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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Acacia’s provision for income taxes for the fiscal periods presented consisted of the following (in thousands):
|  | 2018 |  | 2017
Current: |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  | 87 |  |  | 90 |
Foreign |  | 1,092 |  |  | 2,865 |
Total current |  | 1,179 |  |  | 2,955 |
Deferred: |  |  |  |
Federal |  | — |  |  | — |
State |  | — |  |  | — |
Total deferred |  | — |  |  | — |
Provision for income taxes |  | $ | 1,179 |  |  | $ | 2,955 |
The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following at December 31, 2018 and 2017 (in thousands):
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |
Net operating loss and capital loss carryforwards and credits |  | $ | 104,862 |  |  | $ | 90,871 |
Unrealized loss on investments held at fair value |  | 2,455 |  |  | — |
Stock compensation |  | 1,365 |  |  | 2,635 |
Fixed assets and intangibles |  | 3,330 |  |  | 6,197 |
Basis of investments in affiliates |  | 286 |  |  | 984 |
Accrued liabilities and other |  | 208 |  |  | 167 |
State taxes |  | 26 |  |  | 35 |
Total deferred tax assets |  | 112,532 |  |  | 100,889 |
Valuation allowance |  | (112,532 | ) |  | (90,278 | )
Total deferred tax assets, net of valuation allowance |  | — |  |  | 10,611 |
Deferred tax liabilities: |  |  |  |
Unrealized gain on investments held at fair value |  | — |  |  | (10,587 | )
Other |  | (18 | ) |  | (24 | )
Total deferred tax liabilities |  | (18 | ) |  | (10,611 | )
Net deferred tax assets (liabilities) |  | $ | (18 | ) |  | $ | — |
A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows:
|  | 2018 |  | 2017
Statutory federal tax rate - (benefit) expense |  | 21 | % |  | 35 | %
State income and foreign taxes, net of federal tax effect |  | (1 | )% |  | 8 | %
Foreign tax credit |  | — | % |  | — | %
Noncontrolling interests in operating subsidiaries |  | — | % |  | 1 | %
Nondeductible permanent items |  | (1 | )% |  | 3 | %
Change in tax rate |  | — | % |  | 102 | %
Valuation allowance |  | (20 | )% |  | (137 | )%
|  | (1 | )% |  | 12 | %
For the periods presented, the Company recorded full valuation allowances against its net deferred tax assets due to uncertainty regarding future realization pursuant to guidance set forth in ASC 740, “Income Taxes.” In future periods, if the Company determines it will more likely than not be able to realize certain of these amounts, the applicable portion of the benefit from the release of the valuation allowance will generally be recognized in the statements of operations in the period the determination is made. At December 31, 2018, Acacia had U.S. federal and state income tax net operating loss carryforwards (“NOLs”) totaling approximately $222,861,000 and $19,471,000, expiring between 2026 and 2038, and 2028 and 2038, respectively. Capital loss carryovers totaled $19,952,000 at December 31, 2018, expiring between 2019 and 2023. As of December 31, 2018, Acacia had approximately $51,508,000 of foreign tax credits, expiring between 2020 and 2026. In general, foreign taxes withheld may be claimed as a deduction on future U.S. corporate income tax returns, or as a credit against future U.S. income tax liabilities, subject to certain limitations. Tax expense for the periods presented primarily reflects foreign taxes withheld on revenue agreements executed with licensees in foreign jurisdictions and other state taxes. Excluding the impact of the change in valuation allowance and the impact of the federal tax rate change under the change in tax law described below, annual effective tax rates were 19% and 47% for fiscal years 2018 and 2017, respectively. Results for fiscal year 2018 included an unrealized loss on Acacia’s investment in Veritone which created a deferred tax asset totaling approximately $2,455,000. Results for fiscal year 2017 included an unrealized gain on Acacia’s investment in Veritone which created a deferred tax liability totaling approximately $10,587,000. The 2017 deferred tax liability was reversed in fiscal year 2018 as a result of the 2018 unrealized loss on Acacia’s investment in Veritone and the realized loss on the sale of Veritone common stock. The effective tax rate reflects both the recognition of the deferred tax liability and the reversal of the valuation allowance. Effective January 1, 2017, the Company adopted a new standard that requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. The adoption of this standard resulted in the Company recognizing gross federal and state deferred tax assets of $21,350,000 and $1,559,000, respectively, for the year ended December 31, 2017 related to the impact of share-based payments to employees in prior periods. These deferred tax assets are fully offset by a valuation allowance and were impacted by the change in tax rate described below. Acacia is subject to taxation in the U.S. and in various state jurisdictions and incurs foreign tax withholdings on revenue agreements with licensees in certain foreign jurisdictions. With no material exceptions, Acacia is no longer subject to U.S. federal or state examinations by tax authorities for years before 2011. The California Franchise Tax Board is auditing the 2011 through 2016 California combined income tax returns. The California Franchise Tax Board has proposed adjustments for 2011 and 2012 that, if expensed, would not be material to the consolidated statements of operations for the periods presented. We have protested these adjustments. At December 31, 2018 and 2017, the Company had total unrecognized tax benefits of approximately $808,000. No interest and penalties have been recorded for the unrecognized tax benefits for the periods presented. At December 31, 2017, if recognized, approximately $808,000 of tax benefits, net of valuation allowance, would impact the Company’s effective tax rate. The Company does not expect that the liability for unrecognized tax benefits will change significantly within the next 12 months. Acacia recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense. Acacia has identified no uncertain tax position for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months. On December 22, 2017, new U.S. tax legislation was enacted that has significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate to 21%, revising the rules governing net operating losses and foreign tax credits, and introducing new anti-base erosion provisions. For the year ended December 31, 2017, we reflected a write-down of our deferred income tax assets (including the value of our net operating loss carryforwards and our tax credit carryforwards) due the reduction of the U.S. corporate income tax rate and recorded a reduction of approximately $25,261,000 related to the revaluation of our deferred tax assets. This amount was not adjusted during the year ended December 31, 2018. Given the full valuation allowance provided for net deferred tax assets as of December 31, 2018 and 2017, the change in tax law did not have a material impact on our 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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