XML 105 R20.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes  
Income Taxes

12. Income Taxes

        The provision for (benefit from) income taxes is comprised of:

 
   Years Ended December 31,  
 
   2011   2010   2009  
 
   (In thousands)
  

Federal:

                    

Current

   $ 16,595   $ 55,332   $ (957 )

Deferred

     (255 )   255     —  

State:

                    

Current

     17     1,467     9  

Deferred

     —     —     —  

Foreign:

                    

Current

     886     401     761  

Deferred

     9     (328 )   (354 )
               

 

   $ 17,252   $ 57,127   $ (541 )
               

        The differences between Rambus' effective tax rate and the U.S. federal statutory regular tax rate are as follows:

 
   Years Ended December 31,  
 
   2011   2010   2009  

Expense (benefit) at U.S. federal statutory rate

     (35.0 )%   35.0 %   (35.0 )%

Expense (benefit) at state statutory rate

     (0.1 )   0.5     (5.4 )

Withholding tax

     64.2     17.3     —  

Foreign rate differential

     33.0     2.4     —  

Research and development ("R&D") credit

     (1.0 )   (0.3 )   (0.9 )

Executive compensation

     2.0     0.7     —  

Non-deductible stock-based compensation

     2.8     0.3     0.8  

Foreign tax credit

     (197.7 )   —     —  

Capitalized merger and acquisition costs

     5.9     —     —  

Other

     0.5     (1.4 )   0.7  

Valuation allowance

     192.3     (27.0 )   39.2  
               

 

     66.9 %   27.5 %   (0.6 )%
               

        The components of the net deferred tax assets are as follows:

 
   As of December 31,  
 
   2011   2010  
 
   (In thousands)
  

Deferred tax assets:

              

Depreciation and amortization

   $ 2,063   $ 3,465  

Other liabilities and reserves

     35,050     13,220  

Deferred equity compensation

     58,329     52,077  

Net operating loss carryovers

     8,432     8,432  

Tax credits

     58,314     18,121  
           

Total gross deferred tax assets

   $ 162,188   $ 95,315  

Convertible debt

     (12,932 )   (16,961 )
           

Total net deferred tax assets

   $ 149,256   $ 78,354  

Valuation allowance

     (140,982 )   (75,413 )
           

Net deferred tax assets

   $ 8,274   $ 2,941  
           

 

 
   As of December 31,  
 
   2011   2010  
 
   (In thousands)
  

Reported as:

              

Current deferred tax assets

   $ 2,798   $ 2,420  

Non-current deferred tax assets

     7,531     2,974  

Non-current deferred tax liabilities

     (2,055 )   (2,453 )
           

Net deferred tax assets

   $ 8,274   $ 2,941  
           

        As of December 31, 2011, the Company's consolidated balance sheet included net deferred tax assets, before valuation allowance, of approximately $149.3 million, which consists of net operating loss carryovers, tax credit carryovers, amortization, employee stock-based compensation expenses and certain liabilities, partially reduced by deferred tax liabilities associated with convertible debt instruments. For the year ended December 31, 2011, the Company's valuation allowance increased to $141.0 million as a result of an increase in deferred tax assets before valuation from taking a foreign tax credit instead of a deduction on withholding taxes as well as various timing items related to other liabilities and reserves. Management periodically evaluates the realizability of the Company's net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on the Company's ability to generate sufficient future taxable income during periods prior to the expiration of tax statutes to fully utilize these assets.

        The Company weighed both positive and negative evidence and determined that there is a continued need for a valuation allowance due to projected future losses, which the Company considered significant negative evidence. Though considered positive evidence, potential income from currently unsigned favorable patent and related settlement litigation were not included in the determination for the valuation allowance due to the Company's inability to reliably estimate the probability, timing and amounts of such settlements. Even though the Company is no longer in a cumulative loss position, the projection of significant future losses is a negative factor that outweighs the positive factors leading to a conclusion that a release of the valuation allowance is not yet appropriate. If any settlement income is realized, the Company will reassess its position on maintaining the valuation allowance.

        As of December 31, 2011, Rambus has state net operating loss carryforwards for income tax purposes of $245.9 million which begin to expire in 2018. As of December 31, 2011, Rambus has federal research and development tax credit carryforwards for income tax purposes of $23.3 million and state research and development tax credit carryforwards of $4.8 million, net of federal benefit. The federal research and development tax credit carryforwards begin to expire in 2012 and the state tax credit can be carried forward indefinitely.

        In the event of a change in ownership, as defined under federal and state tax laws, Rambus' net operating loss and tax credit carryforwards could be subject to annual limitations. The annual limitations could result in the expiration of the net operating loss and tax credit carryforwards prior to utilization.

        Tax attributes related to stock option windfall deductions should not be recorded until they result in a reduction of cash taxes payable. The Company's unrealized excess tax benefits from stock option deductions excluded from the federal and state tax attributes as of December 31, 2011 were $93.5 million and $99.2 million, respectively. The excess tax benefits will be recorded to additional paid-in capital when they reduce cash taxes payable.

        As of December 31, 2011, the Company had $16.6 million of unrecognized tax benefits including $7.0 million recorded as a reduction of long-term deferred tax assets and $9.6 million recorded in long term income taxes payable. If recognized, $2.6 million would be recorded as an income tax benefit in the consolidated statements of operations. As of December 31, 2010, the Company had $11.8 million of unrecognized tax benefits including $7.2 million recorded as a reduction of long-term deferred tax assets and $4.6 million recorded in long term income taxes payable. If recognized, $2.8 million would be recorded as an income tax benefit in the consolidated statements of operations.

        At December 31, 2011, no deferred taxes have been provided on undistributed earnings of approximately $6.1 million from the Company's international subsidiaries since these earnings have been, and under current plans will continue to be, permanently reinvested outside the United States. The Company's operations in India was under a tax holiday which expired in 2011.

        A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2011, 2010 and 2009 is as follows (amounts in thousands):

 
   Years Ended December 31,  
 
   2011   2010   2009  

Balance at January 1

   $ 11,816   $ 10,353   $ 9,613  

Tax positions related to current year:

                    

Additions

     608     1,401     767  

Tax positions related to prior years:

                    

Additions

     4,911     140     —  

Reductions

     (725 )   (78 )   (27 )

Settlements

     —     —     —  
               

Balance at December 31

   $ 16,610   $ 11,816   $ 10,353  
               

        Rambus recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). At December 31, 2011 and 2010, an insignificant amount of interest and penalties are included in long-term income taxes payable.

        Rambus files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company is subject to examination by the IRS for tax years ended 2008 through 2010. The Company is also subject to examination by the State of California for tax years ended 2007 through 2010. In addition, any R&D credit carryforward or net operating loss carryforward generated in prior years and utilized in these or future years may also be subject to examination by the IRS and the State of California. The Company is also subject to examination in various other foreign jurisdictions, including India, for various periods. Although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, the Company cannot reasonably estimate the outcome at this time.