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Income taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Income before provision for income taxes consisted of the following:
For the years ended December 31,
202320222021
(in thousands)
United States$(6,107)$(23,490)$(11,530)
International10,945 3,037 9,078 
Total income/(loss) before provision for income taxes$4,838 $(20,453)$(2,452)
The federal and state income tax provision/(benefit) is summarized as follows:
For the years ended December 31,
202320222021
(in thousands)
Current
Federal$3,619 $6,951 $71 
State941 1,774 80 
International6,183 3,681 2,164 
Total current tax expense$10,743 $12,406 $2,315 
Deferred
Federal$(2,265)$(2,740)$2,752 
State(474)(315)(59)
International(1,401)(590)240 
Total deferred tax expense/(benefit)$(4,140)$(3,645)$2,933 
Total tax expense/(benefit)$6,603 $8,761 $5,248 
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
The tax effects of significant items comprising the Company’s deferred taxes as of December 31, 2023 and 2022 are as follows:
As of December 31,
20232022
(in thousands)
Deferred tax assets
Capitalized R&D$3,968 $1,056 
Stock-based compensation3,833 4,004 
Accrued compensation1,950 931 
Lease liability636 465 
Net operating loss267 401 
State tax accrual183 243 
Allowance for bad debt185 105 
Total deferred tax assets$11,022 $7,205 
Deferred tax liabilities
Intangible assets$(6,908)$(5,207)
Lease right-of-use assets(597)(465)
Fixed asset basis(373)(291)
Total deferred tax liabilities(7,878)(5,963)
Net deferred taxes$3,144 $1,242 
The Company assessed its ability to realize the benefits of its domestic deferred tax assets (“DTA”) by evaluating all available positive and negative evidence, objective and subjective in nature, including (1) cumulative results of operations in recent years, (2) sources of recent pre-tax income, (3) estimates of future taxable income, and (4) the length of net operating loss (“NOL”) carryforward periods. The Company determined it is in a 3-year cumulative taxable income position as of December 31, 2023, and expects to continue to be in a taxable income position in the long-term foreseeable future.
After an evaluation of all available qualitative and quantitative evidence, both positive and negative in nature, the Company concluded it is more likely than not that sufficient future taxable income will be generated to realize the benefits of its DTAs prior to expiration. As a result, the Company determined that no valuation allowance was needed as of December 31, 2023.
Net operating losses and tax credit carryforwards as of December 31, 2023 are as follows:
AmountExpiration years
(in thousands)
Net operating losses, federal$891 N/A
Net operating losses, state$6,821 
2040
The effective tax rate of the Company differs from the federal statutory rate as follows:
For the years ended December 31,
202320222021
Statutory rate21.0 %21.0 %21.0 %
State tax10.1 (7.5)(0.4)
Permanent and other items(9.9)(1.0)(10.8)
Stock-based compensation39.3 4.4 114.4 
Tax credits(120.0)13.9 3.8 
Foreign rate differential7.2 (11.9)(4.9)
Foreign inclusion adjustments74.7 (10.8)(75.7)
Foreign intangible amortization10.2 (2.3)(15.7)
162M limitation103.9 (48.6)(245.8)
Total136.5 %(42.8)%(214.1)%
As of December 31, 2023, the Company has approximately $1.2 million of unrecognized tax benefits. Approximately all of the unrecognized tax benefits, if recognized, would affect the effective tax rate. A reconciliation of beginning to ending amounts of unrecognized tax benefits is as follows:
For the years ended December 31,
202320222021
(in thousands)
Unrecognized tax benefit as of January 1$1,151 $780 $654 
Changes related to prior year tax positions(101)168 (50)
Changes related to current year tax positions112 203 176 
Unrecognized tax benefit as of December 31$1,162 $1,151 $780 
Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. The Company does not anticipate a material change to its unrecognized tax benefits over the next twelve months.
The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. There was no interest or penalties accrued as of December 31, 2023 and 2022.
The Company is subject to income taxes in U.S. federal and various state, local and foreign jurisdictions. For federal and states, tax years subsequent to 2019 remain open to examination due to the carryover of unused net operating losses or tax credits. With respect to foreign jurisdictions, tax years 2016 and after remain open.
The Company's provision for income taxes does not include provisions for foreign withholding taxes associated with the repatriation of undistributed earnings of certain foreign subsidiaries that we intend to reinvest indefinitely in our foreign subsidiaries.
As part of the 2017 Tax Cuts and Jobs Act, Section 174 was amended to require that specified research and experimental (“SR&E”) expenditures be capitalized and amortized but delayed the effective date of this amendment to tax years beginning January 1st, 2022 or later. The amortization period is 5 years for domestic research expenditures and 15 years for foreign research expenditures using a mid-year convention. The Company evaluated its R&D expenses both in the U.S. and foreign jurisdictions and determined there were approximately $12.9 million of expenses worldwide subject to capitalization and treated as a temporary adjustment.
The President signed the CHIPS and Science Act and Inflation Reduction Act (“IRA”) into law on August 9 and 16, 2022, respectively. The IRA provides funding for climate and energy provisions. The new law includes a corporate alternative minimum tax, a stock buyback tax, and increased IRS enforcement funding. The CHIPS Act includes funding for the semiconductor industry in the U.S.. Both the Inflation Reduction Act and the CHIPS and Science Act were enacted in 2022. Both CHIPS Act and IRA were not materially impactful on the Company’s tax positions.