XML 32 R22.htm IDEA: XBRL DOCUMENT v3.22.2.2
Income Taxes
 9 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company recorded a provision for income taxes of $2.5 million and $1.1 million for the three months ended September 30, 2022 and 2021, respectively, and $5.9 million and $3.2 million for the nine months ended September 30, 2022 and 2021, respectively. The provision for income taxes for the three and nine months ended September 30, 2022 was driven by a combination of the valuation allowance recorded on U.S. deferred tax assets, foreign withholding taxes, the statutory tax expense for the foreign jurisdictions for 2022 and indefinite-lived intangible tax amortization expense. The provision for income taxes for the three and nine months ended September 30, 2021 was driven by a combination of the valuation allowance recorded on U.S. deferred tax assets, foreign withholding taxes, the statutory tax expense for the foreign jurisdictions for 2021, tax on Canadian capital gains related to the acquisition of AnalogX, and indefinite-lived intangible tax amortization expense.
During the three months ended September 30, 2022 and 2021, the Company paid withholding taxes of $5.5 million and $5.0 million, respectively. During the nine months ended September 30, 2022 and 2021, the Company paid withholding taxes of $15.8 million and $15.4 million, respectively.
The Company periodically evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. The Company continues to maintain a full valuation allowance on its U.S. federal and California deferred tax assets as it does not expect to be able to fully utilize them.
The Company has U.S. federal deferred tax assets related to research and development credits, foreign tax credits and other tax attributes that can be used to offset U.S. federal taxable income in future periods. These credit carryforwards will expire if they are not used within certain time periods. It is possible that some or all of these attributes could ultimately expire unused.
The Company maintains liabilities for uncertain tax positions within its long-term income taxes payable accounts and as a reduction to existing deferred tax assets to the extent tax attributes are available to offset such liabilities. These liabilities
involve judgment and estimation and are monitored by management based on the best information available including changes in tax regulations, the outcome of relevant court cases and other information.
As of September 30, 2022, the Company had approximately $161.0 million of unrecognized tax benefits, including $19.7 million recorded as a reduction of long-term deferred tax assets, $139.4 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea and $1.9 million recorded in long-term income taxes payable. If recognized, $1.9 million would be recorded as an income tax benefit. As a result of recent court rulings in South Korea, the Company has determined that they may be entitled to refund claims for foreign taxes previously withheld from licensees in South Korea. The Company recognizes that there are numerous risks and uncertainties associated with the ultimate collection of this refund and has therefore maintained an offsetting reserve for the entire amount of refundable withholding taxes previously withheld in South Korea. As of December 31, 2021, the Company had $146.2 million of unrecognized tax benefits, including $18.9 million recorded as a reduction of long-term deferred tax assets, $126.1 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea and $1.3 million recorded in long-term income taxes payable.
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.
Additionally, the Company’s future effective tax rates could be adversely affected by earnings being higher than anticipated in countries where the Company has higher statutory rates or lower than anticipated in countries where it has lower statutory rates, by changes in valuation of its deferred tax assets and liabilities or by changes in tax laws or interpretations of those laws.