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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Expense (Benefit), Continuing Operations [Abstract] |
Income Taxes | Income Taxes Income before taxes consisted of the following:
| Years Ended December 31,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Domestic | $ | 49,173 |  |  | $ | (12,535 | ) |  | $ | (61,036 | )
Foreign | 1,077 |  |  | 518 |  |  | (56,849 | )
| $ | 50,250 |  |  | $ | (12,017 | ) |  | $ | (117,885 | )
The provision for income taxes is comprised of:
| Years Ended December 31,
| 2014 |  | 2013 |  | 2012
| (In thousands)
Federal: |  |  |  |  |
Current | $ | 19,386 |  |  | $ | 19,319 |  |  | $ | 15,048 |
Deferred | 2,337 |  |  | 2,200 |  |  | 587 |
State: |  |  |  |  |
Current | 713 |  |  | 47 |  |  | (2,868 | )
Deferred | — |  |  | (501 | ) |  | 2,934 |
Foreign: |  |  |  |  |
Current | 1,640 |  |  | 446 |  |  | 543 |
Deferred | (27 | ) |  | 220 |  |  | 207 |
| $ | 24,049 |  |  | $ | 21,731 |  |  | $ | 16,451 |
The differences between Rambus’ effective tax rate and the U.S. federal statutory regular tax rate are as follows:
| Years Ended December 31,
| 2014 |  | 2013 |  | 2012
Expense (benefit) at U.S. federal statutory rate | 35.0 | % |  | (35.0 | )% |  | (35.0 | )%
Expense (benefit) at state statutory rate | 1.0 |  |  | (3.3 | ) |  | 0.1 |
Withholding tax | 38.6 |  |  | 160.4 |  |  | 13.3 |
Foreign rate differential | 2.5 |  |  | 4.1 |  |  | 17.4 |
Research and development (“R&D”) credit | (6.1 | ) |  | (36.7 | ) |  | — |
Executive compensation | 0.2 |  |  | 0.8 |  |  | 0.3 |
Non-deductible stock-based compensation | 1.4 |  |  | 2.5 |  |  | 0.7 |
Foreign tax credit | (38.7 | ) |  | (163.3 | ) |  | (13.3 | )
Capitalized merger and acquisition costs | — |  |  | — |  |  | 0.3 |
Other | 0.6 |  |  | (1.0 | ) |  | (2.2 | )
Valuation allowance | 13.4 |  |  | 252.3 |  |  | 32.4 |
| 47.9 | % |  | 180.8 | % |  | 14.0 | %
The components of the net deferred tax assets are as follows:
| As of December 31,
| 2014 |  | 2013
| (In thousands)
Deferred tax assets: |  |  |
Depreciation and amortization | $ | 29,099 |  |  | $ | 28,093 |
Other liabilities and reserves | 9,916 |  | 18,578
Deferred equity compensation | 29,511 |  | 33,837
Net operating loss carryovers | 12,307 |  | 27,752
Tax credits | 116,658 |  | 100,052
Total gross deferred tax assets | 197,491 |  |  | 208,312 |
Convertible debt | (8,092) |  | (13,000)
Total net deferred tax assets | 189,399 |  |  | 195,312 |
Valuation allowance | (193,874 | ) |  | (192,823 | )
Net deferred tax assets (liabilities) | $ | (4,475 | ) |  | $ | 2,489 |
| As of December 31,
| 2014 |  | 2013
| (In thousands)
Reported as: |  |  |
Current deferred tax assets | $ | 187 |  |  | $ | 205 |
Current deferred tax liabilities | (1,131 | ) |  | (791 | )
Non-current deferred tax assets | 536 |  |  | 4,797 |
Non-current deferred tax liabilities | (4,067 | ) |  | (1,722 | )
Net deferred tax assets (liabilities) | $ | (4,475 | ) |  | $ | 2,489 |
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 attributes 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 as the Company is in a cumulative loss position over the previous three years, which is considered significant negative evidence. A sustained period of profitability in the Company's operations is required before the Company would change its judgment regarding the need for a full valuation allowance against its net deferred tax assets. Although the weight of negative evidence related to cumulative losses is decreasing as the uncertainty around litigation settlement is reducing, the Company believes that this objectively measured negative evidence outweighs the subjectively determined positive evidence of future profitability and, as such, the Company has not changed its judgment regarding the need for a full valuation allowance on its deferred tax assets in the United States in 2014. However, continued improvement in the Company's operating results, conditioned on its MID, LDT or CRD reporting units successfully commercializing new business arrangements, signing new and renewing existing license agreements and managing costs, could lead to reversal of almost all of the Company's valuation allowance as early as 2015. Until such time, consumption of tax attributes to offset profits will reduce the overall level of deferred tax assets subject to valuation allowance. Should the Company determine that it would be able to realize its remaining deferred tax assets in the foreseeable future, an adjustment to its remaining deferred tax assets would cause a material increase to income in the period such determination is made. The following table presents the tax valuation allowance information for the years ended December 31, 2014, December 31, 2013 and December 31, 2012:
| Balance at Beginning of Period |  | Charged (Credited) to Operations |  | Charged to Other Account* |  | Utilized |  | Balance at End of Period
Tax Valuation Allowance |  |  |  |  |  |  |  |  |
Year ended December 31, 2012 | $ | 130,548 |  |  | — |  |  | 54,269 |  |  | — |  |  | $ | 184,817 |
Year ended December 31, 2013 | $ | 184,817 |  |  | — |  |  | 8,006 |  |  | — |  |  | $ | 192,823 |
Year ended December 31, 2014 | $ | 192,823 |  |  | — |  |  | 1,051 |  |  | — |  |  | $ | 193,874 |
______________________________________
* | Amounts not charged to operations are charged to other comprehensive income or deferred tax assets (liabilities).
As of December 31, 2014, Rambus had California net operating loss carryforwards of $294.5 million. As of December 31, 2014, Rambus had federal research and development tax credit carryforwards of $32.7 million, alternative minimum tax credits of $2.5 million, and foreign tax credits of $120.7 million. As of December 31, 2014, Rambus had California research and development tax credit carryforwards of $18.6 million. These carryforward amounts included $36.3 million of federal tax credits and $97.5 million of California net operating losses for which no deferred tax asset has been recognized because they relate to excess tax benefits from stock-based compensation tax deductions. The excess tax benefits will be recorded to additional paid-in capital when they reduce cash taxes payable. The federal foreign tax credits and research and development credits begin to expire in 2016 and 2018, respectively. Approximately $55 million of federal foreign tax credits expire in 2020. The California net operating losses begin to expire in 2018. The federal alternative minimum tax credits and the California research and development credits carry 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. As of December 31, 2014, the Company had $19.9 million of unrecognized tax benefits including $17.8 million recorded as a reduction of long-term deferred tax assets and $2.1 million recorded in long term income taxes payable. If recognized, $2.1 million would be recorded as an income tax benefit in the consolidated statements of operations. As of December 31, 2013, the Company had $18.8 million of unrecognized tax benefits including $12.6 million recorded as a reduction of long-term deferred tax assets and $6.2 million recorded in long term income taxes payable. If recognized, $1.6 million would be recorded as an income tax benefit in the consolidated statements of operations. It is reasonably possible that a reduction of up to $0.9 million of existing unrecognized tax benefits could occur in the next 12 months. A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2014, 2013 and 2012 is as follows (amounts in thousands):
| Years Ended December 31,
| 2014 |  | 2013 |  | 2012
Balance at January 1 | $ | 18,794 |  |  | $ | 16,773 |  |  | $ | 16,610 |
Tax positions related to current year: |  |  |  |  |
Additions | 1,134 |  |  | 1,156 |  |  | 589 |
Tax positions related to prior years: |  |  |  |  |
Additions | 531 |  |  | 956 |  |  | 1,521 |
Reductions | (556 | ) |  | (91 | ) |  | (1,947 | )
Settlements | — |  |  | — |  |  | — |
Balance at December 31 | $ | 19,903 |  |  | $ | 18,794 |  |  | $ | 16,773 |
Rambus recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). At December 31, 2014 and 2013, an immaterial amount of interest and penalties are included in long-term income taxes payable. In July 2013, the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". The amendments of this ASU require that entities that have an unrecognized tax benefit and a net operating loss carryforward or similar tax loss or tax credit carryforward in the same jurisdiction as the uncertain tax position present the unrecognized tax benefit as a reduction of the deferred tax asset for the loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the loss or tax credit carryforward under the tax law. The disclosure requirements are effective for annual periods beginning after December 15, 2013. The Company adopted this new standard in the first quarter of 2014. The Company's adoption of this guidance resulted in equal reductions to both deferred tax assets and long term taxes payable of approximately $4.7 million in the first quarter of 2014. Rambus files income tax returns for the U.S., California, India and various other state and foreign jurisdictions. The U.S. federal returns are subject to examination from 2012 and forward. The California returns are subject to examination from 2009 and forward. 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. The India returns are subject to examination from fiscal year ending March 2006 and forward. The Company is currently under examination by California for the 2010 and 2011 tax years. The Company’s India subsidiary is under examination by the Indian tax administration for years 2008 through 2010. These examinations may result in proposed adjustments to the income taxes as filed during these periods. Management regularly assesses the likelihood of outcomes resulting from income tax examinations to determine the adequacy of their provision for income taxes and believes their provision for unrecognized tax benefits is adequate. At December 31, 2014, no deferred taxes have been provided on undistributed earnings of approximately $4.2 million from the Company’s international subsidiaries since these earnings have been, and under current plans will continue to be, indefinitely reinvested outside the United States. It is not practicable to determine the amount of the unrecognized tax liability at this time.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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