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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | 15. INCOME TAXES The tax provision is based on the annual effective tax rate for the year, which includes estimated federal, state and foreign income taxes on the Company’s pre-tax income and, in 2015 and 2014, estimated federal and state income taxes for certain noncontrolling interest subsidiaries that were not part of the Company’s consolidated income tax returns. The tax provisions also may include discrete items, principally related to tax credits, increases or decreases in tax reserves, tax provision vs. tax return differences and accrued interest for potential liabilities. The reconciliation of the federal statutory rate on the loss before income taxes and before the gain from sale of equity method investment to the effective income tax rate for the years ended December 31 is as follows:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Statutory federal tax rate |  |  | (34.0 | )% |  |  | (34.0 | )% |  |  | (34.0 | )%
State income taxes, net of federal income tax benefit |  |  | 1.9 |  |  |  | 46.4 |  |  |  | 0.8 |
(Decrease) increase in valuation allowance |  |  | 46.5 |  |  |  | (138.4 | ) |  |  | 46.9 |
Tax credits |  |  | (13.6 | ) |  |  | 29.9 |  |  |  | (12.4 | )
Capital gain on sale to noncontrolling interest |  |  | 3.9 |  |  |  | 237.8 |  |  |  | — |
Permanent items |  |  | 0.9 |  |  |  | 21.2 |  |  |  | 0.4 |
Decrease in unremitted Vicor Custom Power earnings |  |  | (0.9 | ) |  |  | (108.7 | ) |  |  | — |
Foreign rate differential and deferred items |  |  | (0.8 | ) |  |  | (18.2 | ) |  |  | (0.3 | )
Book income attributable to noncontrolling interest |  |  | 0.1 |  |  |  | 47.0 |  |  |  | (0.6 | )
Decrease in tax reserves |  |  | — |  |  |  | (248.6 | ) |  |  | (3.7 | )
Other |  |  | (0.2 | ) |  |  | (0.1 | ) |  |  | — |
|  |  | 3.8 | % |  |  | (165.7 | )% |  |  | (2.9 | )%
In 2016, 2015, and 2014, the Company could not recognize a tax benefit for the majority of its losses due to a full valuation allowance against all domestic deferred tax assets, as described below. In 2016, in connection with the Company’s acquisition of 100% ownership of certain operating assets and cash of Converpower, the related deferred tax liability for unremitted earnings of $55,000 was reversed and recorded as a discrete benefit in the first quarter of 2016 (see Note 9). In 2015, the Company entered into voluntary disclosure agreements with several states. As a result, the Company recognized a tax benefit of approximately $555,000 as a discrete item in the fourth quarter of 2015 for the release of tax reserves. In addition, in connection with the Company’s sale of its 49% interest in APS, recognized as a capital gain, the related deferred tax liability for unremitted earnings of $274,000 was reversed and recorded as a deferred tax benefit in the fourth quarter of 2015 (see Note 9). During the third quarter of 2014, the Company recognized a tax benefit of approximately $552,000 as a discrete item for the release of certain income tax reserves, due to the completion of an Internal Revenue Service examination of its 2010 and 2011 federal corporate income tax returns during the quarter. For financial reporting purposes, income (loss) before income taxes and before the gain from sale of equity method investment for the years ended December 31 include the following components (in thousands):
|  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | (6,034 | ) |  | $ | 1,373 |  |  | $ | (14,223 | )
Foreign |  |  | 4 |  |  |  | (1,615 | ) |  |  | (272 | )
|  | $ | (6,030 | ) |  | $ | (242 | ) |  | $ | (14,495 | )
Significant components of the provision (benefit) for income taxes for the years ended December 31 are as follows (in thousands):
|  | 2016 |  |  | 2015 |  |  | 2014 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | 144 |  |  | $ | (690 | )
State |  |  | 172 |  |  |  | (473 | ) |  |  | 147 |
Foreign |  |  | 137 |  |  |  | 111 |  |  |  | 124 |
|  |  | 309 |  |  |  | (218 | ) |  |  | (419 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (55 | ) |  |  | (274 | ) |  |  | (6 | )
Foreign |  |  | (23 | ) |  |  | 91 |  |  |  | — |
|  |  | (78 | ) |  |  | (183 | ) |  |  | (6 | )
|  | $ | 231 |  |  | $ | (401 | ) |  | $ | (425 | )
As discussed in Note 8, the Company recorded a gain from equity method investment in the third quarter of 2015 for cash consideration received equal to its gross investment in GWS of $4,999,719 for the full preference value of its non-voting convertible preferred stock upon GWS’ acquisition by Intersil, as the value of the investment for financial reporting purposes was zero. For income tax purposes, though, the tax basis of the investment was $4,999,719 at the time of the redemption as it was not previously deducted for tax purposes and, therefore, there was no gain or loss on the transaction for income tax purposes. The Company intends to continue to reinvest certain of its foreign earnings indefinitely. Accordingly, no U.S. income taxes have been provided for approximately $909,000 of unremitted earnings of international subsidiaries. As of December 31, 2016, the amount of unrecognized deferred tax liability on these earnings was $80,000. Significant components of the Company’s deferred tax assets and liabilities as of December 31 were as follows (in thousands):
|  | 2016 |  |  | 2015 |
Deferred tax assets: |  |  |  |  |  |  |  |
Research and development tax credit carryforwards |  | $ | 13,967 |  |  | $ | 12,503 |
Net operating loss carryforwards |  |  | 4,902 |  |  |  | 3,393 |
Stock-based compensation |  |  | 4,066 |  |  |  | 3,993 |
Inventory reserves |  |  | 3,143 |  |  |  | 2,979 |
Vacation accrual |  |  | 1,928 |  |  |  | 1,768 |
Investment tax credit carryforwards |  |  | 1,576 |  |  |  | 1,399 |
Alternative minimum tax credit carryforward |  |  | 340 |  |  |  | 340 |
Deferred revenue |  |  | 154 |  |  |  | 192 |
Unrealized loss on investments |  |  | 136 |  |  |  | 149 |
Warranty reserves |  |  | 73 |  |  |  | 202 |
Bad debt reserves |  |  | 52 |  |  |  | 58 |
Other |  |  | 331 |  |  |  | 735 |
Total deferred tax assets |  |  | 30,668 |  |  |  | 27,711 |
Less: Valuation allowance for deferred tax assets |  |  | (29,274 | ) |  |  | (25,862 | )
Net deferred tax assets |  |  | 1,394 |  |  |  | 1,849 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses |  |  | (654 | ) |  |  | (713 | )
Depreciation |  |  | (406 | ) |  |  | (787 | )
Patent amortization |  |  | (296 | ) |  |  | (334 | )
Unremitted Vicor Custom Power earnings |  |  | — |  |  |  | (55 | )
Total deferred tax liabilities |  |  | (1,356 | ) |  |  | (1,889 | )
Net deferred tax assets (liabilities) |  | $ | 38 |  |  | $ | (40 | )
As of December 31, 2016, the Company has a valuation allowance of approximately $29,274,000 primarily against all domestic net deferred tax assets and the majority of foreign net deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. The Company remains in a significant cumulative loss position as of December 31, 2016 and, as a result, management believes a full valuation allowance against all domestic net deferred tax assets is warranted as of December 31, 2016. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income. A portion of such an adjustment may be accounted for through an increase to “Additional paid-in capital”, a component of Stockholders’ Equity. The amount of any such tax benefit associated with release of our valuation allowance in a particular quarter may be material. As a result of certain realization requirements under the stock-based compensation guidance, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2016, that arose directly from tax deductions related to stock-based compensation greater than stock-based compensation recognized for financial reporting. Equity will be increased, net of any valuation allowance, by $3,485,000 if and when such deferred tax assets are ultimately realized. Beginning in 2017, upon the adoption of new guidance for employee share-based accounting described in Note 2 — Significant Accounting Policies — Impact of recently issued accounting standards, this amount will be allocated and added to the deferred tax assets for research and development tax credit carryforwards and net operating loss carryforwards, but will be fully offset by the valuation allowance for deferred tax assets. The Company uses ASC 740 ordering when determining when excess tax benefits have been realized. The research and development tax credit carryforwards expire beginning in 2017 for state purposes and in 2022 for federal purposes. The Company has federal net operating loss carryforwards which expire beginning in 2033, as well as net operating loss carryforwards in certain states, which expire beginning in 2017 through 2036. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | 2016 |  |  | 2015 |  |  | 2014 |
Balance on January 1 |  | $ | 830 |  |  | $ | 1,254 |  |  | $ | 2,072 |
Additions based on tax provisions related to the current year |  |  | 125 |  |  |  | 120 |  |  |  | 161 |
Reductions for tax positions of prior years |  |  | — |  |  |  | — |  |  |  | (967 | )
Settlements |  |  | — |  |  |  | (480 | ) |  |  | — |
Lapse of statute |  |  | (9 | ) |  |  | (64 | ) |  |  | (12 | )
Balance on December 31 |  | $ | 946 |  |  | $ | 830 |  |  | $ | 1,254 |
The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. The total amount of unrecognized tax benefits, that is the aggregate tax effect of differences between tax return positions and the benefits recognized in the Company’s financial statements, as of December 31, 2016, 2015, and 2014 of $946,000, $830,000, and $1,254,000, respectively, if recognized, may decrease the Company’s income tax provision and effective tax rate. None of the unrecognized tax benefits as of December 31, 2016, are expected to significantly change during the next twelve months. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2016, 2015, and 2014, the Company recognized approximately $6,000, $21,000, and $32,000, respectively, in net interest expense. As of December 31, 2016 and 2015, the Company had accrued approximately $25,000 and $24,000, respectively, for the potential payment of interest. The Company files income tax returns in the United States and various foreign tax jurisdictions. These tax returns are generally open to examination by the relevant tax authorities from three to seven years from the date they are filed. The tax filings relating to the Company’s federal and state taxes are currently open to examination for tax years 2013 and 2015 and 2007 through 2015, respectively. In addition, the 2003, 2004, and 2007 tax years resulted in losses. These years may also be subject to examination since the losses were carried forward and utilized in future years. The Company’s subsidiary in Italy, Vicor Italy S.r.l. (“Vicor Italy”), underwent during 2014 a tax inspection for tax years 2009 through 2013, covering corporation, regional and value added taxes. Vicor Italy received a preliminary tax audit report dated June 30, 2014. The Company filed a response to the preliminary tax audit report in the third quarter of 2014. The statute of limitations for the tax authorities in Italy to file an assessment, if any, expired on December 31, 2015 for tax year 2009 and on December 31, 2016 for tax year 2010. While management believes it is too early to determine the likelihood or amount of potential liability at this time, it does not believe the ultimate impact of this matter will be material to the Company’s financial statements. Other than the Vicor Italy matter discussed above there are no other income tax examinations or audits currently in process.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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