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INCOME TAXES | 6 Months Ended
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Jun. 30, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES |
1 7. | INCOME TAXES:
The Company is subject to income taxes in both the United States and foreign jurisdictions. The effective income tax rate was a benefit of 222.1% and an expense of 16.2% for the three months ended June 30, 2020 and 2019, respectively, and an expense of 17.3% and 16.1% for the six months ended June 30, 2020 and 2019, respectively. The Company recorded an income tax benefit of $562,000 and an expense of $8.4 million for the three months ended June 30, 20 20 and 201 9, respectively, and an expense of $8.1 million and $14.4 million for the six months ended June 30, 2020 and 2019, respectively. The recorded amounts include deductions for employee share awards in excess of compensation costs (“wi ndfalls”) under ASU No. 2016-09 of $1.1 million and $1.4 million for the three months ended June 30, 20 20 and 201 9, respectively, and $1.6 million and $2.8 million for the six months ended June 30, 2020 and 2019, respectively. 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. At this time there is no evidence to release the valuation allowance that has historically been recorded related to the New Jersey research and development credit. On December 27, 2018 the Korean Supreme Court, citing prior cases, held that the applicable law and interpretation of the Korea-U.S. Tax Treaty were clear that only royalties paid with respect to Korean registered patents are Korean source income and subject to Korean withholding tax. Based on this decision, the Company has decided to litigate the Korean withholding taxes paid or withheld on the 2018, 2019 and 2020 royalty payments and has engaged a leading Korean law firm which has advised that there is a more-likely-than-not chance of success. As a result, as of June 30, 2020 and December 31, 2019, the Company has recorded a long-term asset of $33.5 million and $26.9 million, respectively, representing the allocation of withholding to non-Korean patents and a long-term liability of $32.3 million and $25.7 million, respectively, for estimated amounts due to the U.S. Federal government based on the amendment of U.S. tax returns for lower withholding amounts. With respect to the Korean withholding for the years 2011 through 2017, the Company has decided to continue the U.S.-Korean Mutual Agreement Procedure which was accepted by the Korean National Tax Service (KNTS) on September 15, 2017. The Company believes that it is more-likely-than-not that a favorable settlement will be reached resulting in a reduction of the Korean withholding taxes previously withheld since 2011. A long-term asset of $36.9 million for estimated refunds due from the Korean government, a long-term payable of $16.2 million for estimated amounts due to the U.S. Federal government based on amendment of prior year U.S. tax returns for the lower withholding amounts, and a reduction of deferred tax assets for foreign tax credits and research and development credits of $20.7 million has been recorded on the June 30, 2020 and December 31, 2019 Consolidated Balance Sheets for this matter. On October 30, 2018, the KNTS concluded a tax audit with LG Display that included the licensing and royalty payments made to UDC Ireland during the years 2015 through 2017. The KNTS questioned whether UDC Ireland was the beneficial owner of these payments and assessed UDC Ireland a charge of $13.2 million for withholding and interest for the three-year period. UDC Ireland has engaged a leading Korean law firm which believes it is more-likely-than-not that UDC Ireland has beneficial ownership of the underlining intellectual property. As a result, a petition has been filed with the Tax Tribunal. Based on this authority, UDC Ireland has paid the assessment which is recorded as a long-term asset as of June 30, 2020 and December 31, 2019. The Company’s federal income tax returns for the years 2016 to 2019 are open and subject to examination. The State of New Jersey is currently auditing the 2014 and 2017 tax returns of UDC, Inc. The State and foreign tax returns are open for a period of generally three to four years. The above estimates may change in the future and ultimately upon settlement of these uncertain tax positions.

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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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