0)%
The effective tax rate for continuing operations for the year ended December 31, 2023 differs from the federal statutory rate primarily due to the expense recognized for book purposes on the goodwill impairment related to one of the Company’s reporting units that resulted in no corresponding tax benefit and had a detrimental impact to the effective tax rate. The detrimental impact to our effective tax rate was partially offset by a tax benefit recognized as a result of a decrease in the reserve for uncertain tax positions that was primarily due to the lapse of the statute of limitations.
The effective tax rate for continuing operations for the year ended December 31, 2022 differs from the federal statutory rate primarily due to a book-tax difference related to the loss recognized for accounting purposes related to the Company’s shares held in Consensus stock. The Company recognized a deferred tax liability resulting in tax expense of $13.4 million on the outside basis difference between the book basis exceeding the tax basis of the Investment in Consensus on October 7, 2022 due to future disposals of the shares being subject to tax based on guidance and requirements set out by the Internal Revenue Service.
Additional reasons the effective tax rate differs from the federal statutory tax rate is due to income earned in the United States also being subject to income taxes in various state jurisdictions with statutory tax rates that can range from 2.5 percent to 11.5 percent. This increase in the effective income tax rate is offset by a decrease in the net reserve for uncertain tax positions during 2022 and a tax benefit claimed in the United States related to a deduction for foreign-derived intangible income. The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S. tax reserves.
The effective tax rate for continuing operations for 2021 differs from the federal statutory rate primarily due to a book-tax difference related to the $298.5 million of book income recognized related to the Company’s shares held in Consensus stock. The income was not subject to tax since the Company had the ability to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service. Additionally, the Company recorded a decrease in the net reserve for uncertain tax positions during 2021 and a reduction in the valuation allowance on deferred tax assets related to realized and unrealized capital losses. The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S. tax reserves. The reduction in the valuation allowance is primarily due to an increase in unrealized capital gains on investments held by the Company which can provide a source of capital gain income in future years to realize the benefit of the capital losses.
The Organization for Economic Co-operation and Development (“OECD”) established a Pillar Two Framework that was supported by over 130 countries worldwide. On December 15, 2022, the European Union (“EU”) Member States adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15% with effective dates of January 1, 2024 and January 1, 2025, for different aspects of the directive. A significant number of other countries are also implementing similar legislation. The Company is continuing to evaluate the impact on future periods of the Pillar Two Framework and pending legislative adoption by additional individual countries in which we operate. Although we are unable to
predict when and how the Pillar Two Framework will be enacted into law, based on the countries in which we operate, the Company does not believe that the adoption of the Pillar Two Framework will have a material effect on our liability for corporate taxes and our consolidated effective tax rate.
Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities from continuing operations are as follows (in thousands):
 Years Ended December 31,
 2023 2022
Deferred tax assets:
Net operating loss and other carryforwards$15,762 $19,513 
Tax credit carryforwards4,743 4,222 
Accrued expenses14,629 10,702 
Allowance for bad debt2,003 1,445 
Share-based compensation expense6,097 3,885 
Operating lease liabilities6,320 16,756 
Basis difference in fixed assets22,191 14,642 
Deferred revenue2,420 2,994 
State taxes1,974 4,447 
Other2,468 3,920 
 78,607 82,526 
Less: valuation allowance(1,720)(1,699)
Total deferred tax assets$76,887 $80,827 
  
Deferred tax liabilities: 
Operating lease right-of-use assets(4,618)(14,008)
Basis difference in intangible assets(86,712)(101,797)
Unrealized gains on investments(13,512)(24,123)
Prepaid insurance(2,835)(2,744)
Other(5,982)(8,639)
Total deferred tax liabilities(113,659)(151,311)
Net deferred tax liabilities$(36,772)$(70,484)
The Company had approximately $76.9 million and $80.8 million in deferred tax assets, net of valuation allowances as of December 31, 2023 and 2022, respectively, related primarily to net operating loss, operating lease liabilities, interest expense and capital loss carryforwards, tax credit carryforwards, capitalized research and development expenses, and accrued expenses being treated differently between its financial statements and its tax returns. Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax asset will not be realized. If necessary, the Company records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The deferred tax assets should be realized through future operating results and the reversal of temporary differences.
The Company had a valuation allowance on deferred tax assets from continuing operations of $1.7 million and $1.7 million as of December 31, 2023 and 2022, respectively.
The rollforward of the valuation allowance on the deferred tax assets from continuing operations is as follows (in thousands):
Year ended December 31,
202320222021
Beginning balance$1,699 $1,812 $8,262 
Charges to costs and expenses
21 — 178 
Write-offs and recoveries— (113)(6,628)
Ending balance$1,720 $1,699 $1,812 
As of December 31, 2023, the Company had federal net operating loss carryforwards (“NOLs”) of $9.1 million, after considering substantial restrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended. The Company estimates that all of the above-mentioned federal NOLs will be available for use before their expiration. Approximately $7.5 million of the NOLs expire through 2037 depending on the year the loss was incurred and $1.6 million of the NOLs carry forward indefinitely.
As of December 31, 2023, the Company’s deferred tax assets include interest expense limitation carryovers of $1.9 million, which last indefinitely. The Company also has federal capital loss limitation carryforwards as of December 31, 2023 of $21.8 million that begin to expire in 2026. In addition, as of December 31, 2023, the Company had available state research and development tax credit carryforwards of $5.4 million, which last indefinitely. The Company had no foreign tax credit carryforwards as of December 31, 2023.
The Company has not provided for deferred taxes on approximately $272.4 million of undistributed earnings from foreign subsidiaries as of December 31, 2023 or with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes. In addition, because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted.
Certain taxes are prepaid during the year and, where appropriate, included within ‘Prepaid expenses and other current assets’ on the Consolidated Balance Sheet. The Company’s prepaid taxes were $4.7 million and $3.2 million at December 31, 2023 and 2022, respectively.
Income from continuing operations before income taxes included income from domestic operations of $25.8 million, $71.8 million, and $279.7 million for the years ended December 31, 2023, 2022, and 2021, respectively, and income from foreign operations of $49.2 million, $59.4 million, and $71.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Uncertain Income Tax Positions
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets.
As of December 31, 2023, the total amount of unrecognized tax benefits for continuing operations was $29.2 million, of which $27.4 million, if recognized, would affect the Company’s effective tax rate. As of December 31, 2022, the total amount of unrecognized tax benefits for continuing operations was $34.2 million, of which $32.7 million, if recognized, would affect the Company’s effective tax rate. As of December 31, 2021, the total amount of unrecognized tax benefits for continuing operations was $39.5 million, of which $35.6 million, if recognized, would affect the Company’s effective tax rate.
The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2023, 2022, and 2021, is as follows (in thousands):
Year ended December 31,
202320222021
Beginning balance $34,208 $39,527 $46,032 
Increases related to tax positions during a prior year218 — 3,448 
Decreases related to tax positions taken during a prior year(1,023)(2,816)(5,511)
Increases related to tax positions taken in the current year744 819 4,675 
Decreases related to expiration of statute of limitations(4,989)(3,322)(9,117)
Ending balance$29,158 $34,208 $39,527 
The Company includes interest and penalties related to unrecognized tax benefits within ‘Income tax expense’ on the Consolidated Statements of Operations. As of December 31, 2023, 2022, and 2021, the total amount of interest and penalties accrued was $7.1 million, $6.3 million, and $5.7 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets. In connection with the liability for unrecognized tax benefits, the Company recognized interest and penalty expense (benefit) in 2023, 2022, and 2021 of $0.7 million, $0.7 million, and $(1.5) million, respectively.
Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income tax audits and expiration of statutes of limitations. At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reserves for uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months. In addition, the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits. As a result of ongoing federal, state and foreign income tax audits (discussed below), it is reasonably possible that the Company’s entire reserve for uncertain income tax positions for the periods under audit will be released. It is also reasonably possible that the Company’s reserves will be inadequate to cover the entire amount of any such income tax liability.
We conduct business on a global basis and as a result, one or more of our subsidiaries files income tax returns in the U.S. federal and in multiple state, local, and foreign tax jurisdictions. Our U.S. federal income tax returns for years 2012 through 2016 are under various stages of audit by the IRS. We are also under audit for various U.S. state and local tax purposes. With limited exception, our significant foreign tax jurisdictions are no longer subject to an income tax audit by the various tax authorities for tax years prior to 2020.
It is reasonably possible that these audits may conclude in the next twelve months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. If the recorded uncertain tax positions were inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material. If the recorded uncertain tax positions were adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material. However, it is not currently possible to estimate the amount, if any, of such change.