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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income (loss) before income taxes were as follows:
| Years Ended December 31,
| 2023 |  | 2022
| (In thousands)
Domestic | $ | 70,912 |  |  | $ | (126,810) |
Foreign | (3,486) |  |  | (340) |
Total | $ | 67,426 |  |  | $ | (127,150) |
For purposes of reconciling the Company’s provision for income taxes at the statutory rate and the Company’s income tax (benefit) at the effective tax rate, a notional 21% tax rate was applied as follows:
| Years Ended December 31,
| 2023 |  | 2022
Statutory federal tax rate - expense (benefit) | 21 | % |  | (21) | %
Foreign rate differential | 3 | % |  | — | %
Noncontrolling interests in operating subsidiaries | (1) | % |  | (2) | %
Nondeductible permanent items | (1) | % |  | — | %
Expired tax attributes | 6 | % |  | 6 | %
Foreign tax credits | (3) | % |  | — | %
Derivative fair value adjustment | (3) | % |  | (2) | %
Valuation allowance | (27) | % |  | 7 | %
Other | 1 | % |  | (1) | %
Effective income tax rate | (2) | % |  | (13) | %
Acacia’s income tax benefit for the periods presented consisted of the following:
| Years Ended December 31,
| 2023 |  | 2022
| (In thousands)
Current: |  |  |
Federal | $ | (215) |  |  | $ | (54) |
State | 37 |  |  | (482) |
Foreign | (1,975) |  |  | (606) |
Total current | (2,153) |  |  | (1,142) |
Deferred: |  |  |
Federal | (14,041) |  |  | 24,789 |
State | (925) |  |  | 259 |
Foreign | 593 |  |  | (28) |
Total deferred | (14,373) |  |  | 25,020 |
Change in valuation allowance | 18,030 |  |  | (7,667) |
Income tax benefit | $ | 1,504 |  |  | $ | 16,211 |
The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:
| December 31,
| 2023 |  | 2022
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss and capital loss carryforwards and credits | $ | 34,595 |  |  | $ | 47,386 |
Unrealized gain on investments held at fair value | 146 |  |  | 35 |
Compensation expense for share-based awards | 1,095 |  |  | 607 |
Accrued liabilities and other | 1,453 |  |  | 1,551 |
Lease liability | 689 |  |  | 784 |
State taxes | 37 |  |  | 94 |
Total deferred tax assets | 38,015 |  |  | 50,457 |
Valuation allowance | (30,219) |  |  | (48,250) |
Total deferred tax assets, net of valuation allowance | 7,796 |  |  | 2,207 |
Deferred tax liabilities: |  |  |
ROU Asset | (680) |  |  | (782) |
Fixed assets and intangibles | (1,841) |  |  | (2,166) |
Basis of investment in affiliates | (2,360) |  |  | — |
Other | — |  |  | — |
Total deferred tax liabilities | (4,881) |  |  | (2,948) |
Net deferred tax assets (liabilities) | $ | 2,915 |  |  | $ | (742) |
As of December 31, 2023 and 2022, management assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for deferred tax assets on a jurisdictional basis. This evaluation utilizes the framework contained in ASC 740, "Income Taxes," wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or some portion of the Company's deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it is more-likely-than-not that the asset will not be realized. In assessing the realization of the Company's deferred tax assets, management considers all available evidence, both positive and negative. Based upon available evidence, it was concluded on a more-likely-than-not basis that as of December 31, 2023 a valuation allowance of $30.2 million was needed for foreign tax credits and certain state tax attributes the Company estimates will expire prior to utilization. As of December 31, 2022, the Company recorded a full valuation allowance of $48.3 million. The valuation allowance decreased by $18.0 million for the year ended December 31, 2023 as a result of the use of tax attributes used against 2023 earnings and the release of valuation allowance on the remaining federal net operating losses for which positive evidence supported the realization as of December 31, 2023. The valuation allowance increased by $7.7 million for the year ended December 31, 2022 as a result of the changes in realized/unrealized gains and losses. At December 31, 2023, Acacia had U.S. federal, foreign and state income tax net operating loss carryforwards (“NOLs”) totaling approximately $18.3 million, $3.0 million and $26.7 million, respectively. Pursuant to the Tax Cuts and Jobs Act ("TCJA") 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. $706,000 of our foreign NOLs and all of our federal losses can be carried forward indefinitely. The remaining $3.0 million of foreign NOLs and $26.7 million of state NOLs will expire in varying amounts through 2040. As of December 31, 2023, Acacia had approximately $28.3 million of foreign tax credits, expiring between 2024 and 2033. 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. The following changes occurred in the amount of unrecognized tax benefits:
| Years Ended December 31,
| 2023 |  | 2022
| (In thousands)
Beginning balance | $ | 760 |  |  | $ | 887 |
Additions for current year tax positions | — |  |  | — |
Additions included in purchase accounting for prior year positions | — |  |  | — |
Reductions for prior year tax positions | (3) |  |  | (127) |
Ending Balance (excluding interest and penalties) | 757 |  |  | 760 |
Interest and penalties | — |  |  | — |
Total | $ | 757 |  |  | $ | 760 |
At December 31, 2023 and 2022, the Company had total unrecognized tax benefits of approximately $757,000 and $760,000, respectively. At December 31, 2023 and 2022, $757,000 and $760,000, respectively, of unrecognized tax benefits are recorded in other long-term liabilities. At December 31, 2023, if recognized, $757,000 of tax benefits would impact the Company’s effective tax rate. Acacia recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense (benefit). No interest and penalties have been recorded for the unrecognized tax benefits for the periods presented. 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. Acacia is subject to taxation in the U.S. and in various state/foreign jurisdictions and incurs foreign tax withholdings on revenue agreements with licensees in certain foreign jurisdictions. The Company’s 2019 through 2023 tax years generally remain subject to examination by federal, state and foreign tax authorities. As the Company has incurred losses in most jurisdictions, the taxing authorities can generally challenge 2015 through 2022 either the amount of carryforward deduction reported in the open year or the amount of a net operating loss deduction that is absorbed in a closed year and supports the determination of the available net operating loss deduction for the open year under examination. Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries, as earnings are permanently reinvested, however, no deferred tax liability would be necessary as the parent entity would not be required to include the distribution into income as the amount would be tax free under current law. TCJA subjects a US shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5. Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. We have elected to account for GILTI in the year the tax is incurred.

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