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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss before income taxes for the years ended December 31, 2023, 2022 and 2021 are as follows:
Year Ended December 31,
202320222021
United States$(140,371)$(49,948)$(117,761)
Foreign7,005 (3,875)(1,173)
Total$(133,366)$(53,823)$(118,934)
The components of the provision for income taxes for the years ended December 31, 2023, 2022 and 2021 are as follows:
Year Ended December 31,
202320222021
Current expense:
Federal$96 $— $— 
State23 224 8 
Foreign766 818 181 
Total current expense:$885 $1,042 $189 
Deferred expense:
Federal$(2,000)$— $— 
State(5)— — 
Foreign(3,414)(2,077)(516)
Total deferred expense:$(5,419)$(2,077)$(516)
Total income tax benefit
$(4,534)$(1,035)$(327)
The components of deferred tax assets (liabilities) as of December 31, 2023 and 2022 are as follows:
December 31,
20232022
Investment in Ay Dee Kay, LLC44,922 58,039 
Net operating loss (“NOL”) carryforwards57,289 13,458 
Capitalized research and experimentation
4,232 — 
Tax credits
5,374 — 
Other deferred tax assets
$1,783 $116 
Total deferred tax assets before valuation allowance
113,600 71,613 
Valuation allowance
(109,701)(70,040)
Deferred tax assets – net of valuation allowance
3,899 1,573 
Other deferred tax liabilities
$(1,214)$(104)
Intangibles(16,381)(9,292)
Total deferred tax liabilities
(17,595)(9,396)
Net deferred tax liabilities
$(13,696)$(7,823)

Subsequent to the issuance of the financial statements for the year ended December 31, 2022, the Company identified a misstatement in the disclosure of the deferred tax asset for the Investment in Ay Dee Kay, LLC and the corresponding valuation allowance in the amount of $13,925 as of December 31, 2022, which has been corrected in the deferred taxes table and valuation allowance roll forward above. There is no impact to the consolidated financial statements as of or for the year ended
December 31, 2022. The Company evaluated this adjustment both qualitatively and quantitatively and has concluded that this adjustment is immaterial to all impacted periods.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2023 and 2022, are as follows:
20232022
Valuation Allowance as on January 1st
$70,040 $53,430 
Increases recorded to tax provision15,244 16,610 
Increases recorded to goodwill
26,040 — 
Decreases recorded as a benefit to income tax provision(1,623)— 
Valuation Allowance as on December 31st
$109,701 $70,040 

As of December 31, 2023, the Company has $56,090 of deferred tax assets in domestic NOLs, which was primarily related to U.S. Federal NOLs of $51,452. The U.S. Federal NOLs are comprised of NOLs with an indefinite carry-forward pursuant to the Tax Cuts and Jobs Act of 2017, and NOLs that will begin to expire if not utilized by 2029. The Company also recorded $3,256 of California NOLs, which have a carry-forward period of 20 years, and will begin to expire if not utilized by 2041. The Company also has $2,968 of NOLs in China which have a 5-year carry-forward period and $6,179 of NOLs in Germany which have an indefinite carryforward period and are subject to annual change-of-control utilization limitations, $3,269 federal NOLs in Canada which have a 20-year carry-forward period, and $664 NOLs in Quebec which also have a 20-year carry-forward period.

In evaluating its ability to realize its net deferred tax assets, the Company considered all available positive and negative evidence, such as past operating results, forecasted earnings, prudent and feasible tax planning strategies, and the future realization of the tax benefits of existing temporary differences in accordance with the relevant accounting guidance under ASC 740. Based on forecasted earnings, the Company does not reasonably anticipate future taxable income in the U.S. jurisdiction. Further, when considering its history of generating net operating losses, management concluded that it is more likely than not that the Company’s domestic deferred assets will not be realized and continues to maintain a full valuation allowance for U.S. domestic deferred tax assets as of December 31, 2023.

The Company evaluated its historical valuation allowance on China operations conducted through Wuxi and its subsidiaries as of December 31, 2023. Due to the financial results achieved by China operations in 2023 and the forecasted future taxable income, the Company has released the valuation allowance on Wuxi and its subsidiaries. This resulted in a $1,623 deferred tax benefit for the year ended December 31, 2023. In other jurisdictions, the Company has a net deferred tax liability position and anticipates using the existing deferred tax liability as a source of income to realize existing deferred tax assets.

The Company does not provide for foreign income and withholding, U.S. Federal, or state income taxes expense or tax benefits for the difference between the financial reporting basis over the tax basis of its investments in foreign subsidiaries to the extent such amounts are indefinitely reinvested to support operations and continued growth plans outside the U.S. The Company reviews its indefinite reinvestment assertion on a quarterly basis and evaluates its plans for reinvestment. This includes a review of the Company’s ability to control repatriation, its ability to mobilize funds without triggering basis differences, and the profitability of U.S. operations, their cash requirements and the need, if any, to repatriate funds. If the Company’s intent and ability with respect to reinvestment of earnings of non-U.S. subsidiaries changes, deferred U.S. income taxes, foreign income taxes, and foreign withholding taxes may have to be accrued. For the year ended December 31, 2023, the Company intends to indefinitely reinvest earnings and profits, and has not recorded a deferred tax liability.

The Company files a federal income tax return and various state income tax returns in the United States. However, ADK LLC will continue to file a partnership return as it has historically and ADK LLC tax returns for years 2012-2022 remain open to examination by the IRS, and tax years 2019-2022 remain open to California State Tax examination.
A reconciliation of the federal statutory income tax rate to the effective tax rate for the years ended December 31, 2023, 2022 and 2021 are as follows:
December 31,
202320222021
Income tax provision at U.S. statutory federal rate$(27,721)$(11,286)$(25,509)
State income tax provision, net of federal income tax effect(1,216)(5)(5,891)
Foreign rate differential(2,445)(250)22 
Noncontrolling interest4,858 1,844 6,764 
Change in valuation allowance19,511 6,728 24,150 
Research and other tax credits— — (270)
Section 162(m) addback on executive compensation565 542 404 
GILTI inclusion, net2,881 1,301 — 
Other(967)91 3 
Provision for income taxes$(4,534)$(1,035)$(327)
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for the jurisdictions in which it operates or does business in. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records tax positions as liabilities and adjusts these liabilities when its judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2023, the Company has not recorded any uncertain tax positions in its financial statements.
The Company records interest and penalties related to unrecognized tax benefits in provision of income taxes. As of December 31, 2023, no accrued interest or penalties are recorded in the consolidated balance sheets, and the Company has not recorded any related expenses.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examinations by the various jurisdictions where applicable. There are currently no pending material tax examinations. The Company’s tax years are still open under statute from 2020 to 2022 for Federal purposes and from 2019 to 2022 for California. Foreign tax statutes are generally three to five years. The company’s significant foreign taxing jurisdiction are Canada, Germany, and China.

The Company is also party to a Tax Receivable Agreement (“TRA”). Following the Transaction, ADK LLC unitholders’ exchange of ADK LLC units for indie Class A Common stock are expected to result in increases in the Company’s tax basis in its interest in ADK LLC. These increases in tax basis are expected to increase (for tax purposes) depreciation and amortization deductions allocable to the Company, and therefore reduce the amount of tax that the Company would otherwise be required to pay in the future. As a result, the Company has entered into a TRA with certain members of ADK LLC prior to the Transaction. Under the TRA, the Company will be obligated to pay such parties or their permitted assignees 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local taxes that the Company realizes, or is deemed to realize as a result of future tax benefits from increases in tax basis. The TRA liability is accounted for as a contingent liability within accounts payable, accrued expenses and other liabilities on the consolidated balance sheets with amounts accrued when deemed probable and estimable.