|12 Months Ended|
Dec. 31, 2018
|Income Tax Disclosure [Abstract]|
The domestic and international components of income (loss) before income taxes are presented as follows:
The income tax provision (benefit) consists of the following:
The actual income tax provision (benefit) differs from the amount computed using the federal statutory rate as follows:
The components of the deferred income tax assets are as follows:
At December 31, 2018, the Company had federal, state and foreign tax net operating loss carryforwards of approximately $261.4 million, $95.5 million and $13.6 million, respectively. The federal, state and foreign tax loss carryforwards will begin to expire in 2020, 2019 and 2026 respectively, unless previously utilized.
At December 31, 2018, the Company had federal, state and foreign tax credit carryforwards of approximately $37.8 million, $83.1 million and $5.6 million, respectively. The federal and foreign tax credit carryforwards will begin to expire in 2023 and 2024 respectively, unless previously utilized. The state tax credit carryforwards do not expire. The Company also has foreign incentive deductions of approximately $23.5 million that do not expire.
In addition, the Company has $0.7 million of federal alternative minimum tax credit carryforwards that will be refundable in future years, due to the Tax Cuts and Jobs Act described below.
The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the temporary differences reverse. The Company records a valuation allowance to reduce its deferred taxes to the amount it believes is more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence quarterly, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. Based upon the Company's review of all positive and negative evidence, the Company released $51.2 million in valuation allowance against certain of its deferred tax assets in 2017. In 2018, the Company released an additional $11.3 million of its valuation allowance as a result of completing its analysis of the effects of the Tax Act. The Company continues to have a valuation allowance on its state deferred taxes, certain of its federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where the Company has cumulative losses or otherwise is not expected to utilize certain tax attributes. The Company does not incur expense or benefit in certain tax free jurisdictions in which it operates.
The income tax benefit for the year ended December 31, 2018 primarily related to a partial release of the Company's valuation allowance as a result of the Tax Act and the mix of pre-tax income among jurisdictions, excess tax benefits related to stock-based compensation, and release of uncertain tax positions under ASC 740-10.
The income tax benefit for the year ended December 31, 2017 primarily related to the release of the federal valuation allowance in 2017, partially offset by certain discrete tax effects related to initial intercompany royalties from our Singapore subsidiary to our U.S. parent and the impacts of reductions in our U.S. federal corporate tax rates under the Tax Act and reductions to our foreign corporate tax rates on our deferred income taxes in Singapore as a result of the concessionary income tax rates in Singapore. The income tax benefit for the year ended December 31, 2017 included provisional estimates for certain tax effects of the Tax Act for which accounting under ASC 740 was incomplete. Provisional amounts related to the Tax Act were subject to adjustment during a one-year measurement period, which ended December 31, 2018. During 2018, we recorded an additional income tax benefit of $11.3 million for a reduction to our federal valuation allowance on certain net operating loss carryforwards as a result of additional projected federal taxable income resulting from the Tax Act. Other changes to provisional amounts related to the Tax Act did not have a material impact on our income tax benefit for 2018.
Income tax positions must meet a more-likely-than-not threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first financial reporting period in which that threshold is no longer met. The Company records potential penalties and interest accrued related to unrecognized tax benefits within the consolidated statements of operations as income tax expense. At December 31, 2018, the Company’s unrecognized tax benefits totaled $61.5 million, $52.2 million of which, if recognized at a time when the valuation allowance no longer exists, would affect the effective tax rate. At December 31, 2018, the Company had accrued approximately $1.1 million of interest and penalties. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.
The following table summarizes the changes to the unrecognized tax benefits during 2018, 2017 and 2016:
The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At December 31, 2018, the statutes of limitations for the assessment of federal, state, and foreign income taxes are closed for the years before 2015, 2014 and 2011, respectively.
In April 2017, the Company's subsidiary in Singapore began operating under certain tax incentives in Singapore, which are generally effective through March 2022, and are conditional upon meeting certain employment and investment thresholds in Singapore. Under the incentives, qualifying income derived from certain sales of the Company's integrated circuits is taxed at a concessionary rate over the incentive period, and there are reduced Singapore withholding taxes on certain intercompany royalties during the incentive period. Primarily because of the Company's Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on the Company's income tax expense in 2017 or 2018.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning in 2018, the transition of U.S international taxation from a worldwide tax system to a territorial system, which includes a new federal tax on global intangible low-taxed income (Global Minimum Tax or GMT), and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company calculated its best estimate of the impact of the Tax Act in its 2017 income tax benefit in accordance with its understanding of the Tax Act and guidance available as of the date of the 2017 10-K filing.
In addition, the SEC Staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it was previously required to record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The provisional amounts were subject to revisions as the Company completed its analysis of the Tax Act, collected and prepared necessary data, and interpreted any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service, or IRS, FASB, and other standard-setting and regulatory bodies. The measurement period expired on December 31, 2018 and the Company's accounting for the Tax Act is complete. During 2018, the Company reduced its valuation allowance on certain of its federal deferred tax assets by $11.3 million as a result of completing its analysis of the effects of the Tax Act. The other changes in 2018 to provisional amounts recorded in 2017 for the effects of the Tax Act were not material.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef