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8. Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 8. INCOME TAXES Acacia’s income tax benefit (expense) for the fiscal periods presented consisted of the following:
|  | 2019 |  |  | 2018 |
|  | (in thousands) |
Current: |  |  |  |  |  |
Federal |  | $ | – |  |  | $ | – |
State |  |  | (34 | ) |  |  | (87 | )
Foreign |  |  | 1,858 |  |  |  | (1,092 | )
Total current |  |  | 1,824 |  |  |  | (1,179 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | – |  |  |  | – |
State |  |  | – |  |  |  | – |
Total deferred |  |  | – |  |  |  | – |
Income tax benefit (expense) |  | $ | 1,824 |  |  | $ | (1,179 | )
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, 2019 and 2018:
|  | 2019 |  |  | 2018 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss and capital loss carryforwards and credits |  | $ | 112,280 |  |  | $ | 104,862 |
Unrealized loss on investments held at fair value |  |  | 538 |  |  |  | 2,455 |
Stock compensation |  |  | 358 |  |  |  | 1,365 |
Fixed assets and intangibles |  |  | 1,316 |  |  |  | 3,330 |
Basis of investments in affiliates |  |  | 300 |  |  |  | 286 |
Accrued liabilities and other |  |  | 631 |  |  |  | 208 |
State taxes |  |  | 25 |  |  |  | 26 |
Total deferred tax assets |  |  | 115,448 |  |  |  | 112,532 |
Valuation allowance |  |  | (115,077 | ) |  |  | (112,514 | )
Total deferred tax assets, net of valuation allowance |  |  | 371 |  |  |  | 18 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
ROU Asset |  |  | (347 | ) |  |  | – |
Other |  |  | (24 | ) |  |  | (18 | )
Total deferred tax liabilities |  |  | (371 | ) |  |  | (18 | )
Net deferred tax assets (liabilities) |  | $ | – |  |  | $ | – |
A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows:
|  | 2019 |  |  | 2018 |
Statutory federal tax rate - (benefit) expense |  |  | 21% |  |  |  | 21% |
State income and foreign taxes, net of federal tax effect |  |  | 7% |  |  |  | (1)% |
Foreign tax credit |  |  | –% |  |  |  | –% |
Noncontrolling interests in operating subsidiaries |  |  | –% |  |  |  | –% |
Nondeductible permanent items |  |  | 1% |  |  |  | (1)% |
Change in tax rate |  |  | –% |  |  |  | –% |
Expired capitalized loss |  |  | (2)% |  |  |  | –% |
Valuation allowance |  |  | (13)% |  |  |  | (20)% |
Other |  |  | (4)% |  |  |  | –% |
|  |  | 10% |  |  |  | (1)% |
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, 2019, Acacia had U.S. federal and state income tax net operating loss carryforwards (“NOLs”) totaling approximately $253,824,000 and $19,683,000, respectively. For federal income tax purposes, our NOL carryovers generated for tax years beginning before January 1, 2018 will begin to expire in 2026. Pursuant to the Tax Cuts and Jobs Act enacted by the U.S. federal government in December 2017, for federal income tax purposes, NOL carryovers generated for our tax years beginning January 1, 2018 can be carried forward indefinitely but will be subject to a taxable income limitation. For state income tax purposes, our NOLs will expire between 2028 and 2039. Our capital loss carryovers totaled $23,652,000 at December 31, 2019, expiring between 2025 and 2029. As of December 31, 2019, 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 (benefit) for the periods presented primarily reflects foreign taxes withheld and refunded on revenue agreements executed with licensees in foreign jurisdictions and other state taxes. Excluding the impact of the change in valuation allowance, annual effective tax rates were 23% for fiscal year 2019 and 19% for fiscal year 2018. Results for fiscal year 2019 included an unrealized loss on Acacia’s investment in Veritone which created a deferred tax asset totaling approximately $538,000. 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. 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. 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, 2019 and 2018, the Company had total unrecognized tax benefits of approximately $731,000 and $816,000, respectively. No interest and penalties have been recorded for the unrecognized tax benefits for the periods presented. At December 31, 2019, if recognized, approximately $731,000 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 (benefit). 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.

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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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