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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES |
18. | INCOME TAXES:
The components of income before income taxes are as follows (in thousands):
|  | Year ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
United States |  | $ | 100,260 |  |  | $ | 69,595 |  |  | $ | 54,338 |
Foreign |  |  | 49,277 |  |  |  | (997 | ) |  |  | (21,279 | )
Income before income tax |  | $ | 149,537 |  |  | $ | 68,598 |  |  | $ | 33,059 |
The components of the income tax expense are as follows (in thousands):
|  | Year ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current income tax benefit (expense): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (5,817 | ) |  | $ | (4,485 | ) |  | $ | (1,018 | )
State |  |  | (54 | ) |  |  | (47 | ) |  |  | (2 | )
Foreign |  |  | (15,406 | ) |  |  | (12,902 | ) |  |  | (10,224 | )
|  |  | (21,277 | ) |  |  | (17,434 | ) |  |  | (11,244 | )
Deferred income tax (expense) benefit: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (24,425 | ) |  |  | (2,683 | ) |  |  | (7,145 | )
State |  |  | (23 | ) |  |  | (503 | ) |  |  | 51 |
Foreign |  |  | 73 |  |  |  | 92 |  |  |  | (43 | )
|  |  | (24,375 | ) |  |  | (3,094 | ) |  |  | (7,137 | )
Income tax expense |  | $ | (45,652 | ) |  | $ | (20,528 | ) |  | $ | (18,381 | )
Reconciliation of the statutory U.S. federal tax rate to the Company's effective tax rate is as follows:
|  | Year ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Statutory U.S. federal income tax rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal benefit |  |  | 0.0 | % |  |  | 0.5 | % |  |  | (0.1 | )%
Effect of foreign operations |  |  | (7.1 | )% |  |  | 0.9 | % |  |  | 15.2 | %
Accruals and reserves |  |  | 0.1 | % |  |  | 3.2 | % |  |  | 0.0 | %
Nondeductible employee compensation |  |  | 1.5 | % |  |  | 1.5 | % |  |  | 2.5 | %
Research tax credits |  |  | (0.7 | )% |  |  | (1.3 | )% |  |  | (4.4 | )%
Change in valuation allowance |  |  | (4.1 | )% |  |  | (9.7 | )% |  |  | 8.4 | %
Stock based compensation |  |  | (1.9 | )% |  |  | 0.0 | % |  |  | 0.0 | %
U.S. Tax Cuts and Jobs Act |  |  | 7.7 | % |  |  | 0.0 | % |  |  | 0.0 | %
Other |  |  | 0.0 | % |  |  | (0.2 | )% |  |  | (1.0 | )%
Effective tax rate |  |  | 30.5 | % |  |  | 29.9 | % |  |  | 55.6 | %
The following table summarizes Company tax loss and tax credit carry forwards for tax return purposes at December 31, 2017 (in thousands):
|  | Related Tax Deduction |  | Tax Benefit |  |  | Expiration Date
Tax credit carry forwards: |  |  |  |  |  |  |  |
Research tax credits |  | n/a |  | $ | 12,928 |  |  | 2029 to 2037
Foreign tax credits |  | n/a |  |  | 6,161 |  |  | 2027
State research tax credits |  | n/a |  |  | 2,473 |  |  | 2025 to 2030
Total credit carry forwards |  | n/a |  | $ | 21,562 |  |  |
Pursuant to Internal Revenue Code (IRC) sections 382 and 383, utilization of the Company’s tax credit carry forwards could be subject to an annual limitation because of certain ownership changes. On January 1, 2017, the Company adopted ASU No. 2016-09, Improvements to Employee Share-Based Accounting, which includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Under the previous guidance, tax effects of deductions for employee share awards in excess of compensation cost ("windfalls") were recorded in equity in the period in which the deductions actually reduced income taxes payable and any unrecognized tax benefits were tracked separately off the balance sheet. Under the new guidance, excess tax benefits and deficiencies are recorded in the income statement in the period in which stock awards vest or are settled, and any excess tax benefits not previously recognized because the related tax deduction had not reduced current taxes payable are recorded through a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption. The cumulative-effect adjustment on retained earnings resulting from the adoption of ASU 2016-09 was a net windfall tax benefit of $26.5 million as of January 1, 2017. The enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017 resulted in a one-time charge of $11.5 million in the fourth quarter. The charge includes two elements, a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. Without the TCJA, for the year ended December 31, 2017, the effective income tax rate and income tax expense would have been 22.8% and $34.2 million. Significant components of the Company's net deferred tax assets and liabilities are as follows (in thousands):
|  | December 31, |
|  | 2017 |  |  | 2016 |
Deferred tax asset: |  |  |  |  |  |  |  |
Net operating loss carry forwards |  | $ | - |  |  | $ | 3,405 |
Capitalized technology license |  |  | 804 |  |  |  | 4,163 |
Capitalized research expenditures |  |  | 3,719 |  |  |  | 8,100 |
Accruals and reserves |  |  | 962 |  |  |  | 6,712 |
Retirement plan |  |  | 7,125 |  |  |  | 9,723 |
Deferred revenue |  |  | 206 |  |  |  | 516 |
Tax credit carry forwards |  |  | 21,562 |  |  |  | 1,846 |
Stock-based compensation |  |  | 1,819 |  |  |  | 2,889 |
Other |  |  | 59 |  |  |  | 874 |
|  |  | 36,256 |  |  |  | 38,228 |
Valuation allowance |  |  | (2,460 | ) |  |  | (7,950 | )
Deferred tax assets |  |  | 33,796 |  |  |  | 30,278 |
Deferred tax liability: |  |  |  |  |  |  |  |
Accruals and reserves |  |  | (6,774 | ) |  |  | (5,785 | )
Deferred tax liabilities |  |  | (6,774 | ) |  |  | (5,785 | )
Net deferred tax assets |  | $ | 27,022 |  |  | $ | 24,493 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. During the year ended December 31, 2017, based on previous earnings history, a current evaluation of expected future taxable income and other evidence, we determined to retain the valuation allowance that relates to New Jersey research and development credits. The valuation allowance that related to UDC Ireland was almost completely utilized to offset income earned by this entity during the year; and the remainder has been released. During the years ended December 31, 2017, 2016 and 2015, the Company paid foreign taxes on South Korean royalty and license fee income of $14.9 million, $12.4 million and $9.9 million, respectively, which were recorded as current income tax expense. SDC has been required to withhold tax at a rate of 16.5% upon payment of royalties and license fees to the Company. The Company’s 2013 federal income tax return was audited by the Internal Revenue Services with no change; the years 2014 to 2016 are open and subject to examination. The state and foreign tax returns are open for a period of generally three to four years.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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