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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 15 – INCOME TAXES The components of total income (loss) before taxes from continuing operations are as follows (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. |  | $ | 140,428 |  |  | $ | (53,346 | ) |  | $ | 16,684 |
Foreign |  |  | (4,519 | ) |  |  | (29,711 | ) |  |  | (9,774 | )
Total income (loss) before taxes from continuing operations |  | $ | 135,909 |  |  | $ | (83,057 | ) |  | $ | 6,910 |
The provision for (benefit from) income taxes consisted of the following (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 15,175 |  |  | $ | 68,772 |  |  | $ | 290 |
Foreign |  |  | 1,523 |  |  |  | (42,147 | ) |  |  | 22,668 |
State and local |  |  | 10,124 |  |  |  | 94 |  |  |  | 10 |
Total current |  |  | 26,822 |  |  |  | 26,719 |  |  |  | 22,968 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | (28,154 | ) |  |  | (41,826 | ) |  |  | (10,766 | )
Foreign |  |  | (1,132 | ) |  |  | (4,145 | ) |  |  | (3,191 | )
State and local |  |  | (5,423 | ) |  |  | 228 |  |  |  | (338 | )
Total deferred |  |  | (34,709 | ) |  |  | (45,743 | ) |  |  | (14,295 | )
Provision for (benefit from) income taxes |  | $ | (7,887 | ) |  | $ | (19,024 | ) |  | $ | 8,673 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount 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 (in thousands):
|  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax assets |  |  |  |  |  |  |  |
Net operating losses |  | $ | 144,064 |  |  | $ | 10,142 |
Research tax credits |  |  | 82,378 |  |  |  | 13,475 |
Foreign tax credits |  |  | 106,795 |  |  |  | — |
Expenses not currently deductible |  |  | 44,232 |  |  |  | 14,276 |
Basis difference in fixed and intangible assets |  |  | 7,206 |  |  |  | 3,593 |
Deferred revenue |  |  | 20,828 |  |  |  | — |
Capitalized research expenses |  |  | 61,296 |  |  |  | 23,785 |
Lease liability |  |  | 17,995 |  |  |  | 364 |
Gross deferred tax assets |  |  | 484,794 |  |  |  | 65,635 |
Valuation allowance |  |  | (287,895 | ) |  |  | (37,243 | )
Net deferred tax assets |  |  | 196,899 |  |  |  | 28,392 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Revenue recognition |  |  | (7,733 | ) |  |  | (32,466 | )
Operating leases |  |  | (17,535 | ) |  |  | (2,665 | )
Acquired intangible assets, domestic |  |  | (185,662 | ) |  |  | (17,165 | )
Acquired intangible assets, foreign |  |  | (33 | ) |  |  | (2,171 | )
Other |  |  | (3,004 | ) |  |  | — |
Net deferred tax liabilities |  | $ | (17,068 | ) |  | $ | (26,075 | )
At December 31, 2020 and 2019, the Company had a valuation allowance of $287.9 million and $37.2 million, respectively, related to federal, state, and foreign deferred tax assets that the Company believes will not be realizable on a more-likely-than-not basis. The $250.7 million increase from the prior year is primarily comprised of a net $281.7 million increase as a result of the Mergers, offset by a net decrease of $31.0 million primarily from the utilization of tax attributes as a result of the Comcast license agreement. The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of the Company’s net deferred tax assets, the Company determined that it was not more-likely-than-not that it would realize its federal, certain state and certain foreign deferred tax assets given the substantial amount of tax attributes that will remain unutilized to offset reversing deferred tax liabilities as of December 31, 2020. The Company intends to continue maintaining a full valuation allowance on its federal deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given the Company’s current earnings and anticipated future earnings, the Company believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the federal valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain federal deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve. As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $509.2 million and state net operating loss carryforwards of approximately $1,133.1 million (post-apportioned). All of the federal net operating loss carryforwards are carried over from TiVo. The state net operating loss carryforwards are carried over from acquired entities, including TiVo in 2020, DTS in 2016, Ziptronix in 2015, and Siimpel Corporation in 2010. The federal net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2021 and will continue to expire through 2035. The state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2021 and will continue to expire through 2039. In addition, the Company has research tax credit carryforwards of approximately $82.9 million for federal purposes, which were carried over from prior years. The federal research tax credit will start to expire in 2021 and will continue to expire through 2040. The Company also has research tax credit carryforwards of approximately $82.2 million for state purposes and $0.6 million for foreign purposes, which do not expire. The Company has $128.1 million of foreign tax credit carryforwards which will begin to expire in 2021 and will continue to expire through 2030. Under the provisions of the Internal Revenue Code, substantial ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized annually in the future to offset taxable income. In addition, for losses generated after December 31, 2017, the Tax Cuts and Jobs Act modified the maximum deduction of net operating loss, eliminated carryback, and provided an indefinite carryforward. A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. federal statutory rate |  | $ | 28,541 |  |  | $ | (17,442 | ) |  | $ | 1,451 |
State, net of federal benefit |  |  | (1,530 | ) |  |  | 281 |  |  |  | 59 |
Stock-based compensation expense |  |  | 2,471 |  |  |  | 2,807 |  |  |  | 3,883 |
Executive compensation limitation |  |  | 2,132 |  |  |  | 411 |  |  |  | 1,538 |
Research tax credit |  |  | (1,576 | ) |  |  | (2,038 | ) |  |  | 248 |
Foreign withholding tax |  |  | 9,391 |  |  |  | 10,328 |  |  |  | 33,063 |
Transaction costs |  |  | 8,216 |  |  |  | 974 |  |  |  | — |
Foreign tax rate differential |  |  | 921 |  |  |  | 1,907 |  |  |  | 474 |
Foreign tax credit |  |  | (2,647 | ) |  |  | (7,795 | ) |  |  | (33,554 | )
Change in valuation allowance |  |  | (47,649 | ) |  |  | (8,238 | ) |  |  | 7,721 |
U.S. tax reform |  |  | (1,845 | ) |  |  | (2,970 | ) |  |  | (6,333 | )
Unrecognized tax benefits |  |  | 3,049 |  |  |  | 2,994 |  |  |  | 300 |
Change in estimates |  |  | (1,355 | ) |  |  | (1,300 | ) |  |  | (10 | )
Foreign exchange |  |  | (7,438 | ) |  |  | — |  |  |  | — |
Others |  |  | 1,432 |  |  |  | 1,057 |  |  |  | (167 | )
Total |  | $ | (7,887 | ) |  | $ | (19,024 | ) |  | $ | 8,673 |
At December 31, 2020, the Company asserts that it will not permanently reinvest its foreign earnings outside the U.S. The Company anticipates that the cash from its foreign earnings may be used domestically to fund operations, settle a portion of the outstanding debt obligation, or used for other business needs. The accumulated undistributed earnings generated by its foreign subsidiaries was approximately $205.7 million. Substantially all of these earnings will not be taxable upon repatriation to the United States since under the Tax Cuts and Jobs Act they will be treated as previously taxed income from the one-time transition tax, Global Intangible Low-Taxed Income or dividends-received deduction. The withholding taxes related to the distributable cash of the Company’s foreign subsidiaries are not expected to be material. During the fourth quarter of 2019, the Company filed a refund claim for foreign taxes previously withheld from licensees in South Korea based on court rulings in South Korea and other business factors. These previously withheld foreign taxes were claimed as a foreign tax credit in the U.S. As a result of the 2019 refund claim and a planned refund claim for 2020, the Company recorded $123.0 million and $65.2 million as a noncurrent income tax receivable at December 31, 2020 and 2019, respectively, $62.3 million and $48.2 million as a noncurrent income tax payable at December 31, 2020 and 2019, respectively, and $36.7 million and $17.0 million as a reduction in deferred tax assets at December 31, 2020 and 2019, respectively. As of December 31, 2020, unrecognized tax benefits approximated $233.2 million, of which $100.4 million would affect the effective tax rate if recognized. As of December 31, 2019, unrecognized tax benefits approximated $87.3 million, of which $82.9 million would affect the effective tax rate if recognized. The Company believes that its unrecognized tax benefits as of December 31, 2020 will decrease by approximately $5.8 million within the next twelve months due to expiring statutes of limitation. The reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands):
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Total unrecognized tax benefits at January 1 |  | $ | 87,294 |  |  | $ | 33,552 |  |  | $ | 33,506 |
Increases due to the Mergers |  |  | 103,443 |  |  |  | — |  |  |  | — |
Increases for tax positions related to the current year |  |  | 46,978 |  |  |  | 54,823 |  |  |  | 586 |
Increases for tax positions related to prior years |  |  | 2,541 |  |  |  | 178 |  |  |  | — |
Decreases for tax positions related to prior years |  |  | (7,100 | ) |  |  | (1,259 | ) |  |  | (540 | )
Total unrecognized tax benefits at December 31 |  | $ | 233,156 |  |  | $ | 87,294 |  |  | $ | 33,552 |
It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. For the years ended December 31, 2020, 2019 and 2018, the Company recognized an insignificant amount of interest and penalties related to unrecognized tax benefits. Accrued interest and penalties were $2.5 million and $1.2 million as of December 31, 2020 and 2019, respectively. At December 31, 2020, the Company’s 2016 through 2019 tax years are generally open and subject to potential examination in one or more jurisdictions. Earlier tax years for the Company and its subsidiaries are also open in certain jurisdictions which are currently subject to examination. In addition, in the U.S., any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination. The Company has submitted a withholding tax refund claim with the South Korean authorities and the final outcome is not anticipated to be settled within the next twelve months.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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