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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
U.S. and foreign components of the loss before income taxes were as follows:
Year Ended December 31,
(in thousands)202120202019
U.S. loss$(3,319)$(6,719)$(21,644)
Foreign loss(47,310)(30,355)(64,005)
Total loss before income taxes$(50,629)$(37,074)$(85,649)
The components of the provision for income taxes were as follows: 
Year Ended December 31,
(in thousands)
202120202019
Current
Federal$3 $3 $(224)
State100 17 100 
Foreign6,413 5,476 9,245 
Total current tax expense6,516 5,496 9,121 
Deferred
Federal(7,016)102 — 
State(827)59 — 
Foreign(2,625)— 4,243 
Total deferred tax (benefit) expense(10,468)161 4,243 
Total (benefit) provision for income taxes$(3,952)$5,657 $13,364 
In connection with the 2021 acquisition of Accurics, we elected to first offset our existing deferred tax assets with acquired deferred tax liabilities. This resulted in releasing $7.9 million of the federal and state valuation allowance, which was recorded as a component of our deferred tax benefit.
In December 2019, we sold acquired intellectual property through an intercompany transaction, which resulted in $6.3 million of current tax expense and $4.2 million of deferred tax expense in Israel. In January 2021, we restructured the research and development operations in Israel through an intercompany transaction, which resulted in $2.8 million of current tax expense.
The items accounting for the difference between income taxes computed at the federal statutory rate and our effective tax rate were as follows:
Year Ended December 31,
202120202019
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
State and local taxes2.6 10.8 4.8 
Research and development tax credit4.5 11.1 3.1 
Stock-based compensation49.5 34.4 19.0 
Uncertain tax positions(0.1)0.1 (0.5)
Foreign tax rate differential(1.2)(10.6)(7.9)
Change in valuation allowance(55.7)(81.2)(40.8)
Gain on intercompany sale(5.1)— (12.3)
Foreign withholding tax(2.0)(3.3)(1.4)
Transaction costs(1.6)— — 
Other(4.1)2.4 (0.6)
Effective tax rate7.8 %(15.3)%(15.6)%
We maintain a valuation allowance on U.S. federal, state and foreign net deferred tax assets as the realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
The components of the deferred tax assets and liabilities were as follows: 
December 31,
(in thousands)20212020
Deferred tax assets:
Net operating losses$134,503 $89,053 
Deferred revenue13,598 13,454 
Stock-based compensation14,157 11,846 
Tax credits15,142 11,565 
Leases12,929 15,238 
Accrued compensation1,600 1,271 
Interest expense2,013 — 
Other231 379 
Total deferred tax assets194,173 142,806 
Valuation allowance(147,040)(112,363)
Net deferred tax assets47,133 30,443 
Deferred tax liabilities:
Deferred commissions(19,423)(15,987)
Property and equipment(13,720)(13,257)
Intangible assets(15,253)(962)
Other(486)(398)
Total deferred tax liabilities(48,882)(30,604)
Net deferred tax liabilities$(1,749)$(161)
At December 31, 2021, we had net operating loss (“NOL”) carryforwards for federal, state and foreign tax purposes of $398.5 million, $226.1 million, and $289.9 million, respectively, which will begin to expire in 2030, as well as $17.9 million of federal, state and foreign research and development tax credits, foreign tax credits, minimum tax credits and certain
states’ job creation tax credits. The federal research and development and foreign tax credits will begin to expire in 2032 and the state job creation tax credits will begin to expire in 2022.
We are currently subject to the annual limitation under Sections 382 and 383 of the Internal Revenue Code. We will not be precluded from realizing the NOL carryforward and tax credits but may be limited in the amount we could utilize in any given tax year in the event that the federal and state taxable income will exceed the limitation imposed by Section 382. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.
At December 31, 2021 and 2020, the total amount of gross unrecognized tax benefits was $7.6 million and $7.1 million, respectively, which, if recognized, would impact our effective tax rate by less than $0.1 million in each year. Interest and penalties associated with uncertain tax positions recognized as a component of income tax expense were immaterial in 2021, 2020 and 2019.
The change in gross unrecognized tax benefits, excluding accrued interest, were as follows: 
Year Ended December 31,
(in thousands)202120202019
Unrecognized tax benefits at the beginning of the period$7,123 $7,163 $4,814 
Additions for tax positions in the current year194 232 2,306 
Increase in prior year positions64 62 90 
Decrease in prior year positions(48)(334)(89)
Acquisitions242 — 42 
Unrecognized tax benefits at the end of the period$7,575 $7,123 $7,163 
We file income tax returns in the United States, including various state jurisdictions. Our subsidiaries file income tax returns in various foreign jurisdictions. Tax years after 2014 remain open to examination by the major taxing jurisdictions in which we are subject to tax. At December 31, 2021, we were not under examination for income tax audits by the Internal Revenue Service or any state or foreign tax jurisdiction.
Depending on the jurisdiction, distributions of earnings could be subject to withholding taxes at rates applicable to the distributing jurisdiction. As we intend to continue to reinvest the earnings of foreign subsidiaries indefinitely, we have not provided for a U.S. income tax liability and foreign withholding taxes on undistributed foreign earnings of foreign subsidiaries. It is not practicable for us to determine the amount of unrecognized tax expense on these reinvested foreign earnings.