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Income Taxes | 12 Months Ended
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Dec. 30, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 5. Income Taxes The Company’s income tax provision (benefit) consists of the following:
|  | Fiscal Year Ended |
|  | December 30, 2023 |  |  | December 31, 2022 |  |  | December 25, 2021 |
U.S. federal: |  |  |  |  |  |  |  |  |
Current |  | $ | 25,985 |  |  | $ | 45,639 |  |  | $ | (13,096 | )
Deferred |  |  | (122,291 | ) |  |  | (149,734 | ) |  |  | (42,625 | )
|  | $ | (96,306 | ) |  | $ | (104,095 | ) |  | $ | (55,721 | )
U.S. state: |  |  |  |  |  |  |  |  |
Current |  | $ | 6,755 |  |  | $ | 12,870 |  |  | $ | (5,876 | )
Deferred |  |  | (26,602 | ) |  |  | (29,160 | ) |  |  | (8,132 | )
|  | $ | (19,847 | ) |  | $ | (16,290 | ) |  | $ | (14,008 | )
Foreign: |  |  |  |  |  |  |  |  |
Current |  | $ | 217,706 |  |  | $ | 175,335 |  |  | $ | 149,012 |
Deferred |  |  | (190,833 | ) |  |  | 36,439 |  |  |  | 45,313 |
|  | $ | 26,873 |  |  | $ | 211,774 |  |  | $ | 194,325 |
Total |  | $ | (89,280 | ) |  | $ | 91,389 |  |  | $ | 124,596 |
The income tax provision differs from the amount computed by applying the U.S. statutory federal income tax rate to income before taxes. The sources and tax effects of the differences, including the impact of establishing tax contingency accruals, are as follows:
|  | Fiscal Year Ended |
|  | December 30, 2023 |  |  | December 31, 2022 |  |  | December 25, 2021 |
Federal income tax expense at U.S. statutory rate |  | $ | 252,095 |  |  | $ | 223,658 |  |  | $ | 253,429 |
State income tax (benefit) expense, net of federal tax effect |  |  | (23,045 | ) |  |  | (21,064 | ) |  |  | (12,198 | )
Foreign-derived intangible income (FDII) deduction |  |  | (6,432 | ) |  |  | (12,343 | ) |  |  | — |
Foreign tax rate differential |  |  | (129,733 | ) |  |  | (114,599 | ) |  |  | (117,586 | )
Other foreign taxes, net of incentives and credits |  |  | 18,351 |  |  |  | 24,273 |  |  |  | 29,240 |
Withholding tax |  |  | 24,497 |  |  |  | 27,041 |  |  |  | 22,992 |
Net change in uncertain tax positions |  |  | (13,157 | ) |  |  | (14,381 | ) |  |  | (17,087 | )
U.S. federal research and development credit |  |  | (31,849 | ) |  |  | (29,384 | ) |  |  | (22,764 | )
Stock-based compensation |  |  | (851 | ) |  |  | 30 |  |  |  | (6,362 | )
Switzerland deferred tax assets |  |  | (181,410 | ) |  |  | 7,168 |  |  |  | (177 | )
Other, net |  |  | 2,254 |  |  |  | 990 |  |  |  | (4,891 | )
Income tax expense |  | $ | (89,280 | ) |  | $ | 91,389 |  |  | $ | 124,596 |
The Company recorded income tax benefit of $89,280 in the year ended December 30, 2023, representing an effective tax rate of approximately (7%), which included income tax benefit of $181,410 recognized by the Company in the fourth quarter of 2023 related to the revaluation of Switzerland deferred tax assets due to an increase in the Schaffhausen cantonal tax rate and income tax benefit of $12,116 recognized in the fourth quarter of 2023 related to Auto OEM manufacturing tax incentives in Poland. The Company recorded income tax expense of $91,389 in the year ended December 31, 2022, representing an effective tax rate of approximately 9%, which included income tax expense of $7,168 recognized by the Company in the fourth quarter of 2022 related to the revaluation of Switzerland deferred tax assets. The Company recorded income tax expense of $124,596 in the year ended December 25, 2021. The Company’s statutory federal and cantonal income tax rate in Switzerland, the Company's place of incorporation, was approximately 14% in fiscal years 2023, 2022, and 2021. If the Company reconciled taxes at the Swiss holding company federal statutory tax rate to the reported income tax expense for 2023 as presented above, the amounts related to tax at the statutory rate would be approximately $86,000 lower, or $166,000, and the foreign tax rate differential would be adjusted by a similar amount to approximately $38,000. For 2022, the amounts related to tax at the statutory rate would be approximately $77,000 lower, or $147,000, and the foreign tax rate differential would be adjusted by a similar amount to approximately $33,000. For 2021, the amounts related to tax at the statutory rate would be approximately $84,000 lower, or $169,000, and the foreign tax rate differential would be adjusted by a similar amount to approximately $28,000. All other amounts would remain substantially unchanged. The Company’s income before income taxes attributable to non-U.S. operations was $1,406,916, $1,287,794, and $1,227,666, for the years ended December 30, 2023, December 31, 2022, and December 25, 2021, respectively. Income taxes of $42,015, $45,459, and $50,127 at December 30, 2023, December 31, 2022, and December 25, 2021, respectively, have not been accrued by the Company for the unremitted earnings of several of its foreign subsidiaries because such earnings are intended to be reinvested in the subsidiaries indefinitely. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|  | December 30, 2023 |  |  | December 31, 2022 |
Deferred tax assets: |  |  |  |  |  |
Capitalized research & development expenses |  | $ | 385,916 |  |  | $ | 231,429 |
Intangible assets |  |  | 321,500 |  |  |  | 156,702 |
Tax credit carryforwards |  |  | 33,527 |  |  |  | 19,950 |
Operating leases |  |  | 27,987 |  |  |  | 30,310 |
Tax basis in excess of book basis for investments |  |  | 18,939 |  |  |  | 27,227 |
Deferred revenue |  |  | 17,815 |  |  |  | 18,327 |
Net operating losses |  |  | 16,066 |  |  |  | 4,955 |
Accrued paid time off |  |  | 15,591 |  |  |  | 14,986 |
Product warranty accruals |  |  | 12,631 |  |  |  | 12,111 |
Stock-based compensation |  |  | 10,880 |  |  |  | 8,667 |
Other |  |  | 25,231 |  |  |  | 18,259 |
Valuation allowance related to loss carryforward and tax credits |  |  | (12,870 | ) |  |  | (17,077 | )
|  | $ | 873,213 |  |  | $ | 525,846 |
Deferred tax liabilities: |  |  |  |  |  |
Withholding tax |  |  | 107,352 |  |  |  | 108,692 |
Property and equipment |  |  | 68,557 |  |  |  | 40,526 |
Operating leases |  |  | 27,432 |  |  |  | 29,756 |
Book basis in excess of tax basis for acquired entities |  |  | 18,596 |  |  |  | 21,970 |
Prepaid and perpetual license assets |  |  | 10,051 |  |  |  | 11,798 |
Other |  |  | 1,272 |  |  |  | 1,998 |
|  | $ | 233,260 |  |  | $ | 214,740 |
Net deferred tax assets |  | $ | 639,953 |  |  | $ | 311,106 |
Deferred taxes related to intangible assets increased by $164,798 as of December 30, 2023 as compared to December 31, 2022, primarily related to the revaluation of Switzerland deferred tax assets recognized in the fourth quarter of 2023. Deferred tax assets related to capitalized research and development expenses increased by $154,487 as of December 30, 2023 as compared to December 31, 2022, primarily related to the 2017 United States Tax Cuts and Jobs Act, which included provisions that became effective during 2022 tax year that require the Company to capitalize certain research and development costs and amortize those capitalized costs on its U.S. tax returns over a period of five or fifteen years, depending on where the associated costs were incurred. At December 30, 2023, the Company had $33,527 of tax credit carryover compared to $19,950 at December 31, 2022. At December 30, 2023, the Company had a deferred tax asset of $16,066 related to the future tax benefit of net operating loss (NOL) carryforwards of $55,524. Included in the NOL carryforwards is $8,319 that relates to various jurisdictions and expires in periods ranging from 2025 through 2037 and $47,205 that relates to various other jurisdictions and has no expiration date. The Company has recorded a valuation allowance for a portion of its deferred tax asset relating to various tax attributes that management does not believe are more likely than not to be realized. In the future, if the Company determines, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, an adjustment to the valuation allowance will be made in the period such a determination is made. The total amount of gross unrecognized tax benefits as of December 30, 2023 was $13,571. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for years ended December 30, 2023, December 31, 2022, and December 25, 2021 is as follows:
|  | December 30, 2023 |  |  | December 31, 2022 |  |  | December 25, 2021 |
Balance beginning of year |  | $ | 30,795 |  |  | $ | 65,216 |  |  | $ | 84,985 |
Additions based on tax positions related to prior years |  |  | — |  |  |  | — |  |  |  | — |
Reductions based on tax positions related to prior years |  |  | (3,450 | ) |  |  | (6,363 | ) |  |  | (4,727 | )
Additions based on tax positions related to current period |  |  | 450 |  |  |  | 2,368 |  |  |  | 4,272 |
Reductions related to settlements with tax authorities |  |  | — |  |  |  | (15,476 | ) |  |  | — |
Expiration of statute of limitations |  |  | (14,224 | ) |  |  | (14,950 | ) |  |  | (19,314 | )
Balance at end of year |  | $ | 13,571 |  |  | $ | 30,795 |  |  | $ | 65,216 |
Accounting guidance requires unrecognized tax benefits to be classified as noncurrent liabilities, except for the portion that is expected to be paid within one year of the balance sheet date. The balance of net unrecognized benefits of $12,824, $29,159, and $54,443 are classified as noncurrent at December 30, 2023, December 31, 2022, and December 25, 2021, respectively. The net unrecognized tax benefits, if recognized, would reduce the effective tax rate. None of the unrecognized tax benefits are due to uncertainty in the timing of deductibility. Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. At December 30, 2023, December 31, 2022, and December 25, 2021, the Company had accrued approximately $2,127, $2,751, and $4,255, respectively, for interest. The interest component of the reserve decreased income tax expense for the years ending December 30, 2023, December 31, 2022, and December 25, 2021 by $624, $1,474, and $1,441, respectively. The Company did no t have significant amounts accrued for penalties for the years ending December 30, 2023, December 31, 2022, and December 25, 2021. The Company files income tax returns in Switzerland, Taiwan, United Kingdom, U.S. federal jurisdiction, as well as various states, local, and other foreign jurisdictions. In its major tax jurisdictions, Switzerland, Taiwan, United Kingdom, and U.S. federal and various states, the Company is no longer subject to income tax examinations by tax authorities, with few exceptions, for years prior to 2019, 2018, 2021, and 2020, respectively. The Company recognized a reduction of income tax expense, inclusive of interest and net of deferrals, of $11,473, $12,749, and $22,221 in fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021, respectively, to reflect the expiration of statutes of limitations and releases due to audit settlement in various jurisdictions. The Company believes that it is reasonably possible that approximately $3,000 to $7,000 of its reserves for certain unrecognized tax benefits will decrease within the next 12 months as the result of the expiration of statutes of limitations. This potential decrease in unrecognized tax benefits would impact the Company’s effective tax rate within the next 12 months.

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