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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before income tax provision (benefit) consisted of the following (in thousands):
For the year ended December 31,
202320222021
United States$(125,715)$(91,210)$(41,567)
Foreign1,617 2,210 2,467 
Total
$(124,098)$(89,000)$(39,100)
The provision (benefit) for income taxes consisted of the following (in thousands):
For the year ended December 31,
202320222021
Current
Federal
$700 $— $— 
State
937 327 98 
Foreign
1,838 1,020 479 
Total Current3,475 1,347 $577 
Deferred
Federal
$— $— $(1,252)
State
— — (374)
Foreign
(48)600 (321)
Total Deferred$(48)$600 $(1,947)
Total$3,427 $1,947 $(1,370)
During the years ended December 31, 2023, 2022 and 2021, we recorded a federal income tax expense (benefit) of $0.7 million, $0, and $(1.25) million, respectively. The current year federal tax expense is related to the general business credit limitation of our R&D credit. The 2021 benefit was related to the OneCloud acquisition. As the reversal of the net deferred tax liabilities acquired as part of the OneCloud purchase will be recognized on future tax returns, these provide an objective source of taxable income. Therefore, a corresponding portion of our valuation allowance has been released to reflect this availability, resulting in a federal and state tax benefit reflected in the table above.
The items accounting for the difference between income taxes computed at the federal statutory income tax rate and the provision for income taxes consisted of the following (in thousands):
For the year ended December 31,
202320222021
Federal statutory rate21.0 %21.0 %21.0 %
Effect of:
Tax benefit at federal statutory rate
$(26,061)$(18,690)$(8,211)
State taxes, net of federal benefit
(8,397)(5,722)(15,350)
Section 162(m) limitations11,715 6,083 9,008 
Stock-based compensation(10,192)(9,768)(49,020)
Global intangible low-taxed income inclusion2,259 2,850 2,023 
Induced conversion
8,834 — — 
Meals & entertainment
821 263 33 
Permanent items
432 603 (634)
Tax benefit of federal R&D credit
(8,036)(6,406)(3,694)
Foreign income taxes
1,677 256 390 
Valuation allowance
30,636 32,896 64,602 
Other
(261)(418)(517)
Total income tax provision$3,427 $1,947 $(1,370)
The components of deferred tax assets and liabilities were as follows (in thousands):
As of December 31,
20232022
Deferred tax assets:
Property and equipment
$3,018 $2,931 
Accruals and reserves
124 79 
Lease liability
6,815 7,726 
Compensation and benefits
16,756 15,031 
Deferred revenue
42,332 31,497 
Net operating loss and credits
120,021 138,517 
Interest expense80 386 
IRC 174 Capitalization73,680 38,923 
Other
574 2,198 
Total deferred tax assets
263,400 237,288 
Valuation allowance
(248,279)(220,016)
Total deferred tax assets
15,121 17,272 
Deferred tax liabilities:
Property and equipment
(85)(104)
Right-of-use asset(6,589)(7,389)
Acquired intangibles
(604)(1,310)
Deferred commissions(7,265)(8,212)
Other deferred tax liabilities
(481)(179)
Deferred tax liabilities
(15,024)(17,194)
Total$97 $78 
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, we recognized a full valuation allowance against our net US deferred tax asset at December 31, 2023, because we believe it is more likely than not that these benefits will not be realized.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) amended Internal Revenue Code Section 174 to require specific research and experimental (“R&E”) expenditures be capitalized and amortized over five years (U.S. R&E) or fifteen years (non-U.S. R&E). Because of this amendment, we generated U.S. taxable income and have recorded a deferred tax asset related to the Section 174 amortization of $73.7 million at December 31, 2023. We were able to partially offset this income with a combination of net operating loss carryforwards and federal and state credits.
As of December 31, 2023, we have federal and state net operating loss carryforwards of approximately $298.2 million and $372.8 million, respectively, available to reduce future taxable income. Federal and some state net operating losses incurred after 2017 will have an indefinite carryforward. The state net operating loss carryforwards will expire in varying amounts beginning in 2024. Additionally, we have total net operating loss carryforwards from international operations of $1.3 million that do not expire. We also have approximately $32.1 million of federal and $4.7 million of state tax credit carryforwards as of December 31, 2023. The federal credits will expire in varying amounts between the
years 2036 and 2043. The state credits expire beginning in 2024. Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code, as amended, and similar state provisions.
A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):
For the year ended December 31,
202320222021
Unrecognized tax benefits-beginning of period$1,870 $180 $195 
Additions for tax positions related to prior year2001,400—
Reductions for tax positions related to prior year
———
Foreign currency adjustments
6(10)(15)
Additions for tax positions related to current year
200300—
Unrecognized tax benefits-end of period$2,276 $1,870 $180 
We have analyzed our inventory of tax positions taken with respect to all applicable income tax issues for all open tax years. The gross unrecognized tax benefits, if recognized, would not materially affect the effective tax rate as of December 31, 2023.
We are subject to taxation in the U.S. and various states and foreign jurisdictions. As of December 31, 2023, tax years for 2019 through 2022 are subject to examination by the tax authorities. Generally, as of December 31, 2023, we are no longer subject to federal, state, local or foreign examinations by tax authorities for years before 2019. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward.