Tenable Holdings Inc

11. Income Taxes

U.S. and foreign components of the loss before income taxes were as follows:

The components of the provision for income taxes were as follows:

In connection with the 2022 acquisition of Bit Discovery, we elected to first offset our existing deferred tax assets with acquired deferred tax liabilities. This resulted in releasing $2.5 million of the federal and state valuation allowance, which was recorded as a component of our deferred tax benefit.

In connection with the 2021 acquisition of Accurics, we elected to first offset our existing deferred tax assets with acquired deferred tax liabilities. This resulted in releasing $7.9 million of the federal and state valuation allowance, which was recorded as a component of our deferred tax benefit.

In 2022 and 2021, we restructured our operations in Israel through intercompany transactions, which resulted in $2.7 million and $2.8 million, respectively, of current tax expense.

The items accounting for the difference between income taxes computed at the federal statutory rate and our effective tax rate were as follows:

We maintain a valuation allowance on U.S. federal, state and foreign net deferred tax assets as the realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.

The components of the deferred tax assets and liabilities were as follows:

At December 31, 2023, we had net operating loss (“NOL”) carryforwards for federal, state and foreign tax purposes of $372.5 million, $246.6 million, and $469.3 million, respectively, which will begin to expire in 2030, as well as $27.6 million of federal, state and foreign research and development tax credits, foreign tax credits, minimum tax credits and certain states’ job creation tax credits. The federal research and development and foreign tax credits will begin to expire in 2032 and the state job creation tax credits will begin to expire in 2024.

We are currently subject to the annual limitation under Sections 382 and 383 of the Internal Revenue Code. We will not be precluded from realizing the NOL carryforward and tax credits but may be limited in the amount we could utilize in any given tax year in the event that the federal and state taxable income will exceed the limitation imposed by Section 382. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.

At December 31, 2023 and 2022, the total amount of gross unrecognized tax benefits was $8.3 million and $7.8 million, respectively, which, if recognized, would impact our effective tax rate by approximately $0.2 million in each year. Interest and penalties associated with uncertain tax positions recognized as a component of income tax expense were immaterial in 2023, 2022 and 2021.

The change in gross unrecognized tax benefits, excluding accrued interest, were as follows:

We file income tax returns in the United States, including various state jurisdictions. Our subsidiaries file income tax returns in various foreign jurisdictions. Tax years after 2014 remain open to examination by the major taxing jurisdictions in which we are subject to tax. At December 31, 2023, we were not under examination for income tax audits by the Internal Revenue Service. We are currently under tax examination in France for tax years 2019 through 2022 and in Israel for tax years 2018 through 2021.

Depending on the jurisdiction, distributions of earnings could be subject to withholding taxes at rates applicable to the distributing jurisdiction. As we intend to continue to reinvest the earnings of foreign subsidiaries indefinitely, we have not provided for a U.S. income tax liability and foreign withholding taxes on undistributed foreign earnings of foreign subsidiaries. It is not practicable for us to determine the amount of unrecognized tax expense on these reinvested foreign earnings.