Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes The Company is subject to U.S. federal, state, and foreign income taxes. For the three and six months ended June 30, 2020, the Company recorded a benefit from income taxes of $12.5 million and a provision for income taxes of $42.3 million, respectively. For the three and six months ended June 30, 2019, the Company recorded provisions for income taxes of $59.7 million and $111.2 million, respectively. The Company’s effective tax rate for the three and six months ended June 30, 2020 was lower than the U.S. statutory rate primarily due to a discrete tax benefit associated with an intra-entity transfer of intellectual property rights to the United Kingdom in the second quarter of 2020, a discrete tax benefit associated with the write-off of a long-term intercompany receivable in the first quarter of 2020 and excess tax benefits related to stock-based compensation. The Company’s effective tax rate for the three and six months ended June 30, 2019 was lower than the U.S. statutory rate primarily due to excess tax benefits related to stock-based compensation.

In the second quarter of 2020, the Company completed an intra-entity transfer of intellectual property rights to the United Kingdom resulting in a deferred tax benefit of $187.0 million. The Company expects to be able to utilize the deferred tax asset resulting from the intra-entity transfer.

The Company released its valuation allowance on the majority of its net operating losses and other deferred tax assets as of December 31, 2018. Starting in 2019, the Company began recording a provision for income taxes on its pre-tax income using an effective tax rate approximating statutory rates. Due to the Company's ability to offset its pre-tax income against previously benefited net operating losses and credits, it expects a portion of its tax provision to represent a non-cash expense until its net operating losses and credits have been fully utilized.

The Company maintained a valuation allowance of $205.2 million related primarily to U.S. state and foreign tax attributes as of December 31, 2019. On a periodic basis, the Company reassesses any valuation allowances that it maintains on its deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets.

In March 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes provisions relating to several aspects of corporate income taxes. The Company does not currently expect the CARES Act to have a significant impact on its provision for income taxes; however, it will continue to monitor the provisions of the CARES Act in relation to its operations.

The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements. As of June 30, 2020 and December 31, 2019, the Company had $68.4 million and $33.9 million, respectively, of gross unrecognized tax benefits, which would affect the Company’s tax rate if recognized. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company accrues interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes. The Company did not recognize any material interest or penalties related to uncertain tax positions during the three and six months ended June 30, 2020 and 2019.

As of June 30, 2020, foreign earnings, which were not significant, have been retained by foreign subsidiaries for indefinite reinvestment. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to withholding taxes payable to the various foreign countries.

The Company files U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. The Company is no longer subject to any tax assessment from an income tax examination in the United States or any other major taxing jurisdiction for years before 2011, except where the Company has net operating losses or tax credit carryforwards that originate before 2011. The Company has various income tax audits ongoing at any time throughout the world. No significant adjustments have been reported for any jurisdiction under audit.