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Income Taxes | 12 Months Ended
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Dec. 28, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We are subject to federal and state income tax as well as income tax in the various foreign jurisdictions in which we operate. The domestic and foreign components of Income (loss) before income taxes were as follows:
|  | Year Ended
(In thousands) |  | December 28, 2019 |  | December 29, 2018 |  | December 30, 2017
Domestic |  | $ | 33,417 |  |  | $ | (8,274 | ) |  | $ | (17,341 | )
Foreign |  | 11,648 |  |  | (15,695 | ) |  | (52,372 | )
Income (loss) before taxes |  | $ | 45,065 |  |  | $ | (23,969 | ) |  | $ | (69,713 | )
The components of the Income tax expense are as follows:
|  | Year Ended
(In thousands) |  | December 28, 2019 |  | December 29, 2018 |  | December 30, 2017
Current: |  |  |  |  |  |
Federal |  | $ | 499 |  |  | $ | 536 |  |  | $ | 508 |
State |  | 45 |  |  | 38 |  |  | 30 |
Foreign |  | 1,345 |  |  | 1,869 |  |  | 304 |
|  | 1,889 |  |  | 2,443 |  |  | 842 |
Deferred: |  |  |  |  |  |
Federal |  | — |  |  | — |  |  | — |
State |  | — |  |  | — |  |  | — |
Foreign |  | (317 | ) |  | (90 | ) |  | 7 |
|  | (317 | ) |  | (90 | ) |  | 7 |
Income tax expense |  | $ | 1,572 |  |  | $ | 2,353 |  |  | $ | 849 |
Income tax expense differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:
|  | Year Ended
|  | December 28, 2019 |  | December 29, 2018 |  | December 30, 2017
|  | % |  | % |  | %
Statutory federal rate |  | 21 |  | (21) |  | (35)
Adjustments for tax effects of: |  |  |  |  |  |
State taxes, net |  | 3 |  | (6) |  | (7)
Research and development credits |  | 3 |  | (5) |  | (1)
Stock compensation |  | (11) |  | 8 |  | 3
Foreign rate differential |  | (2) |  | 20 |  | 28
Foreign dividends |  | — |  | — |  | 1
Foreign withholding taxes |  | 3 |  | 5 |  | —
Other permanent |  | 6 |  | 2 |  | —
Other deferred tax asset adjustment |  | — |  | 13 |  | —
Valuation allowance |  | (19) |  | (11) |  | (73)
Change in uncertain tax benefit accrual |  | — |  | 2 |  | 1
Stock compensation (ASU 2016-09) adoption |  | — |  | — |  | (8)
Tax rate change |  | — |  | — |  | 93
Other |  | — |  | 3 |  | (1)
Effective income tax rate |  | 4 |  | 10 |  | 1
ASC 740, “Income Taxes”, provides for the recognition of deferred tax assets if realization of these assets is more-likely-than-not. We evaluate both positive and negative evidence to determine if some or all of our deferred tax assets should be recognized on a quarterly basis. Through December 28, 2019, we continued to evaluate the valuation allowance position in the United States and concluded that we should maintain a full valuation allowance against the net federal and state deferred tax assets. In making this evaluation, we exercised significant judgment and considered estimates about our ability to generate revenue and taxable profits sufficient to offset expenditures in future periods within the United States. It is reasonably possible that during the next twelve months, we will establish a sustained level of profitability in the U.S. As a result, we may reverse a significant portion of the valuation allowance recorded against our U.S. deferred tax assets. The reversal would result in an income tax benefit for the quarterly and annual fiscal period in which we release the valuation allowance. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the net deferred tax assets. We don't have a valuation allowance in any foreign jurisdictions as we have concluded it is more likely than not that we will realize the net deferred tax assets in future periods. The net decrease in the total valuation allowance affecting the effective tax rate for the year ended December 28, 2019 was approximately $8.6 million, mainly attributable to the write down of intangible assets which had no tax basis. The components of our net deferred tax assets are as follows:
(In thousands) |  | December 28, 2019 |  | December 29, 2018
Deferred tax assets: |  |  |  |
Accrued expenses and reserves |  | $ | 4,137 |  |  | $ | 3,714 |
Inventory |  | — |  |  | 2 |
Deferred Revenue |  | — |  |  | — |
Stock-based and deferred compensation |  | 2,812 |  |  | 2,660 |
Interest expense disallowance |  | — |  |  | 1,283 |
Intangible assets |  | 12,294 |  |  | 14,649 |
Fixed assets |  | 256 |  |  | 281 |
Net operating loss carry forwards |  | 86,899 |  |  | 88,333 |
Tax credit carry forwards |  | 90,339 |  |  | 92,208 |
Capital loss carry forwards |  | 4,235 |  |  | 5,007 |
Other |  | 1,059 |  |  | 1,130 |
Total deferred tax assets |  | 202,031 |  |  | 209,267 |
Less: valuation allowance |  | (198,499 | ) |  | (207,108 | )
Net deferred tax assets |  | 3,532 |  |  | 2,159 |
Deferred tax liabilities: |  |  |  |
Fixed assets |  | 2,620 |  |  | 1,536 |
Deferred revenue |  | 434 |  |  | 525 |
Other |  | — |  |  | (57 | )
Total deferred tax liabilities |  | 3,054 |  |  | 2,004 |
Net deferred tax assets |  | $ | 478 |  |  | $ | 155 |
The following table displays the activity related to changes in our valuation allowance for deferred tax assets:
Fiscal Years Ended (In thousands) |  | Balance at beginning of period |  | Charged (Credit) to costs and expenses |  | Charged (credit) to other accounts |  | Balance at end of period
Valuation allowance for deferred tax assets |  |  |  |  |  |  |  |
December 28, 2019 |  | $ | 207,108 |  |  | $ | (8,609 | ) |  | $ | — |  |  | $ | 198,499 |
December 29, 2018 |  | $ | 209,691 |  |  | $ | (2,583 | ) |  | $ | — |  |  | $ | 207,108 |
December 30, 2017 |  | $ | 260,687 |  |  | $ | (50,960 | ) |  | $ | (36 | ) |  | $ | 209,691 |
At December 28, 2019, we had U.S. federal net operating loss ("NOL") carryforwards (pretax) of approximately $360.5 million that expire at various dates between 2020 and 2037. We had state NOL carryforwards (pretax) of approximately $141.3 million that expire at various dates from 2020 through 2039. We also had federal and state credit carryforwards of $50.1 million and $62.6 million, respectively. Of the $62.6 million state credit carryforwards, $61.9 million do not expire. The federal and remaining state credits expire at various dates from 2020 through 2039. Future utilization of federal and state net operating losses and tax credit carry forwards may be limited if cumulative changes to ownership exceed 50% within any three-year period. If there is a significant change in ownership, future tax attribute utilization may be restricted and NOL carryforwards and/or R&D credits will be reduced to reflect the limitation. Foreign earnings may be subject to withholding taxes in local jurisdictions if they are distributed and repatriated in the United States. At December 28, 2019, U.S. income taxes and foreign withholding taxes were not provided for on a cumulative total of approximately $2.9 million of the undistributed earnings of our Chinese subsidiary. We intend to reinvest these earnings indefinitely. At December 28, 2019, our unrecognized tax benefits associated with uncertain tax positions were $41.9 million, of which $39.9 million, if recognized, would affect the effective tax rate, subject to valuation allowance. As of December 28, 2019, interest and penalties associated with unrecognized tax benefits were $9.0 million, which are not reflected in the table below. The following table summarizes the changes to unrecognized tax benefits for the fiscal years presented:
(In thousands) |  | Amount
Balance at December 31, 2016 |  | $ | 47,623 |
Additions based on tax positions related to the current year |  | 471 |
Additions based on tax positions of prior years |  | 11 |
Reduction for tax positions of prior years |  | (1,226 | )
Reduction as a result of lapse of applicable statute of limitations |  | (2,047 | )
Balance at December 30, 2017 |  | 44,832 |
Additions based on tax positions related to the current year |  | 389 |
Additions based on tax positions of prior years |  | 19 |
Reductions for tax positions of prior years |  | (5 | )
Reduction as a result of lapse of applicable statute of limitations |  | (1,235 | )
Balance at December 29, 2018 |  | 44,000 |
Additions based on tax positions related to the current year |  | 238 |
Additions based on tax positions of prior years |  | 334 |
Reductions for tax positions of prior years |  | (213 | )
Reduction as a result of lapse of applicable statute of limitations |  | (2,432 | )
Balance at December 28, 2019 |  | $ | 41,927 |
Our liability for uncertain tax positions (including penalties and interest) was $24.6 million and $26.3 million at December 28, 2019 and December 29, 2018, respectively, and is recorded as a component of Other long-term liabilities on our Consolidated Balance Sheets. The remainder of our uncertain tax position exposure of $24.8 million is netted against deferred tax assets. At December 28, 2019, it is reasonably possible that $2.4 million of unrecognized tax benefits and $0.5 million of associated interest and penalties could be recognized during the next twelve months. The $2.9 million potential change would represent a decrease in unrecognized tax benefits, comprised of items related to tax filings for years that will no longer be subject to examination under expiring statutes of limitations. The years that remain subject to examination are 2016 for federal income taxes, 2015 for state income taxes, and 2012 for foreign income taxes, including years ending thereafter. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward amount. Our Philippines 2016 and 2017 and Israeli 2013 through 2017 income tax returns are currently under examination. We are not under examination in any other jurisdiction. We are not currently paying U.S. federal income taxes and do not expect to pay such taxes until we fully utilize our tax NOL and credit carryforwards. We expect to pay a nominal amount of state income tax. We are paying foreign income and withholding taxes, which are reflected in income tax expense in our Consolidated Statements of Operations and are primarily related to the cost of operating offshore activities and subsidiaries. We accrue interest and penalties related to uncertain tax positions in income tax expense.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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