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INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

NOTE 5.           INCOME TAXES

The geographic distribution of pretax income from continuing operations was as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2022			2021			2020
Domestic	​	$	5,969	​	$	24,541	​	$	17,526
Foreign	​		235,772	​		124,170	​		140,621
Income from continuing operations, before income taxes	​	$	241,741	​	$	148,711	​	$	158,147

​

The provision for income taxes from continuing operations is summarized as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2022			2021			2020
Current:		​			​			​
Federal	​	$	23,370	​	$	(2,468)	​	$	5,475
State	​		1,949	​		929	​		1,927
Foreign	​		20,267	​		14,217	​		16,216
Total current provision	​	​	45,586	​	​	12,678	​	​	23,618
​	​	​	​	​	​	​	​	​	​
Deferred:	​			​			​
Federal	​	​	(6,742)	​	​	762	​	​	(312)
State	​		(1,030)	​		(200)	​		1,270
Foreign	​		2,036	​		764	​		(1,580)
Total deferred provision (benefit)	​		(5,736)	​		1,326	​		(622)
Total provision for income taxes	​	$	39,850	​	$	14,004	​	$	22,996

​

Our effective tax rate increased in 2022 compared to 2021, primarily driven by a change in tax law from the 2017 Tax Cuts and Jobs Act related to the capitalization of R&D expenses, as it impacts the net U.S. tax on foreign operations, that went into effect in January 2022, offset by the benefit of earnings in foreign jurisdictions which are subject to lower tax rates.

​

Our effective tax rate decreased in 2021 compared to 2020, primarily driven by one-time tax benefits due to reductions in uncertain tax positions and increased tax credits.

​

The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2022			2021			2020
Income taxes per federal statutory rate	​	$	50,766	​	$	31,229	​	$	33,211
State income taxes, net of federal deduction	​	​	510	​	​	534	​	​	2,793
U.S. tax on foreign operations	​	​	28,726	​	​	5,786	​	​	9,666
Foreign derived intangible income deduction	​	​	(6,259)	​	​	(3,927)	​	​	(4,070)
Tax effect of foreign operations	​	​	(28,432)	​	​	(11,520)	​	​	(20,527)
Uncertain tax positions	​	​	1,080	​	​	(6,899)	​	​	(3,215)
Audit settlements	​	​	34	​	​	7,764	​	​	—
Unremitted earnings	​	​	—	​	​	261	​	​	(567)
Tax credits	​	​	(5,857)	​	​	(6,149)	​	​	(2,292)
Change in valuation allowance	​	​	—	​	​	(73)	​	​	(1,175)
Withholding taxes	​	​	413	​	​	756	​	​	4,265
Executive compensation limitation	​	​	641	​	​	1,926	​	​	1,070
Other permanent items, net	​	​	(1,772)	​	​	(5,684)	​	​	3,837
Total provision for income taxes	​	$	39,850	​	$	14,004	​	$	22,996

​

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following:

​	​	​	​	​	​	​
​	​	December 31,		​	December 31,
​		2022			2021
Deferred tax assets		​			​
Net operating loss and tax credit carryforwards	​	$	47,733	​	$	54,210
Interest expense limitation	​	​	7,282	​	​	7,344
Pension obligation	​		7,301	​		10,778
Employee bonuses and commissions	​		9,276	​		3,861
Depreciation and amortization	​		25,879	​		26,358
Operating lease liabilities	​	​	10,136	​	​	19,405
Other	​		17,102	​		20,288
Deferred tax assets	​		124,709	​		142,244
Less: Valuation allowance	​		(36,046)	​		(42,051)
Net deferred tax assets	​		88,663	​		100,193
​	​	​	​	​	​	​
Deferred tax liabilities	​		​	​
Depreciation and amortization	​		35,678	​		37,515
Unremitted earnings	​		4,115	​		4,435
Operating lease right-of-use assets	​	​	8,392	​	​	17,558
Other	​		1,801	​		3,364
Deferred tax liabilities	​		49,986	​		62,872
Net deferred tax assets	​	$	38,677	​	$	37,321

​

Of the $38.7 million and $37.3 million net deferred tax asset on December 31, 2022 and 2021, respectively, $48.1 million and $47.2 million, respectively, are included as a net non-current deferred tax asset within other assets on the Consolidated Balance Sheets. $9.4 million and $9.9 million, respectively, are included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

As of December 31, 2022, we have recorded a valuation allowance on $2.9 million of our U.S. domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions. The remaining valuation allowance on deferred tax assets approximates $33.1 million and is associated primarily with operations in Germany, Hong Kong, and Switzerland. As of December 31, 2022, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will be recognized. The December 31, 2022 valuation allowance balance reflects a decrease of $6.0 million during the year. The change in the valuation allowance is primarily due to decreases from foreign exchange movements and current year activity.

As of December 31, 2022, we had U.S., foreign and state tax loss carryforwards of $45.2 million, $120.1 million, and $106.5 million, respectively. Additionally, we had $0.7 million and $30.5 million of capital loss and interest expense limitation carryforwards, respectively. Finally, we had U.S. and state tax credit carryforwards of $0.9 million and $1.9 million, respectively. The U.S. and state net operating losses, tax credits, and interest expense limitation are subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws. These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period. Much of the foreign loss carryforwards, and $8.0 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore and China. These tax holidays are in effect through June 30, 2027 and December 31, 2022, respectively. The tax holiday is conditional upon our meeting certain employment and investment thresholds. The impact of the tax holidays decreased foreign taxes by $19.4 million and $13.3 million for 2022 and 2021, respectively. The benefit of the tax holiday on earnings per diluted share was $0.52 and $0.35 for 2022 and 2021, respectively.

As of December 31, 2022, we have undistributed earnings in certain foreign subsidiaries of approximately $33.3 million that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements. The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2022			2021			2020
Balance at beginning of period	​	$	5,513	​	$	9,673	​	$	13,009
Additions based on tax positions taken during a prior period	​		245	​		963	​		219
Additions based on tax positions taken during a prior period - acquisitions	​		1,025	​		—	​		—
Additions based on tax positions taken during the current period	​		836	​		566	​		—
Reductions based on tax positions taken during a prior period	​		—	​		—	​		—
Reductions related to a lapse of applicable statute of limitations	​		(152)	​		(4,575)	​		(3,555)
Reductions related to a settlement with taxing authorities	​		—	​		(1,114)	​		—
Balance at end of period	​	$	7,467	​	$	5,513	​	$	9,673

​

The unrecognized tax benefits of $7.5 million, if recognized, will impact our effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $0.6 million and $0.4 million of accrued interest and penalties on December 31, 2022

and 2021, respectively. With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2019.

​

The Inflation Reduction Act (“IRA”) and CHIPS and Science Act (“CHIPS Act”) were both enacted in August 2022. The IRA introduced new provisions including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a 1% excise tax surcharge on stock repurchases. The CHIPS Act provides a variety of incentives associated with investments in domestic semiconductor manufacturing and related activities. The IRA and the CHIPS Act are applicable for tax years beginning after December 31, 2022 and had no benefit to our consolidated financial statements for any of the periods presented, and we do not expect them to have a direct material impact on our future results of operations, financial condition, or cash flows.

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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.

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