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Income Taxes
 3 Months Ended
Mar. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

T. INCOME TAXES

The effective tax rate for the three months ended March 30, 2025 and March 31, 2024, was 12.2% and 11.9%, respectively. The increase in the effective tax rate from the three months ended March 31, 2024, to three months ended March 30, 2025, is primarily attributable to a decrease in benefit related to uncertain tax positions, net of an increase in benefit related to tax credits.

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of March 30, 2025, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

As of March 30, 2025 and December 31, 2024, Teradyne had $6.8 million and $6.8 million, respectively, of reserves for uncertain tax positions.

As of March 30, 2025, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $0.7 million in the next twelve months because of a lapse of statutes of limitation. The estimated decrease relates to U.S. federal and state research and development credits.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of March 30, 2025 and December 31, 2024, $0.3 million and $0.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the three months ended March 30, 2025 and March 31, 2024, expense of $0.0 million and benefit of $0.6 million, respectively, was recorded for interest and penalties related to income tax items.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended March 30, 2025, was $2.0 million, or $0.01 per diluted share. The tax savings due to the tax holiday for the three months ended March 31, 2024, was $1.1 million, or $0.01 per diluted share. In November 2020, Teradyne entered into an agreement with the Singapore Economic Development Board which extended its Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA introduced a 15% alternative minimum tax based on the financial statement income of certain large corporations (“CAMT”), effective January 1, 2023. Teradyne currently does not expect the CAMT to have a material impact on its financial results.

The Organization for Economic Cooperation and Development (the “OECD”) has introduced a framework to implement a global minimum tax of 15% for certain multinational companies, referred to as Pillar Two. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which Teradyne operates have enacted Pillar Two legislation, and other countries are in the process of introducing draft Pillar Two legislation. Teradyne is closely monitoring these developments and evaluating the potential future impact on its effective tax rate. As of March 30, 2025, the effective tax rate was immaterially impacted by Pillar Two in some of Teradyne's foreign jurisdictions.