XML 30 R17.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 25, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

 

The provision for income taxes from continuing operations consists of the following for the fiscal years indicated:

 

             
   Fiscal Year 
   2021   2020   2019 
Current               
State  $1,000   $—   $4,000 
Foreign   128,000    129,000    104,000 
Total current provision   129,000    129,000    108,000 
Deferred               
Federal   (3,367,000)   (1,075,000)   (5,165,000)
State   (928,000)   (321,000)   (2,341,000)
Foreign   318,000    (19,000)   (56,000)
Change in valuation allowance   3,977,000    1,415,000    7,562,000 
Total deferred provision   —    —    — 
Total provision for income taxes  $129,000   $129,000   $108,000 

 

The following table sets forth the changes in the Company’s balance of unrecognized tax benefits for the year ended:

 

   Total 
Unrecognized tax benefits at December 28, 2019  $394,000 
Gross increases—prior year tax positions   — 
      
Unrecognized tax benefits at December 26, 2020   394,000 
      
Gross increases—current year tax positions   — 
Unrecognized tax benefits at December 25, 2021  $394,000 

 

U.S. GAAP requires applying a ‘more likely than not’ threshold to the recognition and derecognition of uncertain tax positions either taken or expected to be taken by the Company’s income tax returns. The total amount of our gross tax liability for tax positions that may not be sustained under a ‘more likely than not’ threshold amounts to $0.4 million as of December 25, 2021 and December 26, 2020. The Company’s policy regarding the classification of interest and penalties is to include these amounts as a component of income tax expense. The total amount of accrued interest and penalties related to the Company’s unrecognized tax benefits was $1.0 million and $0.9 million as of December 25, 2021 and December 26, 2020 respectively.

 

Net operating losses were not utilized in 2021, 2020 and 2019 to offset federal and state taxes.

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The actual income tax provision reported from operations are different than those which would have been computed by applying the federal statutory tax rate to loss before income tax provision. A reconciliation of income tax provision from continuing operations as computed at the U.S. federal statutory income tax rate to the provision for income tax benefit is as follows:

 

             
   Fiscal Year 
   2021   2020   2019 
Tax provision at federal statutory rates  $(2,787,000)  $(925,000)  $(6,196,000)
State tax liability   —    —    4,000 
Foreign deferred tax rate differential   (55,000)   (38,000)   (64,000)
Permanent items   (79,000)   238,000    1,964,000 
Increase in net state operating loss carryforwards   (911,000)   (233,000)   (1,985,000)
Utilization of net operating losses for U.K. research and development refund   (134,000)   (151,000)   (148,000)
Provision to tax return adjustments and tax rate change   (69,000)   (180,000)   803,000 
Tax credits   (261,000)   9,000    (1,931,000)
Equity compensation   326,000    (121,000)   16,000 
Uncertain tax position for transfer pricing   128,000    129,000    105,000 
Other, net   (6,000)   (14,000)   (22,000)
Change in valuation allowance   3,977,000    1,415,000    7,562,000 
Total provision  $129,000   $129,000   $108,000 

 

Pretax foreign income from continuing operations was approximately $2.7 million for the fiscal year ended 2021, $1.0 million for fiscal year ended 2020, and $1.3 million for fiscal year ended 2019. Deferred income taxes are provided to recognize the effect of temporary differences between tax and financial reporting. Deferred income tax assets and liabilities consist of the following:

 

         
   Fiscal Year 
   2021   2020 
Deferred tax liability:          
Foreign withholding liability  $(513,000)  $(554,000)
Deferred tax assets:          
Federal net operating loss carryforwards   49,609,000    46,311,000 
State net operating loss carryforwards   6,393,000    5,454,000 
Foreign net operating loss carryforwards   994,000    1,319,000 
Equity awards   222,000    549,000 
Tax credits   9,413,000    9,153,000 
Property, plant and equipment   620,000    577,000 
Unrealized losses on investments   2,834,000    2,860,000 
Other   872,000    757,000 
Net deferred tax assets   70,444,000    66,426,000 
Valuation allowance   (70,957,000)   (66,980,000)
Deferred tax assets, net  $(513,000)  $(554,000)

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The valuation allowance was approximately $71.0 million and $67.0 million at December 25, 2021 and December 26, 2020, respectively, primarily driven by U.S. net operating loss carryforwards (“NOLs”) and tax credits that the Company does not believe will ultimately be realized.

 

As of December 25, 2021, the Company has available for tax purposes NOLs of $160.3 million expiring 2021 through 2038 and $60.1 million that have an unlimited carryover period. The Company has recognized a full valuation allowance on its net deferred tax assets as the Company has concluded that such assets are not more likely than not to be realized.

 

The 2017 Tax Act imposes a mandatory transition tax on accumulated foreign earnings and eliminates U.S. taxes on foreign subsidiary distribution. As a result, earnings in foreign jurisdictions are available for distribution to the U.S. without incremental U.S. income taxes.

 

Under the provisions of Section 382, certain substantial changes in Kopin’s ownership may limit in the future the amount of net operating loss carryforwards that could be used annually to offset future taxable income and income tax liability.

 

The Company’s income tax returns have not been examined by the Internal Revenue Service and are subject to examination for all years since 2001. State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

 

International jurisdictions have statutes of limitations generally ranging from three to twenty years after filing of the respective return. Years still open to examination by tax authorities in major jurisdictions include Korea (2010 onward), Japan (2010 onward), Hong Kong (2012 onward) and United Kingdom (2015 onward). The Company is not currently under examination in these jurisdictions.