Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

Note 18. Income Taxes

Income before income taxes is as follows:

	Year ended December 31,
	2024		2023		2022
	(in thousands)
United States	$	222,160	$	270,842	$	198,028
Foreign		8,114		7,757		6,857
Income before income taxes	$	230,274	$	278,599	$	204,885

Provision for income taxes is as follows:

	Year ended December 31,
	2024		2023		2022
	(in thousands)
Current:
United States
Federal	$	38,963	$	46,871	$	8,430
State		2,026		1,985		1,716
Foreign		3,887		3,498		3,124
Total current		44,876		52,354		13,270
Deferred:
Federal		(13,758)		(18,526)		9,097
State		205		(440)		(102)
Foreign		(2,041)		(1,052)		(459)
Total deferred		(15,594)		(20,018)		8,536
Income tax provision	$	29,282	$	32,336	$	21,806

Reconciliation of income taxes at the United States Federal statutory rate to the effective income tax rate of 12.7% is as follows:

	Year ended December 31,
	2024		2023		2022
	(in thousands)
Income taxes at the United States statutory rate	$	48,358	$	58,506	$	43,026
State income taxes		1,136		1,062		1,075
Foreign-derived intangible income		(20,439)		(24,052)		(20,526)
Research and other tax credits		(6,037)		(5,955)		(5,469)
Stock-based compensation		(2,765)		(6,718)		(3,818)
Nondeductible compensation		2,834		4,488		2,692
Effect of change in valuation allowance		3,169		1,978		680
Unrecognized tax benefits		761		1,053		705
Other, net		2,265		1,974		3,441
Income tax provision	$	29,282	$	32,336	$	21,806

Deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The tax effects of the temporary differences were as follows:

	Year ended December 31,
	2024		2023
	(in thousands)
Deferred tax assets:
State net operating loss carryforwards	$	52	$	96
Foreign net operating loss carryforwards		122		182
Federal tax credit carryforwards		3,378		1,999
State tax credit carryforwards		11,357		9,560
Property, plant and equipment		4,896		6,979
Operating lease liability		5,504		5,564
Accrued compensation		313		242
Inventories		552		804
Stock compensation		2,399		1,790
Warranty		2,666		3,108
Deferred revenue		6,562		6,389
Capitalized research and development costs		54,673		38,036
Gross deferred tax assets		92,474		74,749
Valuation allowance		(14,736)		(10,963)
Net deferred tax assets		77,738		63,786
Deferred tax liabilities:
Intangible assets		—		—
Right-of-use asset		(8,750)		(9,155)
Other		(711)		(1,203)
Gross deferred tax liabilities		(9,461)		(10,358)
Deferred taxes, net	$	68,277	$	53,428

Changes in tax rates and tax laws are accounted for in the period of enactment. Our deferred tax assets and liabilities are measured at the enacted tax rate expected to apply when these temporary differences are expected to be realized or settled.

At December 31, 2024, we maintained a $14.7 million valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these attributes. This represents an increase of $3.8 million from the prior year.

At December 31, 2024, we had research and development and other tax credit carryforwards of $17.4 million. These carry forwards are subject to an uncertain tax position reserve of $6.0 million. These credits can be used to reduce future federal and state income tax liabilities and expire principally between 2025 and 2036.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2024 to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon. As of December 31, 2024, there is no cash associated with indefinitely reinvested foreign earnings. We did not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business.

We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We and most foreign subsidiaries are subject to income tax examinations by tax authorities for all years dating back to 2021. Our policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. We believe that we have appropriate support for the income tax positions taken and to be taken on our tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

At December 31, 2024, we had unrecognized tax benefits related to uncertain tax positions of $12.5 million, $9.0 million of which is recorded as a long-term liability, and the remainder of which reduced the Company’s state deferred tax

assets and the offsetting valuation allowance. We recognized $0.7 million in interest and penalty expenses for the year ended December 31, 2024 relating to these uncertain tax positions. These unrecognized tax benefits, if recognized, would reduce the effective tax rate and also reverse associated accrued interest and penalty expenses.

A reconciliation of the beginning and ending balance of unrecognized tax benefits are as follows:

		Year ended December 31,
	2024		2023		2022
	(in thousands)
Balance at beginning of year	$	11,926	$	10,443	$	9,961
Decrease in unrecognized tax benefits as a result of tax positions taken during a prior period		(330)		(271)		(122)
Decreases in unrecognized tax benefits related to settlements with tax authorities		—		—		(708)
Increases in unrecognized tax benefits as a result of tax positions taken during the current period		947		1,754		1,312
Balance at end of year	$	12,543	$	11,926	$	10,443
Recorded as other long-term liability	$	9,049	$	8,344	$	7,190
Recorded as a decrease in deferred tax assets		3,494		3,582		3,253
Balance at end of year	$	12,543	$	11,926	$	10,443