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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before provision for income taxes consisted of the following:
Year Ended December 31,
202320222021
(In thousands)
United States$(26,266)$(60,374)$(59,370)
International5,405 4,723 4,018 
Total$(20,861)$(55,651)$(55,352)

Provision for income taxes consisted of the following:
Year Ended December 31,
202320222021
(In thousands)
Current:
U.S. Federal$88 $166 $— 
State273 87 21 
Foreign697 601 989 
1,058 854 1,010 
Deferred:
U.S. Federal— — — 
State— — — 
Foreign117 121 (333)
117 121 (333)
Total$1,175 $975 $677 
The effective tax rate differed from the U.S. federal income tax rate as follows:
Year Ended December 31,
202320222021
Tax benefit at U.S. federal income tax rate21.0 %21.0 %21.0 %
State tax benefit, net of federal benefit(1.0)%1.9 %2.9 %
Impact of international operations3.1 %1.3 %1.3 %
FDII deduction
1.8 %— %— %
U.S. taxes on foreign entities— %— %(3.9)%
Stock-based compensation(22.5)%(7.3)%(3.0)%
U.S. federal tax credits13.8 %3.7 %1.6 %
Change in valuation allowance(21.7)%(21.8)%(20.3)%
Non-deductible transaction costs(0.6)%(0.1)%(0.6)%
Other0.5 %(0.5)%(0.2)%
Provision for income taxes(5.6)%(1.8)%(1.2)%

The significant components of net deferred tax assets consisted of the following:
As of December 31,
20232022
(In thousands)
Deferred Tax Assets:
Accruals and allowances$9,377 $11,330 
Net operating loss carryforwards18,940 22,622 
Stock-based compensation3,165 3,527 
Lease liabilities4,965 5,706 
Deferred revenue100 409 
Tax credit carryforwards15,775 11,510 
Depreciation and amortization3,231 3,307 
Capitalized research and development expenses50,519 40,016 
Total deferred tax assets106,072 98,427 
Deferred Tax Liabilities:
Operating lease right-of-use assets(2,823)(3,174)
Total deferred tax liabilities(2,823)(3,174)
Valuation Allowance(101,977)(93,869)
Net deferred tax assets$1,272 $1,384 
Changes in valuation allowance for deferred tax assets were as follows:
 Year Ended December 31,
 202320222021
(In thousands)
Balance at the beginning of the period$93,869 $81,742 $70,496 
Additions (1)
13,892 16,798 11,246 
Deductions (2)
(5,784)(4,671)— 
Balance at the end of the period$101,977 $93,869 $81,742 
________________________
(1)    Additions are primarily increases in tax attribute carryforwards and capitalized expenditures for income tax purposes.

(2)     Deductions present the utilization of U.S. federal and state net operating losses and tax credit attributes.

Realization of the deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. We do not anticipate to realize the net U.S. federal and state deferred tax assets and certain foreign tax attributes, which have been fully offset by a valuation allowance. As of December 31, 2023 and 2022, the valuation allowance was $102.0 million and $93.9 million, respectively.

The utilization of net operating loss and credit carryforwards may be subject to annual limitation due to the ownership changes provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of portions of the net operating loss and tax credit carryforwards before utilization.

As of December 31, 2023, net operating loss carryforwards consisted of the following:
AmountBeginning Year of Expiration
(in thousands)
U.S. federal (1)
$7,736 2031
U.S. federal (1)(2)
62,798 Indefinite
California36,888 2028
Other states35,489 2024
_________________________
(1)All of the losses are subject to annual usage limitations under Internal Revenue Code Section 382.

(2)All of the losses are subject to usage limitation of 80% of taxable income in a year when the losses will be utilized.

As of December 31, 2023, tax credit carryforwards consisted of the following:
AmountBeginning Year of Expiration
(in thousands)
U.S. federal$9,249 2039
California8,662 Indefinite
Foreign2,766 2041

As of December 31, 2023, withholding taxes and state income taxes expected to be incurred on the foreign subsidiaries’ earnings that are not indefinitely reinvested are immaterial.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows:
Year Ended December 31,
202320222021
(In thousands)
Balance at the beginning of the period$2,763 $1,736 $1,355 
Additions for tax positions taken during the current year679 765 444 
Additions (reductions) for tax positions taken during a prior year133 275 (58)
Reductions as a result of a lapse of the applicable statute of limitations(21)(13)(5)
Balance at the end of the period$3,554 $2,763 $1,736 

The total amount of unrecognized tax benefits, including immaterial interest and penalties, was $3.6 million and $2.8 million as of December 31, 2023 and 2022, respectively. We recognize interest and penalties accrued related to unrecognized tax benefits as part of the provision for income taxes.

We file income tax returns in the U.S. and numerous foreign jurisdictions. We are subject to income tax examinations by taxing authorities globally for years ending or after December 31, 2018. IRS audit of the consolidated returns of NETGEAR for which Arlo was a part of in 2018, had been closed with no findings, while the 2018 California Franchise Tax Board and 2016-2018 Texas Franchise tax audits are still in progress. Our estimate of the potential outcome of any uncertain tax positions is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We believe that the estimate has adequately reflected these matters. However, the future results may include adjustments to estimates in the period the audits will be resolved, which may impact the effective tax rate. We don't expect a significant change in unrecognized tax benefits within the next twelve months.