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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s loss before income taxes consisted of (in millions):
Year Ended December 31,
202320222021
United States$(314.1)$(610.4)$(496.5)
International(7.6)8.0 (0.1)
Total$(321.7)$(602.4)$(496.6)
For the year ended December 31, 2023, the loss before income taxes of $321.7 million includes $3.3 million of losses from the Company’s equity investment in OriginPoint and excludes $1.2 million in net income attributable to non-controlling interests. The OriginPoint business and other non-controlling interests operate in the United States.
The components of the Company’s income tax benefit (provision) consisted of (in millions):
Year Ended December 31,
202320222021
Current:
Federal$— $— $— 
State(0.3)— — 
Foreign(0.1)(3.1)(1.2)
Total current(0.4)(3.1)(1.2)
Deferred:   
Federal0.8 0.9 2.1 
State— 0.3 0.4 
Foreign— 2.8 1.2 
Total deferred0.8 4.0 3.7 
Total benefit from income taxes$0.4 $0.9 $2.5 
The Company had an income tax benefit for the years ended December 31, 2023, 2022 and 2021 resulting from a partial reduction in the valuation allowance related to the carryover tax basis in deferred tax liabilities from acquisitions. The benefit from income taxes is reduced by current taxes in India that are not offset with future alternative minimum tax credits and state income tax expense.
The effective income tax rate differed from the statutory federal income tax rate as follows:
Year Ended December 31,
202320222021
Tax at federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal effect5.2 %7.0 %8.8 %
Change in valuation allowance(23.7)%(25.0)%(34.2)%
Stock-based compensation(3.6)%(2.4)%7.9 %
Non-deductible executive compensation(0.6)%(0.6)%(2.8)%
Non-deductible expenses(0.4)%(0.4)%0.1 %
Worthless stock deduction3.2 %— %— %
Other(1.0)%0.6 %(0.3)%
Benefit from income taxes0.1 %0.2 %0.5 %
The components of net deferred taxes arising from temporary differences were as follows (in millions):
December 31,
20232022
Deferred tax assets:
Nondeductible accruals$14.4 $15.0 
Stock-based compensation44.3 55.0 
Lease liabilities143.9 161.2 
Net operating loss carryforward462.1 395.6 
Allowance for credit losses10.7 9.2 
Accrued compensation27.6 35.4 
Capitalized research & development costs84.5 83.6 
Intangible assets12.1 6.7 
Other5.9 5.4 
Total deferred tax assets$805.5 $767.1 
Deferred tax liabilities:  
Operating lease right-of-use assets$(110.8)$(132.2)
Property and equipment(26.6)(37.5)
Total deferred tax liabilities(137.4)(169.7)
Less: valuation allowance(664.9)(594.2)
Net deferred tax assets$3.2 $3.2 
The Company is subject to income taxes in the United States and India. 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.
As of December 31, 2023 and 2022, the Company’s deferred tax assets were primarily the result of U.S. federal and state net operating losses, operating lease obligations, capitalized research and development costs, stock-based compensation and other compensation related accruals. A full valuation allowance was maintained against its U.S. gross deferred tax asset balances as of December 31, 2023 and 2022. As of each reporting date, the Company considers new evidence, both positive and negative, that could impact the Company’s view with regard to future realization of deferred tax assets. As of December 31, 2023 and 2022, the Company continued to maintain that the realization of its deferred tax assets has not achieved a more-likely-than-not threshold primarily due to the evidence that the Company continued to maintain three-year
cumulative pre-tax book losses. As of December 31, 2023, the valuation allowance was approximately $664.9 million, an increase of $70.7 million from December 31, 2022, which includes the impact of acquisition activity.
As of December 31, 2023 and 2022, the Company had approximately $1.6 billion and $1.4 billion of gross federal net operating losses, respectively. Of those amounts, $152.0 million will begin to expire in 2032 and $1.5 billion have an unlimited carryforward with utilization limited to 80% of taxable income. Such amounts may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, as a result of various ownership change rules.
As of December 31, 2023 and 2022, the Company had approximately $1.9 billion and $1.6 billion of gross state net operating losses, respectively, that will begin to expire in 2026.
In connection with the previously announced shutdown of Modus Technologies, Inc. (“Modus”), the Company recognized an ordinary worthless stock deduction for U.S. income tax purposes. This resulted in an increase to the gross federal net operating loss of approximately $27.0 million. The Company has not recognized any tax benefits from the Modus worthless stock deduction as a result of the full valuation allowance maintained on its deferred tax assets.
The Company had no material uncertain tax positions as of December 31, 2023, 2022 and 2021. The Company does not anticipate a material increase or decrease in the uncertain tax positions in the next twelve months after the reporting period. It is the Company’s policy to record interest and penalties related to uncertain tax positions as a component of the provision for income taxes. No material amounts of interest or penalties were recognized in the consolidated financial statements for the years ended December 31, 2023, 2022 and 2021.
The Company has obtained an income tax holiday for one of the three locations it operates in India, which expires in 2024. This incentive is conditional on meeting certain direct investment thresholds. If the Company fails to satisfy the conditions, the Company may be required to refund previously realized benefits. The Company does not expect these amounts to be material to the Company’s consolidated financial statements.
The number of years with open tax audits varies depending upon the tax jurisdiction. The Company is generally no longer subject to U.S. federal examination by the Internal Revenue Service (“IRS”) for years before 2015. The IRS and state taxing authorities can subject the Company to audit dating back to 2012 when the Company begins to utilize its net operating loss carryforwards.