

	Year Ended
	December 31,
(In thousands)	2024		2023		2022
Current:
Federal	$	112,768	$	81,504	$	60,927
State		25,650		15,190		12,408
Foreign		13,357		4,075		1,845
		151,775		100,769		75,180
Deferred:
Federal		(104,581)		(46,217)		(16,429)
State		(13,385)		(6,421)		(3,142)
Foreign		(16,071)		(5,611)		(2,759)
		(134,037)		(58,249)		(22,330)
Total	$	17,738	$	42,520	$	52,850

A reconciliation of the statutory U.S. federal tax rate to our effective rate is as follows:



	Year Ended
	December 31,
	2024		2023		2022
Statutory U.S. federal tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	5.5		4.1		3.0
Foreign taxes	0.4		(0.6)		0.7
Valuation Allowance	10.6		0.4		(0.5)
Tax credits	(9.0)		(3.4)		(1.3)
Stock-based compensation windfall	(5.0)		(0.9)		(1.2)
Nondeductible expenses	3.9		1.3		—
Foreign inclusions	(0.8)		(0.9)		—
Acquisition related charges	—		4.9		—
Other	0.6		(0.2)		—
Legal entity reorganization	(8.6)		—		—
Uncertain tax position	(3.9)		—		—
Effective tax rate	14.7	%	25.7	%	21.7	%

Deferred income taxes reflect the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting purposes and tax purposes. Significant components of our deferred income taxes are as follows:



	December 31,
(In thousands)	2024		2023
Deferred tax assets:
Inventory reserve	$	70,011	$	27,228
Accruals, reserves, and other currently not deductible		47,434		37,798
Stock-based compensation		41,084		39,715
Capitalized R&E		83,581		68,832
Net operating loss carryforwards		110,386		128,810
General business and other credit carryforwards		33,995		42,569
Lease Liability		27,449		22,887
Other		45,703		30,948
Total deferred tax assets		459,643		398,787
Valuation allowance		(182,607)		(190,762)
Total deferred tax assets, net of valuation allowance		277,036		208,025
Deferred tax liabilities:
Depreciation and amortization		(173,845)		(244,348)
Right of Use Asset		(12,065)		(12,370)
Total deferred tax liabilities		(185,910)		(256,718)
Net deferred tax assets/(liabilities)	$	91,126	$	(48,693)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize a portion of the benefits of these deductible differences at December 31, 2024 and 2023. The Company has established valuation allowances of $182.6 million and $190.8 million at December 31, 2024 and 2023, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets comprised of tax loss carryforwards in various jurisdictions. The decrease in the valuation allowance during 2024 was primarily driven by the internal reorganization, as well as the mix of earnings in loss entities. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

At December 31, 2024, the Company had $1.3 million and $326.8 million of federal and foreign net operating loss carryforwards, respectively. Federal net operating loss carryforwards begin to expire in 2026 and foreign net operating losses carry forward indefinitely.

The Company has California research and development income tax credit carryforwards of $40.1 million. The California credits can be carried forward indefinitely. The Company has foreign tax credit carryforwards of $2.1 million which expire beginning in 2027.

Due to the “change of ownership” provision of the Tax Reform Act of 1986, utilization of the Company’s net operating loss and credit carryforwards may be subject to an annual limitation against taxable income in future periods. As a result of any future ownership changes, the annual limitation of loss and credit carryforwards may cause them to expire before ultimately becoming available to reduce future income tax liabilities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Year Ended
	December 31,
(In thousands)	2024		2023		2022
Unrecognized tax benefits at the beginning of the year	$	33,757	$	986	$	1,052
Additions related to current year tax positions		2,601		853		—
Additions related to prior year tax positions		27,922		32,045		50
Reductions related to prior year tax positions		(7,917)		(127)		(116)
Unrecognized tax benefits at the end of the year	$	56,363	$	33,757	$	986

The additions related to current year tax positions for the year ended December 31, 2024 of $2.6 million are primarily related to additional current year reserves. The additions related to the prior year tax positions for the year ended December 31, 2024 of $27.9 million are related to the historical positions from the NuVasive Merger, partially recorded to goodwill using the acquisition method of accounting. The reductions related to prior year tax positions for the year ended December 31, 2024 of $7.9 million are primarily related to the resolution of certain foreign and U.S. federal tax positions.

The impact of our unrecognized tax benefits to the effective income tax rate is as follows:

Due to recent tax reform in the U.S. and favorable treaties between the U.S. and countries in which the Company’s controlled foreign corporations operate, the Company has the ability to repatriate earnings without incurring additional tax liabilities. Accordingly, the Company has not recorded a liability for taxes associated with any future distributions of these undistributed earnings.