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Income Taxes
 12 Months Ended
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 not 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.