v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and foreign components of pre-tax loss were as follows:
Year Ended December 31,
202420232022
(in thousands)
Domestic (1)
$(280,877)$(285,330)$(538,311)
Foreign (1)
(391,349)(1,009,093)(862,386)
Loss before income taxes$(672,226)$(1,294,423)$(1,400,697)
(1)Includes the impact of intercompany charges to foreign affiliates for financing, management fees, and research and development cost sharing, inclusive of stock-based compensation.
The components of our income tax (benefit) expense were as follows:
Year Ended December 31,
202420232022
(in thousands)
Current:
Federal$5,216 $— $— 
State6,811 8,585 10,704 
Foreign13,273 26,727 22,404 
Total current income tax expense (benefit)25,300 35,312 33,108 
Deferred:
Federal1,595 1,267 1,212 
State1,027 1,061 837 
Foreign(2,292)(9,578)(6,201)
Total deferred income tax expense (benefit)330 (7,250)(4,152)
Income tax expense (benefit)$25,630 $28,062 $28,956 
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate:
Year Ended December 31,
202420232022
Tax benefit (expense) computed at the federal statutory rate21.0 %21.0 %21.0 %
State tax benefit (expense), net of federal benefit (1)
3.9 2.2 2.9 
Change in valuation allowance(31.0)(31.5)(32.0)
Differences between U.S. and foreign tax rates on foreign income(0.3)3.3 2.5 
Stock-based compensation(6.4)(7.0)(0.1)
U.S. federal research & development credit benefit11.0 8.6 5.0 
Acquisitions and divestitures(1.0)1.8 (0.7)
Other benefits (expenses)(1.0)(0.6)(0.7)
Total income tax benefit (expense)(3.8)%(2.2)%(2.1)%
(1)    Inclusive of state research and development credits.
The significant components of net deferred tax balances were as follows:
Year Ended December 31,
20242023
(in thousands)
Deferred tax assets:
Accruals and reserves$16,413 $22,475 
Intangible assets139,612 168,661 
IRC 174 capitalized R&D598,669 449,253 
Stock-based compensation58,171 70,563 
Loss carryforwards2,757,814 2,774,231 
Tax credit carryforwards1,060,486 969,368 
Lease liability128,072 126,637 
Other67,958 51,764 
Total deferred tax assets4,827,195 4,632,952 
Deferred tax liabilities:
Right-of-use asset(112,907)(111,777)
Investments(18,333)(20,183)
Other(18,445)(28,416)
Total deferred tax liabilities(149,685)(160,376)
Total net deferred tax assets before valuation allowance4,677,510 4,472,576 
Valuation allowance(4,677,088)(4,471,571)
Net deferred taxes$422 $1,005 
On December 20, 2021, the Organisation for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. A number of countries, including the United Kingdom, are currently proposing or have enacted legislation to implement core elements of the Pillar Two proposal. On February 1, 2023, the FASB indicated that they believe the minimum tax imposed under Pillar Two is an alternative minimum tax, and, accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred. We are closely monitoring developments and evaluating their potential impact. Enactments effective in 2024 did not have a significant impact on our
2024 financial results, nor do we anticipate a significant impact on our financial results during the transition period due to safe harbor relief.
As of December 31, 2024, we had an immaterial amount of unremitted earnings related to certain foreign subsidiaries. We intend to continue to reinvest these foreign earnings indefinitely and do not expect to incur any significant taxes related to such amounts.
As of December 31, 2024, we had accumulated U.S. federal and state net operating loss carryforwards of $6.1 billion and $4.4 billion, respectively. During 2024, we fully utilized all of our federal net operating loss carryforwards generated before January 1, 2018, which were subject to a 20-year carryforward period and no taxable income limitation. The remaining $6.1 billion can be carried forward indefinitely but is subject to an 80% taxable income limitation. Certain significant state net operating loss carryforwards will begin to expire in 2031. As of December 31, 2024, we had $4.7 billion of U.K. net operating loss carryforwards that can be carried forward indefinitely; however, use of such carryforwards in a given year is generally limited to 50% of such year’s taxable income. As of December 31, 2024, we had accumulated $214.0 million of Singapore net operating loss carryforwards, which can be carried forward indefinitely and are not subject to any taxable income limitation. As of December 31, 2024, we had accumulated U.S. federal and state research tax credits of $916.5 million and $523.7 million, respectively. The U.S. federal research tax credits will begin to expire in 2032. The U.S. state research tax credits do not expire.
Beginning January 1, 2022, the Tax Cuts and Jobs Act eliminated the option to currently deduct research and development expenditures in the period incurred and requires taxpayers to capitalize and amortize such expenditures over five or fifteen years, as applicable, pursuant to Section 174 of the Internal Revenue Code. In prior years, this tax law change did not result in any U.S. federal tax liability due to the availability of pre-2018 federal net operating loss carryforwards. However, as these pre-2018 carryforwards were fully utilized in 2024, the application of the 80% taxable income limitation on remaining federal net operating loss carryforwards resulted in incremental U.S. federal tax liability and expense for the year ended December 31, 2024. We continue to incur incremental state tax liability and expense due to limitations on the use of existing state net operating loss carryforwards.
We recognize valuation allowances on deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. We had valuation allowances against net deferred tax assets of $4.7 billion and $4.5 billion as of December 31, 2024 and 2023, respectively. In 2024, the increase in the valuation allowance was primarily attributable to a net increase in our deferred tax assets resulting from the loss from operations.
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended December 31, 2024, 2023, and 2022:
Year Ended December 31,
202420232022
(in thousands)
Beginning balance of unrecognized tax benefits$513,404 $510,669 $469,573 
Additions for current year tax positions49,536 46,188 47,366 
Additions for prior year tax positions1,163 10,171 115 
Reductions for prior year tax positions(622)(16,736)(3,569)
Changes due to lapse of statute of limitations(99)(31,786)(1,887)
Reductions for settlements with taxing authorities— (4,927)— 
Changes due to foreign currency translation adjustments(574)(175)(929)
Ending balance of unrecognized tax benefits (excluding interest and penalties)562,808 513,404 510,669 
Interest and penalties associated with unrecognized tax benefits1,918 967 385 
Ending balance of unrecognized tax benefits (including interest and penalties)$564,726 $514,371 $511,054 
Substantially all of the unrecognized tax benefit was recorded as a reduction in our gross deferred tax assets, offset by a corresponding reduction in our valuation allowance. We have net unrecognized tax benefits of $35.8 million and $27.3 million included in other liabilities on our consolidated balance sheet as of December 31, 2024 and 2023, respectively, which, if recognized, would result in a tax benefit.
Our policy is to recognize interest and penalties associated with tax matters as part of the income tax provision and include accrued interest and penalties with the related income tax liability on our consolidated balance sheet. For the year ended December 31, 2024, interest expense recorded related to uncertain tax positions was not material.
The income taxes we pay are subject to potential review by taxing jurisdictions globally. Our estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We believe that our estimate has adequately provided for these matters. However, our future results may include adjustments to estimates in the period the audits are resolved, which may impact our effective tax rate.
The material tax jurisdictions in which we are subject to potential examination include the United States for tax years ending on or after 2012, and the United Kingdom for tax years ending on or after 2020. We are currently under examination by the U.K. tax authorities for tax years 2020 through 2022, and also in various other jurisdictions covering multiple tax years.