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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the Company’s income (loss) before provision for income taxes are as follows (in thousands):
Year Ended December 31,
202320222021
U.S.$136,498 $34,344 $(61,332)
Foreign40,659 (39,296)211 
Income (loss) before provision for income taxes$177,157 $(4,952)$(61,121)

The provision for income taxes charged to operations consists of the following (in thousands):
Year Ended December 31,
202320222021
Current expense (benefit):
Federal$26,592 $12,826 $(8)
State5,678 1,630 (668)
Foreign16,509 7,725 60 
48,779 22,181 (616)
Deferred expense (benefit):
Federal942 (6,160)(9,085)
State(327)(960)(1,017)
Foreign(9,477)(24,445)— 
(8,862)(31,565)(10,102)
Total income tax expense (benefit)$39,917 $(9,384)$(10,718)
Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
December 31,
20232022
Deferred tax assets:
Bad debts$164 $234 
Inventories3,528 2,780 
Accrued warranties4,336 3,575 
Accrued compensation569 637 
Net operating loss2,181 1,014 
Equity-based compensation3,222 2,240 
Lease liabilities5,794 4,588 
Premium on capped call9,376 10,792 
Interest expense carryforward3,411 6,750 
Capitalized research and development expenses2,000 1,752 
Other4,580 2,435 
Deferred tax assets39,161 36,797 
Valuation allowance(2,360)(1,449)
Deferred tax assets, net36,801 35,348 
Deferred tax liabilities:
Property, plant, and equipment(2,825)(1,592)
Intangible assets(79,913)(85,927)
ROU assets(5,051)(3,969)
Deferred tax liabilities(87,789)(91,488)
Deferred tax asset (liability), net$(50,988)$(56,140)
A reconciliation of income tax expense computed at the federal statutory rate of 21% to actual income tax expense at the Company’s effective rate is as follows (in thousands):
Year Ended December 31,
202320222021
Income tax rate reconciliation
Income tax expense (benefit) at U.S. statutory rate$37,204 $(1,040)$(12,835)
State income taxes
4,150 530 (1,545)
Officer’s compensation518 740 435 
Equity-based compensation(932)712 1,542 
Contingent consideration622 (947)567 
Tax credits(407)(421)(620)
Non-U.S. income taxed at different rate than U.S. statutory rate 2,658 (4,274)— 
Non-U.S. indirect tax incentives(5,035)(4,183)— 
Foreign derived intangible income benefit(403)(1,668)— 
Transaction costs— 1,628 950 
Change in valuation allowance911 (534)14 
Nondeductible expenses299 10 69 
Other332 63 705 
Total income tax expense (benefit)
$39,917 $(9,384)$(10,718)

The Company receives a non-U.S. indirect tax incentive which is excluded from the local income tax base, resulting in a reduction of the overall effective tax rate of the Company. The income tax benefits from the non-U.S. indirect tax incentive is $5.0 million and 4.2 million for 2023 and 2022, respectively. Due to recent legislation, effective in 2024 these non-U.S. indirect tax incentives will no longer be excluded from the local income tax base.

As of December 31, 2023, the Company has federal income tax net operating loss (“NOL”) carryforwards of approximately $6.8 million that do not expire, state income tax NOL carryforwards of approximately $2.3 million that will expire in future years beginning in 2029, state tax credits of approximately $0.3 million that will expire in future years beginning in 2033, and certain foreign NOLs that are immaterial. As of December 31, 2022, the Company has federal income tax NOL carryforwards of approximately $4.8 million that do not expire, state income tax NOL carryforwards of approximately $4.5 million that will expire in future years beginning in 2029, and certain foreign NOLs that are immaterial.

Realization of deferred tax assets is dependent upon generating sufficient taxable income of the appropriate type and in the appropriate jurisdictions. In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. It is not more likely than not that deferred tax assets from certain U.S. Federal, state and foreign net operating loss would be realized due to type and location of future earnings. As a result, the Company has a valuation allowance of $2.4 million and $1.4 million for the years ended December 31, 2023 and 2022. A valuation allowance of $1.8 million was established against certain of STI’s acquired deferred income tax assets.
ASC 740 addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. In accordance with ASC 740, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company’s assessments of its tax positions in accordance with ASC 740 did not result in changes that had a material impact on results of operations, financial condition or liquidity. The Company had no unrecognized income tax benefits at either December 31, 2023 or 2022.

The Company files income tax returns in the U.S. federal jurisdiction, in multiple U.S. states, as well as in non-U.S. jurisdictions. Through global expansion and the acquisition of STI, the Company has a significant presence in Spain and Brazil. The Company and its subsidiaries are routinely examined by various U.S. and non-U.S. taxing authorities. The Company is not subject to U.S. federal, state and non-U.S. income tax examinations by tax authorities for years before 2017. There are currently no income tax audits in any material jurisdictions.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Repatriation of funds could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or state income taxes and the impact of foreign currency movements. At December 31, 2023, management believed that sufficient liquidity was available in the U.S. The Company may consider repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations; however, any repatriation activities are not expected to result in a significant incremental tax liability to the Company.

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two), with certain aspects of Pillar Two effective January 1, 2024 and other aspects effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. We currently do not expect Pillar Two to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows.

Additionally, the IRA created a 15% corporate alternative minimum tax on certain large corporations and a 1% excise tax on certain corporate stock repurchases. These provisions, which became effective for Company beginning on January 1, 2023, did not have a material impact on the Company during the year ended December 31, 2023.