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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Expense (Benefit), Continuing Operations [Abstract] |
Income Taxes | Income Taxes Income before taxes consisted of the following:
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Domestic | $ | 38,211 |  |  | $ | 58,498 |  |  | $ | 49,173 |
Foreign | (15,574 | ) |  | 1,733 |  |  | 1,077 |
| $ | 22,637 |  |  | $ | 60,231 |  |  | $ | 50,250 |
The provision for (benefit from) income taxes is comprised of:
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Federal: |  |  |  |  |
Current | $ | 22,115 |  |  | $ | 20,497 |  |  | $ | 19,386 |
Deferred | (2,198 | ) |  | (170,798 | ) |  | 2,337 |
State: |  |  |  |  |
Current | 884 |  |  | 609 |  |  | 713 |
Deferred | (271 | ) |  | (1,933 | ) |  | — |
Foreign: |  |  |  |  |
Current | 1,275 |  |  | 443 |  |  | 1,640 |
Deferred | (5,988 | ) |  | 25 |  |  | (27 | )
| $ | 15,817 |  |  | $ | (151,157 | ) |  | $ | 24,049 |
The differences between Rambus’ effective tax rate and the U.S. federal statutory regular tax rate are as follows:
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
Expense at U.S. federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Expense (benefit) at state statutory rate | 1.8 |  |  | (1.5 | ) |  | 1.0 |
Withholding tax | 97.0 |  |  | 34.1 |  |  | 38.6 |
Foreign rate differential | 4.1 |  |  | 0.4 |  |  | 2.5 |
Research and development (“R&D”) credit | (8.3 | ) |  | (2.3 | ) |  | (6.1 | )
Executive compensation | 1.5 |  |  | 0.5 |  |  | 0.2 |
Stock-based compensation | 34.8 |  |  | 5.3 |  |  | 1.4 |
Foreign tax credit | (97.0 | ) |  | (34.1 | ) |  | (38.7 | )
Other | 1.0 |  |  | (0.6 | ) |  | 0.6 |
Valuation allowance | — |  |  | (287.8 | ) |  | 13.4 |
| 69.9 | % |  | (251.0 | )% |  | 47.9 | %
The components of the net deferred tax assets are as follows:
| As of December 31,
| 2016 |  | 2015
| (In thousands)
Deferred tax assets: |  |  |
Depreciation and amortization | $ | 22,174 |  |  | $ | 30,019 |
Other liabilities and reserves | 12,442 |  | 7,227
Deferred equity compensation | 17,426 |  | 23,176
Net operating loss carryovers | 11,439 |  | 11,746
Tax credits | 120,660 |  | 117,078
Total gross deferred tax assets | 184,141 |  |  | 189,246 |
Convertible debt | (3,870) |  | (6,044)
Total net deferred tax assets | 180,271 |  |  | 183,202 |
Valuation allowance | (23,529 | ) |  | (20,717 | )
Net deferred tax assets | $ | 156,742 |  |  | $ | 162,485 |
| As of December 31,
| 2016 |  | 2015
| (In thousands)
Reported as: |  |  |
Non-current deferred tax assets | $ | 168,342 |  |  | $ | 162,485 |
Non-current deferred tax liabilities | (11,600 | ) |  | — |
Net deferred tax assets | $ | 156,742 |  |  | $ | 162,485 |
In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes (Topic 740)," to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. The Company has early adopted this ASU as of December 31, 2015 on a prospective basis. Management periodically evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. The realizability of the Company’s net deferred tax assets is dependent on its ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. Management evaluated the realizability of its net deferred tax assets based on all available evidence, both positive and negative, in determining that it was appropriate to release the valuation allowance for the Company’s U.S. federal and other state deferred tax assets of $174.5 million during the third quarter of 2015 in accordance with FASB ASC 740-10-30-16 to 25. The Company emerged from a cumulative loss position over the previous three years during the first quarter of 2015. The cumulative three-year pre-tax income is considered positive evidence which is objective and verifiable, and thus, received significant weighting. The continued stability in the Company’s operations along with the increased visibility into the adoption of its security technology in the third quarter of 2015 provided additional evidence to the Company’s belief that it will generate sufficient taxable income in the future. Additional positive evidence considered by management in its assessment included a lack of unused operating loss carryforwards in the Company’s history as well as anticipated future benefits from its cost management. Negative evidence management considered included economic uncertainties such as volatility of the semiconductor industry and uncertainties associated with the development of new products that could impact the Company’s ability to generate a sustained level of future profits. Upon considering the relative impact of all evidence during the third quarter of 2015, both negative and positive, and the weight accorded to each, the Company concluded that it was more likely than not that its deferred tax assets would be realizable with the exception of primarily its California deferred tax assets that have not met the “more likely than not” realization threshold criteria. As a result, the Company released the related valuation allowance against such deferred tax assets which is included as a component of the benefit from income taxes in the accompanying consolidated statement of operations. The Company continues to maintain a deferred tax asset valuation allowance of $23.5 million as of December 31, 2016. The following table presents the tax valuation allowance information for the years ended December 31, 2016, 2015 and 2014:
| Balance at Beginning of Period |  | Charged (Credited) to Operations |  | Charged to Other Account* |  | Valuation Allowance Release |  | Balance at End of Period
Tax Valuation Allowance |  |  |  |  |  |  |  |  |
Year ended December 31, 2014 | $ | 192,823 |  |  | — |  |  | 1,051 |  |  | — |  |  | $ | 193,874 |
Year ended December 31, 2015 | $ | 193,874 |  |  | — |  |  | 1,299 |  |  | (174,456 | ) |  | $ | 20,717 |
Year ended December 31, 2016 | $ | 20,717 |  |  | — |  |  | 2,812 |  |  | — |  |  | $ | 23,529 |
______________________________________
* | Amounts not charged to operations are charged to other comprehensive income or deferred tax assets (liabilities).
As of December 31, 2016, Rambus had California and other state net operating loss carryforwards of $274.6 million and $99.7 million, respectively. As of December 31, 2016, Rambus had federal research and development tax credit carryforwards of $36.5 million, alternative minimum tax credits of $2.5 million, and foreign tax credits of $120.3 million. As of December 31, 2016, Rambus had California research and development tax credit carryforwards of $24.7 million. These carryforward amounts included $38.2 million of federal tax credits and $98.2 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 2020 and 2018, respectively. Approximately $55 million of federal foreign tax credits expire in 2020. The California net operating losses began to expire in 2016, and $3.2 million expired during the year. Additionally, $64.5 million of California net operating loss is expected to expire in 2017. 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, 2016, the Company had $21.9 million of unrecognized tax benefits including $19.7 million recorded as a reduction of long-term deferred tax assets and $2.2 million recorded in long term income taxes payable. If recognized, $2.2 million would be recorded as an income tax benefit in the consolidated statements of operations. As of December 31, 2015, the Company had $20.8 million of unrecognized tax benefits including $18.6 million recorded as a reduction of long-term deferred tax assets and $2.2 million recorded in long term income taxes payable. If recognized, $2.2 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 $0.2 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, 2016, 2015 and 2014 is as follows (amounts in thousands):
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
Balance at January 1 | $ | 20,836 |  |  | $ | 19,903 |  |  | $ | 18,794 |
Tax positions related to current year: |  |  |  |  |
Additions | 1,225 |  |  | 1,186 |  |  | 1,134 |
Tax positions related to prior years: |  |  |  |  |
Additions | 256 |  |  | — |  |  | 531 |
Reductions | (171 | ) |  | (35 | ) |  | (556 | )
Settlements | (221 | ) |  | (218 | ) |  | — |
Balance at December 31 | $ | 21,925 |  |  | $ | 20,836 |  |  | $ | 19,903 |
Rambus recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). At December 31, 2016 and 2015, an immaterial amount of interest and penalties are included in long-term income taxes payable. Rambus files income tax returns for the U.S., California, India, the U.K., the Netherlands and various other state and foreign jurisdictions. The U.S. federal returns are subject to examination from 2013 and forward. The California returns are subject to examination from 2010 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 2012 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 tax years beginning with 2011, except for 2014, which was assessed in the Company's favor. 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, 2016, no deferred taxes have been provided on undistributed earnings of approximately $6.7 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 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 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 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=65882285&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=65882285&loc=d3e32537-109319 + Details
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