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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes [Abstract] |
Income Taxes | Note 5 – Income Taxes U.S. Tax Reform: Tax Cuts and Jobs Act On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted in the United States. The TCJA represents sweeping changes in U.S. tax law. Among the numerous changes in tax law, the TCJA permanently reduces the U.S. corporate income tax rate to 21% beginning in 2018; imposes a one-time transition tax on deferred foreign earnings; establishes a participation exemption system by allowing a 100% dividends received deduction on qualifying dividends paid by foreign subsidiaries; limits deductions for net interest expense; and expands the U.S. taxation of foreign earned income to include "global intangible low-taxed income" ("GILTI"). The TCJA represents the first significant change in U.S. tax law in over 30 years. As permitted by SAB No. 118 (see Note 1), the tax expense recorded in the fourth fiscal quarter of 2017 due to the enactment of the TCJA is considered "provisional," based on reasonable estimates. The Company is continuing to collect and analyze detailed information about the earnings and profits of its non-U.S. subsidiaries, the related taxes paid, the amounts which could be repatriated, the foreign taxes which may be incurred on repatriation, and the associated impact of these items under the TCJA. The Company may record adjustments to refine those estimates during the measurement period, as additional analysis is completed. Furthermore, the Company is continuing to evaluate the TCJA's provisions and may prospectively adjust its financial structure and business practices accordingly. As a result of the TCJA, the Company recognized a provisional tax benefit of $74,816 to remeasure its net deferred tax liabilities at the lower, 21% rate. The TCJA transitions the U.S. from a worldwide tax system to a territorial tax system. Under previous law, companies could indefinitely defer U.S. income taxation on unremitted foreign earnings. The TCJA imposes a one-time transition tax on deferred foreign earnings of 15.5% for liquid assets and 8% for illiquid assets, payable in defined increments over eight years. As a result of this requirement, the Company recognized provisional tax expense of $215,558, and provisionally expects to pay $180,000, net of estimated applicable foreign tax credits, and after utilization of net operating loss and R&D and FTC Credit carryforwards. These previously deferred foreign earnings may now be repatriated to the United States without additional U.S. federal taxation. However, any such repatriation could incur withholding and other foreign taxes in the source and intervening foreign jurisdictions, and certain U.S. state taxes. Due to the changes in taxation of dividends received from foreign subsidiaries, and also because of the need to finance the payment of the transition tax, the Company has made the determination during the fourth fiscal quarter of 2017 that certain unremitted foreign earnings in Israel, Germany, Austria, and France are no longer permanently reinvested, and has recorded provisional tax expense of $213,000 to accrue the incremental foreign income taxes and withholding taxes payable to foreign jurisdictions assuming the hypothetical repatriation to the United States of these approximately $1,100,000 of available foreign earnings. Due to the existence of the foreign cash taxes payable at the source, the Company expects to actually repatriate these amounts at a measured pace over several years, and may decide to ultimately not repatriate some of these amounts. There are additional amounts of unremitted foreign earnings in other countries, which continue to be reinvested indefinitely, and the Company has made no provision for incremental foreign income taxes and withholding taxes payable to foreign jurisdictions related to these amounts. Determination of the amount of the unrecognized deferred foreign tax liability for these amounts is not practicable because of the complexities associated with its hypothetical calculation. During the fourth fiscal quarter of 2015, the Company recognized income tax, including U.S. federal and state income taxes, incremental foreign income taxes, and withholding taxes payable to foreign jurisdictions, on $300,000 of foreign earnings. This tax expense was recognized in 2015 following an evaluation of the Company's anticipated domestic cash needs over the next several years and the Company's most efficient use of liquidity, and with consideration of the amount of cash that could be repatriated to the U.S. efficiently with lesser withholding taxes in foreign jurisdictions. The Company repatriated $38,000 and $46,000 pursuant to this program in 2017 and 2016, respectively. Prior to the enactment of the TCJA, the related deferred tax liability for the 2015 repatriation plan was $118,887. The Company has terminated the 2015 cash repatriation plan and recorded a provisional income tax benefit to reverse this deferred tax liability, which was replaced by the liability for the transition tax and foreign income and withholding taxes described above. The deferred tax liability related to these unremitted foreign earnings is based on the available sources of cash, applicable tax rates, foreign currency exchange rates, and other factors and circumstances, as of each balance sheet date. Changes in these underlying facts and circumstances result in changes in the deferred tax liability balance, which are recorded as tax benefit or expense. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017. The provisional amount of net tax expense recorded by the Company in the fourth fiscal quarter of 2017 that is directly and indirectly related to the TCJA is summarized as follows:
Remeasurement of net deferred tax liabilities |  | $ | (74,816 | )
Transition tax on unremitted foreign earnings |  |  | 215,558 |
Incremental foreign taxes on assumed repatriation |  |  | 213,000 |
Reversal of deferred taxes due to cancellation of 2015 repatriation plan |  |  | (118,887 | )
Total tax expense related to the enactment of the TCJA |  | $ | 234,855 |
Note 5 – Income Taxes (continued) Income (loss) from continuing operations before taxes and noncontrolling interests consists of the following components:
|  | Years ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Domestic |  | $ | (40,171 | ) |  | $ | (135,953 | ) |  | $ | (40,929 | )
Foreign |  |  | 319,535 |  |  |  | 230,169 |  |  |  | 115,669 |
|  | $ | 279,364 |  |  | $ | 94,216 |  |  | $ | 74,740 |
Significant components of income taxes are as follows:
|  | Years ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 180,873 |  |  | $ | 358 |  |  | $ | 290 |
State and local |  |  | 108 |  |  |  | 5 |  |  |  | 163 |
Foreign |  |  | 65,566 |  |  |  | 46,999 |  |  |  | 63,573 |
|  |  | 246,547 |  |  |  | 47,362 |  |  |  | 64,026 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (101,896 | ) |  |  | 6,163 |  |  |  | 78,933 |
State and local |  |  | 1,538 |  |  |  | (3,039 | ) |  |  | 311 |
Foreign |  |  | 152,735 |  |  |  | (5,643 | ) |  |  | 39,203 |
|  |  | 52,377 |  |  |  | (2,519 | ) |  |  | 118,447 |
Total income tax expense |  | $ | 298,924 |  |  | $ | 44,843 |  |  | $ | 182,473 |
Note 5 – Income Taxes (continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
|  | December 31, |
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |
Pension and other retiree obligations |  | $ | 43,536 |  |  | $ | 47,104 |
Inventories |  |  | 9,658 |  |  |  | 7,691 |
Property and equipment |  |  | 3,798 |  |  |  | (1,025 | )
Net operating loss carryforwards |  |  | 136,599 |  |  |  | 183,562 |
Tax credit carryforwards |  |  | 13,328 |  |  |  | 25,432 |
Other accruals and reserves |  |  | 22,930 |  |  |  | 29,401 |
Total gross deferred tax assets |  |  | 229,849 |  |  |  | 292,165 |
Less valuation allowance |  |  | (149,070 | ) |  |  | (165,269 | )
|  |  | 80,779 |  |  |  | 126,896 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Earnings not permanently reinvested |  |  | (213,000 | ) |  |  | (139,165 | )
Convertible debentures |  |  | (135,576 | ) |  |  | (203,641 | )
Other - net |  |  | (6,125 | ) |  |  | (10,646 | )
Total gross deferred tax liabilities |  |  | (354,701 | ) |  |  | (353,452 | )
Net deferred tax assets (liabilities) |  | $ | (273,922 | ) |  | $ | (226,556 | )
The Company makes significant judgments regarding the realizability of its deferred tax assets (principally net operating losses). The carrying value of deferred tax assets is based on the Company's assessment that it is more likely than not that the Company will realize these assets after consideration of all available positive and negative evidence. A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax provision is as follows:
|  | Years ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Tax at statutory rate |  | $ | 97,777 |  |  | $ | 32,976 |  |  | $ | 26,159 |
State income taxes, net of U.S. federal tax benefit |  |  | 1,070 |  |  |  | (1,972 | ) |  |  | 309 |
Effect of foreign operations |  |  | (54,807 | ) |  |  | (26,551 | ) |  |  | (13,212 | )
Tax on earnings not permanently reinvested |  |  | 88,311 |  |  |  | (3,553 | ) |  |  | 163,699 |
Unrecognized tax benefits |  |  | 5,887 |  |  |  | (8,453 | ) |  |  | (1,353 | )
Change in valuation allowance on non-U.S. deferred tax assets |  |  | - |  |  |  | 991 |  |  |  | (8,888 | )
TCJA - remeasurement of net deferred tax liabilities |  |  | (74,816 | ) |  |  | - |  |  |  | - |
TCJA - transition tax on unremitted foreign earnings |  |  | 215,558 |  |  |  | - |  |  |  | - |
Foreign income taxable in the U.S. |  |  | 20,436 |  |  |  | 18,442 |  |  |  | 7,025 |
Termination of U.S. pension |  |  | - |  |  |  | 34,853 |  |  |  | - |
Tax effect of impairment charges |  |  | - |  |  |  | (454 | ) |  |  | 8,305 |
Other |  |  | (492 | ) |  |  | (1,436 | ) |  |  | 429 |
Total income tax expense |  | $ | 298,924 |  |  | $ | 44,843 |  |  | $ | 182,473 |
Note 5 – Income Taxes (continued) Income tax expense for the years ended December 31, 2017, 2016, and 2015 includes certain discrete tax items for changes in uncertain tax positions, valuation allowances, tax rates, and other related items. These items total $230,618, $22,596, and $152,437 in 2017, 2016, and 2015, respectively. For the year ended December 31, 2017, the discrete items include $234,855 related to the enactment of the TCJA, as previously described; $5,802 (tax benefit) for the periodic remeasurement of the deferred tax liability related to the 2015 cash repatriation program described below, and $1,565 of net tax expense for changes in uncertain tax positions. The 2015 cash repatriation program was expected to occur over several years, and the deferred tax liability is based on the available sources of cash, applicable tax rates, and other factors and circumstances, as of each respective balance sheet date. Changes in the underlying facts and circumstances result in changes in the deferred tax liability balance, which are recorded as tax benefit or expense. For the year ended December 31, 2016, the discrete items include $34,853 of additional tax expense related to the termination and settlement of the Vishay Retirement Plan (see Notes 10 and 11), $8,704 (tax benefit) for changes in uncertain tax positions related largely to statute expiration, and $3,553 (tax benefit) for periodic remeasurement of the deferred tax liability related to the 2015 cash repatriation program described below. For the year ended December 31, 2015, the discrete items include $163,954 of expense recorded in the fourth fiscal quarter primarily to repatriate $300,000 of foreign earnings to the United States, following an evaluation of the Company's anticipated domestic cash needs over the next several years and the Company's most efficient use of liquidity, and with consideration of the amount of cash that can be repatriated to the U.S. efficiently with lesser withholding taxes in foreign jurisdictions (the "2015 cash repatriation program"). The 2015 cash repatriation program has been terminated and replaced as described under the heading "US Tax Reform: Tax Cuts and Jobs Act," above. Discrete items for 2015 also include $8,888 (tax benefit) for changes in valuation allowances and $2,629 (tax benefit) for changes in uncertain tax positions. At December 31, 2017, the Company had the following significant net operating loss carryforwards for tax purposes:
|  |  |  |  | Expires |
Austria |  | $ | 16,836 |  |  | No expiration |
Belgium |  |  | 171,122 |  |  | No expiration |
Brazil |  |  | 12,622 |  |  | No expiration |
Germany |  |  | 6,272 |  |  | No expiration |
Israel |  |  | 10,707 |  |  | No expiration |
Japan |  |  | 5,358 |  |  |  | 2018 - 2026 |
Netherlands |  |  | 19,073 |  |  |  | 2018 - 2026 |
The Republic of China (Taiwan) |  |  | 14,594 |  |  |  | 2024 - 2027 |
California |  |  | 55,479 |  |  |  | 2026 - 2037 |
Pennsylvania |  |  | 722,277 |  |  |  | 2018 - 2037 |
At December 31, 2017, the Company had the following significant tax credit carryforward available:
|  |  | Expires
California Research Credit |  | $ | 13,327 |  | No expiration
Note 5 – Income Taxes (continued) Net income taxes paid were $76,900, $58,788, and $49,301 for the years ended December 31, 2017, 2016, and 2015, respectively. See Note 19 for a discussion of the tax-related uncertainties for the pre-spin-off period of Vishay Precision Group, Inc. ("VPG"), which was spun off on July 6, 2010. The following table summarizes changes in the liabilities associated with unrecognized tax benefits:
|  | Years ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at beginning of year |  | $ | 16,805 |  |  | $ | 23,527 |  |  | $ | 26,583 |
Addition based on tax positions related to the current year |  |  | 3,911 |  |  |  | 1,553 |  |  |  | 1,439 |
Addition based on tax positions related to prior years |  |  | 1,837 |  |  |  | 1,047 |  |  |  | 1,894 |
Currency translation adjustments |  |  | 915 |  |  |  | (96 | ) |  |  | (1,370 | )
Reduction based on tax positions related to prior years |  |  | (1,473 | ) |  |  | - |  |  |  | - |
Reduction for settlements |  |  | (4,077 | ) |  |  | (1,210 | ) |  |  | (4,879 | )
Reduction for lapses of statute of limitation |  |  | (862 | ) |  |  | (8,016 | ) |  |  | (140 | )
Balance at end of year |  | $ | 17,056 |  |  | $ | 16,805 |  |  | $ | 23,527 |
All of the unrecognized tax benefits of $17,056 and $16,805, as of December 31, 2017 and 2016, respectively, would reduce the effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2017 and 2016, the Company had accrued interest and penalties related to the unrecognized tax benefits of $2,845 and $1,638, respectively. During the years ended December 31, 2017, 2016, and 2015, the Company recognized $2,479, $542, and $785, respectively, in interest and penalties. The Company and its subsidiaries file U.S. federal income tax returns, as well as tax returns in multiple states and foreign jurisdictions. During the years ended December 31, 2017, 2016, and 2015, certain tax examinations were concluded, including in 2017 the examinations of tax returns of principal non-U.S. subsidiaries in Germany (2009 through 2012) and Israel (2013 through 2015), and certain statutes of limitations lapsed. The tax provision for those years includes adjustments related to the resolution of these matters, as reflected in the table above. The tax returns of other non-U.S. subsidiaries which are currently under examination include France (2015 through 2016), India (2004 through 2014), Italy (2012 through 2016), and Taiwan (2016). The Company and its subsidiaries also file income tax returns in other taxing jurisdictions in the U.S. and around the world, many of which are still open to examination. The timing of the resolution of income tax examinations is highly uncertain, as are the amounts and timing of tax payments that result from such examinations. These events could cause large fluctuations in the balance sheet classification of current and non-current unrecognized tax benefits. The Company believes that in the next 12 months it is reasonably possible that certain income tax examinations will conclude or the statutes of limitation on certain income tax periods open to examination will expire, or both. Given the uncertainties described above, the Company can only determine an estimate of potential decreases in unrecognized tax benefits ranging from $2,730 to $5,149.

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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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