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INCOME TAXES
 12 Months Ended
Oct. 31, 2024
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 14 - INCOME TAXES


On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates. The Company is currently not subject to Pillar Two but is continuously evaluating the potential impact of the Pillar Two Framework to ensure we are compliant in the future.


Income before the income tax provisions consists of the following:

 
Year Ended
  
   
October 31,
2024
    
October 31,
2023
    
October 31,
2022
  
United States
  
$
20,145
    
$
(1,737
)
  
$
1,813
  
Foreign
    
227,270
      
271,683
      
237,220
  
   
$
247,415
    
$
269,946
    
$
239,033
  


Income Tax Provision


The components of our income tax provisions are presented below.

 
Year Ended
  
   
October 31,
2024
    
October 31,
2023
    
October 31,
2022
  
Current:
                  
Federal
  
$
-
    
$
-
    
$
-
  
State
    
95
      
14
      
1
  
Foreign
    
64,861
      
71,225
      
58,981
  
      64,956       71,239       58,982  
                         
Deferred:
                        
Federal
    
-
      
-
      
-
  
State
    
13
      
12
      
10
  
Foreign
    
(1,402
)
    
(939
)
    
799
  
      (1,389 )     (927 )     809  
Total
  
$
63,567
    
$
70,312
    
$
59,791
  


The table below presents a reconciliation of income taxes calculated by applying the statutory U.S. federal income tax rate to our income tax provisions of the reporting periods.

 
Year Ended
  
   
October 31,
2024
    
October 31,
2023
    
October 31,
2022
  
U.S. federal income tax at statutory rate
  
$
51,957
    
$
56,689
    
$
50,197
  
Changes in valuation allowance
    
(1,986
)
    
(256
)
    
(1,462
)
Foreign rate differential
    
10,695
      
11,394
      
7,941
  
Tax credits
    
(5,209
)
    
(2,425
)
    
(1,368
)
Uncertain tax positions, including reserves, settlements and resolutions
    
6,226
      
3,328
      
3,214
  
Other, net
    
1,884
      
1,582
      
1,269
  
Income tax provision
  
$
63,567
    
$
70,312
    
$
59,791
  

Reporting
Period
  
U.S. Statutory
Tax Rates
    
Photronics
Effective Tax
Rates
  
Primary Reasons for Differences
2024
    
21.0%

    25.7%
Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions, the establishment of uncertain tax positions in non-U.S. jurisdiction and loss jurisdiction pre-tax losses not being benefited due to valuation allowances.
2023
    
21.0%

   
26.0%

Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions, the establishment of uncertain tax positions in non-U.S. jurisdiction and loss jurisdiction pre-tax losses not being benefited due to valuation allowances.
2022
    
21.0%

   
25.0%

Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions; and the establishment of uncertain tax positions in non-U.S. jurisdiction.

Deferred Income Tax Assets and Liabilities


The net deferred income tax assets consist of the following:

 
As of
  
   
October 31,
2024
    
October 31,
2023
  
Deferred income tax assets
            
Net operating losses
  
$
18,941
    
$
26,377
  
Reserves not currently deductible
    
9,892
      
8,776
  
Tax credit carryforwards
    
12,550
      
10,442
  
Share-based compensation
    
3,102
      
1,892
  
Property, plant and equipment
    
10,710
      
9,844
  
Research intangibles
     2,721       -  
Lease liabilities
     4,116       5,743  
     
62,032
      
63,074
  
Valuation allowances
    
(30,633
)
    
(32,619
)
     
31,399
      
30,455
  
Deferred income tax liabilities
                
ROU assets
    
(7,351
)
    
(8,193
)
Other     (1,458 )     (1,200 )
     
(8,809
)
    
(9,393
)
Net deferred income tax assets
  
$
22,590
    
$
21,062
  
                 
Classification
                
Deferred income tax assets
  
$
23,059
    
$
21,297
  
Other liabilities
    
(469
)
    
(235
)
   
$
22,590
    
$
21,062
  


We have established a valuation allowance for a portion of our deferred tax assets because we believe, based on the weight of all available evidence, that it is more likely than not that a portion of our deferred tax assets will expire prior to utilization. In 2024 the valuation allowance decreased as a result of management’s determination that tax benefits on deferred tax assets would more likely than not be realized and, therefore, decreased the valuation allowance to include these deferred tax assets.


Due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, as of fiscal year end 2018, U.S. deferred taxes were no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. Therefore, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and foreign withholding tax expense on those earnings, the amount of which is not practicable to compute.

Tax Credits and Carryforwards



The following tables present our available operating loss and credit carryforwards as of October 31, 2024, and their related expiration periods.

Operating Loss Carryforwards
  
Amount
    
Expiration Period
  
Federal
  
$
55,729
    
2030-Indefinite
  
                 
State
   $
135,736
      
2025-Indefinite
  
                 
Foreign
   $
165
      
2025-2034
  

Tax Credit Carryforwards
  
Amount
    
Expiration Period
  
Federal research and development
  
$
6,042
      
2025-2044
  
                 
Federal 48D credit
   $
2,276       2043-2044  
                 
State
  
$
5,357
      
2025-2038
  

Uncertain Tax Positions



We include unrecognized tax benefits in Other liabilities, and we include any applicable interest and penalties related to uncertain tax positions in our income tax provision.


A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented below. The amounts in the table include settlements of non-U.S. audits.

 
Year Ended
  
   
October 31,
2024
    
October 31,
2023
    
October 31,
2022
  
Balance at beginning of year before interest and penalties
  
$
8,332
    
$
5,204
    
$
3,534
  
(Reductions) additions of tax positions in prior years
     86      
209
      
(355
)
Additions based on current year tax positions
     6,139      
3,361
      
2,892
  
Settlements
     (835 )    
(423
)
    
(848
)
Lapses of statutes of limitations
     (30 )    
(19
)
    
(19
)
Balance at end of year before interest and penalties
     13,692      
8,332
      
5,204
  
Interest and penalties
     1,028       576       395  
Balance at end of year including interest and penalties
   $ 14,720     $ 8,908     $ 5,599  


The following table presents additional information on our uncertain tax positions, as of the balance sheet dates.

   
October 31,
2024
    
October 31,
2023
  
Unrecognized tax benefits that, if recognized, would impact the effective tax rate
  
$
14,720
    
$
8,908
  
Accrued interest and penalties related to uncertain tax positions
  
$
1,028
    
$
576
  



Although the timing of the reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits or expirations of statutes of limitations, the Company believes that the amount of uncertain tax positions (including accrued interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is $0.4 million. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2019.

Income Tax Payments and Refunds


The table below presents income taxes paid and refunds of income taxes received during the reporting periods.


   
Year Ended
  
   
October 31,
2024
    
October 31,
2023
    
October 31,
2022
  
Income taxes paid
  
$
62,520
    
$
70,362
    
$
37,770
  
Income tax refunds received
   $
2,519
     $
485
     $
388