XML 43 R27.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before taxes consisted of the following:
Years Ended December 31,
(In thousands)202320222021
Domestic$154,434 $(16,663)$19,244 
Foreign32,726 8,838 4,042 
$187,160 $(7,825)$23,286 
The provision for (benefit from) income taxes was comprised of:
Years Ended December 31,
(In thousands)202320222021
Federal:
Current
$1,075 $183 $(112)
Deferred
(126,734)2,479 2,042 
State:
Current
893 (215)214 
Deferred
(17,264)24 324 
Foreign:
Current
(3,362)5,828 3,328 
Deferred
(1,352)(1,814)(844)
$(146,744)$6,485 $4,952 
The differences between the Company’s effective tax rate and the U.S. federal statutory regular tax rate were as follows:
Years Ended December 31,
202320222021
U.S. federal statutory rate21.0 %21.0 %21.0 %
State income tax expense (benefit)(8.7)6.1 2.2 
Withholding tax3.9 (36.6)4.4 
Foreign rate differential(2.6)(28.3)3.3 
Research and development credit(2.9)4.8 (7.1)
Executive compensation3.9 (49.0)6.6 
Stock-based compensation(5.2)47.9 (7.7)
Foreign tax credit(2.5)57.4 (84.0)
Foreign-derived intangible income deduction(1.9)70.5 (55.8)
Acquisition1.6 (25.1)8.8 
Debt extinguishment— (226.7)— 
Other0.3 (1.0)(0.2)
Valuation allowance(85.3)76.1 129.8 
(78.4)%(82.9)%21.3 %
The components of the net deferred tax assets (liabilities) were as follows:
As of December 31,
(In thousands)20232022
Deferred tax assets:
Depreciation and amortization$— $3,247 
Lease liabilities6,6077,691
Other timing differences, accruals and reserves5,30610,393
Deferred equity compensation3,9734,366
Net operating loss carryovers14,57813,423
Capitalized research77,24449,649
Tax credits50,44596,758
Total gross deferred tax assets158,153185,527 
Deferred tax liabilities:
Lease right-of-use assets(4,589)(5,501)
Deferred revenue—(76)
Depreciation and amortization(5,078)—
Total gross deferred tax liabilities(9,667)(5,577)
Total net deferred tax assets148,486179,950
Valuation allowance(25,056)(201,883)
Net deferred tax assets (liabilities)$123,430 $(21,933)
As of December 31,
(In thousands)20232022
Reported as:
Non-current deferred tax assets
$127,892 $3,031 
Non-current deferred tax liabilities
(4,462)(24,964)
Net deferred tax assets (liabilities)$123,430 $(21,933)
The Company 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. During the second quarter of 2023, based on all available positive and negative evidence, the Company determined that it was appropriate to release the valuation allowance on the majority of the Company’s U.S. federal and other state deferred tax assets. During the third quarter of 2023, the Company further adjusted its valuation allowance release as a result of a change in forecasted income and tax expense, primarily due to the sale of intangible assets as part of the PHY IP group divestiture. The Company recognized a $177.9 million tax benefit during the year ended December 31, 2023 as a result of the valuation allowance release.
During the second quarter of 2023, the Company reached a cumulative income position over the previous three years. The cumulative three-year income is considered positive evidence, which is considered objective and verifiable, and thus received significant weighting. Additional positive evidence considered by the Company in its assessment included recent utilization of tax attribute carryforwards and future forecasts of continued profitability in the United States. Negative evidence the Company considered included economic uncertainties, including volatility of the industry, and the possibility of a recession or a decline in the market.
Upon considering the relative impact of all evidence during the second quarter of 2023, both negative and positive, and the weight accorded to each, the Company concluded that it was more likely than not that the majority of its deferred tax assets would be realizable, with the exception of primarily its California research and development credits that have not met the “more likely than not” realization threshold criteria. As a result, the Company released the related valuation allowance against the majority of its federal and state deferred tax assets. The effect of the valuation allowance release is included as a component of the benefit from income taxes in the accompanying Consolidated Statements of Operations.
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 following table presents the tax valuation allowance information for the years ended December 31, 2023, 2022 and 2021:
(In thousands)Balance at Beginning of PeriodCharged (Credited) to OperationsCharged to Other Account*Valuation Allowance ReleaseBalance at End of Period
Tax Valuation Allowance
Year ended December 31, 2021$174,119 32,544 211 — $206,874 
Year ended December 31, 2022$206,874 (7,233)2,242 — $201,883 
Year ended December 31, 2023$201,883 1,776 (717)(177,886)$25,056 
______________________________________
*    Amounts not charged to operations are charged to other comprehensive income or retained earnings.
As of December 31, 2023, the Company had California and other state net operating loss carryforwards of $167.7 million and $0.8 million, respectively. As of December 31, 2023, the Company had federal research and development tax credit carryforwards of $45.2 million and foreign tax credits of $10.1 million. As of December 31, 2023, the Company had California research and development tax credit carryforwards of $28.1 million and California alternative minimum tax credit carryforwards of $0.5 million. The federal foreign tax credits and research and development credits begin to expire in 2024. Approximately $3.9 million of federal foreign tax credits will expire in 2024. The California net operating losses begin to expire in 2031. 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, the Company’s 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, 2023, the Company had $185.7 million of unrecognized tax benefits including $31.7 million recorded as a reduction of long-term deferred tax assets, $75.0 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea and $78.9 million recorded to long-term income taxes payable, which are primarily comprised of $77.1 million in income taxes payable related to withholding taxes previously withheld from licensees in South Korea. 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. If the Company is
successful in recovering the $162.2 million of refundable withholding taxes from South Korea, the refund would result in an offsetting reduction in U.S. foreign tax credits. The Company recognizes that there are numerous risks and uncertainties associated with the ultimate collection of this refund. The Company previously maintained an offsetting reserve for the entire amount of refundable withholding taxes previously withheld in South Korea. During the year ended December 31, 2023, the Company concluded it is more likely than not it will recover withholding taxes withheld during the past five years and accordingly filed a claim in October 2023 for refund of certain refundable withholding taxes and recorded an income taxes receivable of $82.7 million, with an offsetting long-term payable of $72.6 million and a reduction in long-term deferred tax assets of $10.1 million for the reduction in U.S. foreign tax credits. The Company has recorded a receivable for the portion of withholding taxes paid subsequent to the third quarter of 2023 for which it intends to file a future refund claim. The Company has not recorded a receivable for the portion of potentially available refunds for which a claim for refund has not been submitted or for which the Company does not intend to pursue at this time, as the Company does not believe recovery of those taxes would be more likely than not if a refund claim were submitted. The Company continues to evaluate the potential for recovery of these taxes and has therefore established an offsetting reserve for the entire amount of potentially refundable withholding taxes previously withheld in South Korea, for which a claim for refund has not been submitted.
As of December 31, 2022, the Company had $164.5 million of unrecognized tax benefits, including $19.6 million recorded as a reduction of long-term deferred tax assets, $143.6 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 to long-term income taxes payable.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2023, 2022 and 2021 was as follows:
Years Ended December 31,
(In thousands)202320222021
Balance as of January 1
$164,531 $146,215 $134,044 
Tax positions related to current year:
Additions
19,403 18,515 18,748 
Tax positions related to prior years:
Additions
1,378 — 615 
Reductions
(391)(199)(1,586)
Settlements
— — (5,606)
Balance as of December 31
$184,921 $164,531 $146,215 
The Company recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). At December 31, 2023 and 2022, an immaterial amount of interest and penalties was included in long-term income taxes payable.
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 2017 and forward. The California returns are subject to examination from 2018 and forward. In addition, any research and development 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 under examination by the Indian tax administration for tax years beginning with 2011, except for 2012 through 2015, which were assessed in the Company’s favor, and are subject to examination from 2016 and forward. 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. The estimated potential reduction in the Company’s unrecognized tax benefits in the next 12 months would not be material.
At December 31, 2023, no other income taxes (state or foreign) have been provided on undistributed earnings of approximately $50.3 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, with the exception of France. If the non-France earnings were distributed, the Company would incur approximately $3.1 million of foreign withholding taxes and an immaterial amount of U.S. taxes.