18. INCOME TAXES

During the years ended December 31, 2021 and 2020, the Company recorded $29.7 million and $0.9 million of income tax benefit, which was primarily driven by a partial release of the valuation allowance related to the deferred tax liabilities acquired on various acquisitions during 2021. For financial reporting purposes, loss before provision for income taxes, includes the following components (in thousands):

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The provision (benefit) for income taxes consists of the following (in thousands):

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A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2021 and 2020 is as follows:

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As of December 31, 2021, and 2020, deferred tax assets and liabilities consist of the following (in thousands):

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Realization of deferred tax assets is dependent upon the generation of future taxable income. As required by ASC 740 Income Taxes, the Company evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets as of December 31, 2021. As a result of the fact that the Company has incurred tax losses from inception, the Company has determined that it was more likely than not that the Company would not realize the benefits of federal and state net deferred tax assets.

As a result of recent acquisitions, the Company recorded U.S. deferred tax liabilities in purchase accounting related to non-tax-deductible intangible assets recognized in the financial statements. The acquired deferred tax liabilities are a source of income to support recognition of the Company’s existing deferred tax assets. Pursuant to ASC 805, the impact on a Company’s existing deferred tax assets and liabilities caused by an acquisition should be recorded in the financial statements outside of acquisition accounting.

Accordingly, the Company recorded an income tax benefit of $29.6 million for the decrease in the valuation allowance as a result of such purchase accounting considerations. The Company maintains a valuation allowance on other U.S. deferred tax assets; and on non-U.S. deferred tax assets in certain jurisdictions.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2021 and 2020 were as follows (in thousands):

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As of December 31, 2021, and 2020, the Company had federal net operating loss carryforwards of $592.5 million and $273.8 million, respectively, which may be available to reduce future taxable income. The $98.6 million of carryforwards generated in 2017 and prior expire at various dates through 2037. The $493.9 million in carryforwards generated from 2018 forward do not expire. As of December 31, 2021, and 2020, the Company had State net operating loss carryforwards of $190.5 million and $243.2 million, respectively, which may be available to reduce future taxable income. These carryforwards expire at various dates through 2041. In addition, the Company had federal and state research and development tax credit carryforwards of $10.9 million available to reduce future tax liabilities, which will expire at various dates through 2041.

The Company has foreign net operating loss carryforwards available to reduce taxable income in Germany, Japan, Belgium, Italy and the United Kingdom. As of December 31, 2021, the Company had total foreign net operating loss carryforwards of $32.6 million. In Germany, the Company has $30.0 million of net operating loss carryforwards, which have an unlimited carryforward period and do not expire. In Japan, the Company has $1.5 million of net operating loss carryforwards, which have a ten-year carryforward period and will expire at various dates through 2031. The Company has smaller loss carryforwards in Belgium, Italy and the United Kingdom.

Utilization of the Company’s net operating loss (“NOL”) carryforwards and research and development (“R&D”) credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“Section 382”) as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to significant complexity with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforward or research and development tax credits carryforwards would be subject to an annual limitation under Section 382. Although the Company has not completed its analysis, it is reasonably possible that its federal NOLs available to offset future taxable income could materially decrease. This reduction would be offset by an equal and offsetting adjustment to the existing valuation allowance. Given the offsetting adjustments to the existing valuation allowance, any ownership change is not expected to have an adverse material effect on the Company’s consolidated financial statements. Any limitation may result in expiration of a portion of the net operating loss carryforward or research and development tax credit carryforwards before utilization.

The Company operates within multiple tax jurisdictions and could be subject to audit in those jurisdictions. Such audits can involve complex income tax issues, which may require an extended period of time to resolve and may cover multiple years. In management’s opinion, adequate provisions for income taxes have been made for all years subject to audit.

In the U.S., the Company files income tax returns in the U.S. federal tax jurisdiction and various states. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years after 2017; and for 2017 and earlier years to the extent of the losses carried forward from such earlier years. The

Company is currently not under examination by the Internal Revenue Service or any other jurisdiction for any tax years. The Company remains subject to non-U.S. income tax examinations in various jurisdictions for tax years 2016 through 2021.

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As of December 31, 2021, the Company has a liability of $1.0 million for uncertain tax positions acquired in various acquisitions during 2021. None of these positions are expected to reverse within twelve months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. At December 31, 2021, the Company had a balance in accrued interest and penalties related to uncertain tax positions of $0.2 million. A reconciliation of the beginning and ending amount of unrecognized tax liabilities as of December 31, 2021 and 2020 is as follows (in thousands):

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The Company intends to permanently reinvest all earnings of its international subsidiaries in order to support the current and future capital needs of their operations in the foreign jurisdictions.