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PROVISION FOR INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
PROVISION FOR INCOME TAXES [Text Block] | PROVISION FOR INCOME TAXES: U.S. Tax Reform The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2017, the Company has not completed the accounting for the tax effects of enactment of the Tax Act; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on existing deferred tax balances and the one-time transition tax. In other cases, the Company has not been able to make a reasonable estimate and continues to account for those items based on the Company’s existing accounting policies and positions that were in effect immediately prior to enactment. The SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The items for which the Company was able to determine a reasonable estimate includes a provisional one-time transition tax of $35.3 million, which was included as a component of the income tax provision for the year-ended December 31, 2017. This one-time transition tax was based on the Company’s total post-1986 earnings and profits (E&P) previously deferred from U.S. income taxes. The Company has not yet completed the calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. As of December 31, 2017, the Company has no undistributed foreign earnings that would be subject to the transition tax; although, this amount may change upon finalization of the total post-1986 foreign E&P balances and the amounts held in cash or other specified assets. The Company also re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in future periods, which is generally 21%. The Company recorded a provisional amount of $4.9 million related to the re-measurement of the Company’s deferred tax assets and liabilities. However, the Company is still analyzing certain aspects of the Tax Act and refining calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. Due to the complexity of the GILTI tax rules; the Company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. The Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of deferred taxes (the “deferred method”). The Company’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing the Company’s global income to determine whether the Company expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends on not only the Company’s current structure and estimated future results of global operations but also the Company’s intent and ability to modify the Company’s structure and/or business. The Company is not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, the Company has not made any adjustments related to potential GILTI tax in the Company’s financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI. Income Taxes The Company accounts for income taxes under the provisions of ASC 740, Income Taxes. Under the provisions of ASC 740, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, utilizing the tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. U.S. and foreign components of income before income taxes were:
| Year Ended December 31,
(in thousands) | 2017 |  | 2016 |  | 2015
U.S. operations | $ | (6,944 | ) |  | $ | (477 | ) |  | $ | (2,246 | )
Foreign operations | 67,243 |  |  | 50,429 |  |  | 41,577 |
Total pretax income | $ | 60,299 |  |  | $ | 49,952 |  |  | $ | 39,331 |
The components of the provision for income taxes are as follows:
| Year Ended December 31,
(in thousands) | 2017 |  | 2016 |  | 2015
Current provision: |  |  |  |  |
Federal | $ | 35,311 |  |  | $ | — |  |  | $ | 443 |
State | 4 |  |  | — |  |  | 83 |
Foreign | 1,483 |  |  | 1,638 |  |  | 5,407 |
| 36,798 |  |  | 1,638 |  |  | 5,933 |
Deferred provision (benefit): |  |  |  |  |
Federal | (3,640 | ) |  | (175 | ) |  | (1,791 | )
State | — |  |  | (27 | ) |  | (57 | )
Foreign | (468 | ) |  | (382 | ) |  | (3,906 | )
| (4,108 | ) |  | (584 | ) |  | (5,754 | )
Total | $ | 32,690 |  |  | $ | 1,054 |  |  | $ | 179 |
The Company is entitled to a deduction for federal and state tax purposes with respect to employees' stock option activity. The net reduction in taxes otherwise payable in excess of any amount credited to income tax expense has been reflected as an adjustment to the tax provision due to the adoption of ASU 2019-09, Compensation - Stock Compensation, effective January 1, 2017. For additional details on the adoption of ASU 2016-09, refer to Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the Company’s Notes to Consolidated Financial Statements. Prior to the adoption of ASU 2016-09, the net reduction in taxes otherwise payable in excess of any amount credited to income tax expense has been reflected as an adjustment to additional paid-in capital. For 2015, the deficiency arising from employee stock option activity that resulted in an adjustment to additional paid in capital was approximately $0.2 million. No adjustment was recorded in 2016. The provision for income taxes differs from the amount that would result by applying the applicable federal income tax rate to income before provision for income taxes, as follows:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Provision computed at Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Business tax credits | (5.7 | ) |  | (6.0 | ) |  | (6.8 | )
Stock-based compensation | (5.0 | ) |  | 2.2 |  |  | 0.8 |
Foreign income taxed at different rate | (37.3 | ) |  | (33.1 | ) |  | (33.2 | )
U.S. Tax Act - transition tax | 54.1 |  |  | — |  |  | — |
U.S. Tax Act - deferred tax asset and liability adjustment | 8.1 |  |  | — |  |  | — |
Valuation allowance | 2.2 |  |  | 1.8 |  |  | 2.6 |
Other | 2.8 |  |  | 2.2 |  |  | 2.1 |
Total | 54.2 | % |  | 2.1 | % |  | 0.5 | %
The Company’s effective tax rate is impacted by the geographic distribution of the world-wide earnings in lower tax jurisdictions and the federal R&D tax credit. Additionally, in 2017 the Company’s effective tax rate is impacted by a $37.5 million charge resulting from the enactment of the Tax Act. The components of the net deferred income tax asset (liabilities) were as follows:
| December 31,
(in thousands) | 2017(1) |  | 2016
Deferred tax assets: |  |  |
Other reserves and accruals | $ | 979 |  |  | $ | 1,267 |
Tax credit carry-forwards | 10,442 |  |  | 26,895 |
Stock compensation | 4,064 |  |  | 5,760 |
Capital losses | 163 |  |  | 10,585 |
Net operating loss | 7,059 |  |  | 2,671 |
Other | — |  |  | 174 |
Valuation allowance | (18,421 | ) |  | (27,489 | )
| 4,286 |  |  | 19,863 |
Deferred tax liabilities: |  |  |
Depreciation | (1,965 | ) |  | (2,322 | )
Unremitted earnings | — |  |  | (7,019 | )
Other | (95 | ) |  | — |
| (2,060 | ) |  | (9,341 | )
Net deferred tax asset | $ | 2,226 |  |  | $ | 10,522 |
_______________
(1) | The reduction of deferred tax assets is primarily due to the utilization of tax attributes for transition tax related to the Tax Act as well as the reduction of the U.S. federal corporate tax rate from 35% to 21% beginning in 2018.
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 upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income. In the event that the Company determines, based on available evidence and management judgment, that all or part of the net deferred tax assets will not be realized in the future, the Company would record a valuation allowance in the period the determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with the Company’s expectations could have a material impact on its results of operations and financial position. As of December 31, 2017, the Company continues to maintain a valuation allowance primarily as a result of capital losses for federal purposes, and on its California deferred tax assets as the Company believes that it is not more likely than not that the deferred tax assets will be fully realized. In addition, the Company maintains a valuation allowance with respect to certain of its deferred tax assets relating to tax credits in Canada and the state of New Jersey. As of December 31, 2017, due to the impact of the Tax Act, the Company expects to utilize all federal research and development tax credit carry-forwards and all net operating loss carry-forwards; California research and development tax credit carry-forwards of approximately $21.5 million (there is no expiration of research and development tax credit carry-forwards for the state of California) and California net operating losses of $46.6 million which will begin to expire in 2032. As of December 31, 2017, the Company had Canadian scientific research and experimental development tax credit carry-forwards of approximately $2.4 million and New Jersey research and experimental development tax credit carry-forwards of approximately $0.8 million, which will start to expire in 2030 and 2026, respectively. Unrecognized Tax Benefits The Company applies the provisions of ASC 740-10, relating to accounting for uncertain income taxes. Reconciliation of the beginning and ending amount of unrecognized tax benefits:
(in thousands) | Unrecognized Tax Benefits
Unrecognized Tax Benefits Balance at January 1, 2015 | $ | 11,160 |
Gross Increase for Tax Positions of Current Year | 3,063 |
Gross Decrease for Tax Positions of Prior Years | (663 | )
Unrecognized Tax Benefits Balance at December 31, 2015 | 13,560 |
Gross Increase for Tax Positions of Current Year | 1,856 |
Gross Decrease for Tax Positions of Prior Years | (23 | )
Unrecognized Tax Benefits Balance at December 31, 2016 | 15,393 |
Gross Increase for Tax Positions of Current Year | 1,699 |
Gross Decrease for Tax Positions of Prior Years | (409 | )
Unrecognized Tax Benefits Balance at December 31, 2017 | $ | 16,683 |
The Company's total unrecognized tax benefits as of December 31, 2017, 2016 and 2015, were $16.7 million, $15.4 million and $13.6 million, respectively. An income tax benefit of $10.3 million, net of valuation allowance adjustments, would be recorded if these unrecognized tax benefits are recognized. The Company cannot reasonably estimate the amount of the unrecognized tax benefit that could be adjusted in the next twelve months. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had accrued interest and penalties of $0.1 million as of both December 31, 2017, and December 31, 2016, which have been recorded in long-term income taxes payable in the accompanying consolidated balance sheets. As of December 31, 2017, the Company has concluded all U.S. federal income tax matters for the years through 2012. However, due to tax attributes, the IRS may calculate tax adjustments for subsequent years for positions taken prior to 2012. There is currently no pending income tax audit. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision was issued by the Tax Court in December 2015. In February 2016, the Commissioner appealed the Tax Court decision. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation expense from IRS cost-sharing regulations. The Company has reviewed this case and its impact and concluded that no adjustment to the consolidated financial statements is appropriate at this time. The Company will continue to monitor ongoing developments and potential impacts to the consolidated financial statements.

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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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