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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Current and Deferred Income Tax Expense Domestic and foreign pre-tax loss is as follows:
| Year Ended December 31,
| 2022 |  | 2021 |  |
Domestic | $ | (20,196) |  |  | $ | (10,967) |  |  |
Foreign | 4,079 |  |  | (8,578) |  |  |
Domestic and foreign pre-tax loss | $ | (16,117) |  |  | $ | (19,545) |  |  |
Income tax expense (benefit) attributable to operations is comprised of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  |
Current: |  |  |  |  |
Federal | $ | 396 |  |  | $ | (27) |  |  |
State | 14 |  |  | 19 |  |  |
Foreign | (1,722) |  |  | 643 |  |  |
Total current | (1,312) |  |  | 635 |  |  |
Deferred: |  |  |  |  |
Federal | (364) |  |  | — |  |  |
Foreign | 792 |  |  | (768) |  |  |
Total deferred | 428 |  |  | (768) |  |  |
Income tax benefit | $ | (884) |  |  | $ | (133) |  |  |
The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:
| Year Ended December 31,
| 2022 |  | 2021 |  |
Federal statutory rate | 21 | % |  | 21 | % |  |
Impact of foreign earnings | (27) |  |  | 3 |  |  |
Change in valuation allowance | 28 |  |  | 24 |  |  |
Tax contingencies, net of reversals | 13 |  |  | (5) |  |  |
Corporate restructuring | (11) |  |  | (38) |  |  |
Expiration of tax attributes | (12) |  |  | (6) |  |  |
Permanent items | (2) |  |  | 4 |  |  |
Research and development credits | 4 |  |  | 2 |  |  |
Stock-based compensation | (4) |  |  | (1) |  |  |
Other | (5) |  |  | (3) |  |  |
Effective income tax rate | 5 | % |  | 1 | % |  |
Deferred Tax Assets, Liabilities and Valuation Allowance Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Research and experimentation credit and deduction carryforwards | $ | 60,041 |  |  | $ | 62,771 |
Net operating loss carryforwards | 44,424 |  |  | 45,985 |
Depreciation and amortization | 5,568 |  |  | 5,664 |
Reserves and accrued expenses | 1,000 |  |  | 992 |
Deferred stock-based compensation | 821 |  |  | 994 |
Foreign tax credit carryforwards | 163 |  |  | 208 |
Other | 1,201 |  |  | 1,451 |
Total gross deferred tax assets | 113,218 |  |  | 118,065 |
Deferred tax liabilities: |  |  |
Foreign earnings | (212) |  |  | — |
Other | (620) |  |  | (812) |
Total gross deferred tax liabilities | (832) |  |  | (812) |
Less valuation allowance | (111,941) |  |  | (116,372) |
Net deferred tax assets | $ | 445 |  |  | $ | 881 |
We continue to record a full valuation allowance against our U.S. and China net deferred tax assets as of December 31, 2022 and 2021, as it is not more likely than not that we will realize a benefit from these assets in a future period. In the fourth quarter of 2021, we released a portion of the valuation allowance against our Canadian deferred tax assets in conjunction with forecasted income within our Canada subsidiary. During the year ended December 31, 2022, our Canadian subsidiary generated taxable profits which were able to be offset by our Canadian deferred tax assets. As of December 31, 2022, a valuation allowance against our remaining net Canadian deferred tax assets was established as future utilization is uncertain based upon updated projections of income within our Canada Subsidiary. We have not provided a valuation allowance against our other foreign net deferred tax assets as we have concluded it is more likely than not that we will realize a benefit from these assets in a future period because our subsidiaries in these jurisdictions are cost-plus taxpayers. The net valuation allowance decreased $4,431 for the year ended December 31, 2022 and decreased $4,609 for the year ended December 31, 2021. As of December 31, 2022, we had federal, state and foreign net operating loss carryforwards of $154,992, $9,600 and $42,668 respectively, which will begin to expire in 2024 with $31,705 of our federal net operating loss carryforward lasting indefinitely. As of December 31, 2022, we had available federal, state and foreign research and experimentation tax credit carryforwards of $6,747, $5,173, and $21,850 respectively. The federal and state tax credits will begin expiring in 2023 while the foreign credits have an indefinite life. In addition, our Canadian subsidiary has unclaimed scientific and experimental expenditures to be carried forward and applied against future income in Canada of approximately $120,277. We have a general foreign tax credit of $84 which will begin to expire in 2023. Our ability to utilize our federal net operating losses may be limited by Section 382 of the Internal Revenue Code of 1986, as amended, which imposes an annual limit on the ability of a corporation that undergoes an "ownership change" to use its net operating loss carryforwards to reduce its tax liability. An ownership change is generally defined as a greater than 50% increase in equity ownership by 5% shareholders in any three-year period. We are not indefinitely reinvested in the earnings of our subsidiaries in Canada, Japan and Taiwan and have accrued tax on the future repatriation of cash for jurisdictions where withholding taxes would apply. The Tax Cuts and Jobs Act ("TCJA") was enacted on December 22, 2017. Included in the TCJA is the requirement to capitalize and amortize research and experimental expenditures starting with the first tax year after December 31, 2021. The required capitalization and amortization of these costs resulted in an increase to our taxable income before utilization of our operating loss carryforward. The capitalization did not have a significant impact to our income tax benefit in the current year. Uncertain Tax Positions We have recorded tax liabilities to address potential exposures involving positions that could be challenged by taxing authorities. As of December 31, 2022, the amount of our uncertain tax positions was a liability of $378 and a reduction to deferred tax assets of $1,353. As of December 31, 2021, the amount of our uncertain tax positions was a liability of $2,493 and a reduction to deferred tax assets of $1,254. The following is a summary of the change in our liability for uncertain tax positions and interest and penalties:
| 2022 |  | 2021
Uncertain tax positions: |  |  |
Balance at beginning of year | $ | 3,646 |  |  | $ | 2,711 |
Accrual for positions taken in a prior year | (214) |  |  | 825 |
Accrual for positions taken in current year | 117 |  |  | 121 |
Reversals due to lapse of statute of limitations | (97) |  |  | (11) |
Reversals due to positions taken in the current year | (1,809) |  |  | — |
Balance at end of year | $ | 1,643 |  |  | $ | 3,646 |
Interest and penalties: |  |  |
Balance at beginning of year | $ | 101 |  |  | $ | 88 |
Accrual for positions taken in prior year | 11 |  |  | 16 |
Accrual for positions taken in current year | — |  |  | — |
Reversals due to lapse of statute of limitations | (24) |  |  | (3) |
Balance at end of year | $ | 88 |  |  | $ | 101 |
During the years ended December 31, 2022 and 2021 we recognized $11 and $16, respectively, of interest and penalties in income tax expense in our consolidated statements of operations. During the year ended December 31, 2022, our China subsidiary settled a portion of the outstanding intercompany debt with the US parent, Pixelworks, Inc. The portion that was not able to be settled was forgiven and was recognized as taxable income in China. We previously accrued for a long term liability in the event that the full amount of the intercompany debt would be recognized as taxable income in China. The related uncertain tax position was reversed as a part of the settlement of the intercompany debt. We file income tax returns in the U.S. and various foreign jurisdictions. A number of years may elapse before an uncertain tax position is resolved by settlement or statute of limitations. Settlement of any particular position could require the use of cash. If the uncertain tax positions we have accrued for are sustained by the taxing authorities in our favor, the reduction of the liability will reduce our effective tax rate. We reasonably expect reductions in the liability for unrecognized tax benefits and interest and penalties of approximately $1 within the next twelve months due to the expiration of statutes of limitation in federal, state and foreign jurisdictions. We are no longer subject to U.S. federal, state, and foreign examinations for years before 2019, 2018 and 2015, respectively. Our net operating loss and tax credit carryforwards from all years may be subject to adjustment for three years following the year in which utilized. We do not anticipate that any potential tax adjustments will have a significant impact on our financial position or results of operations.We were not subject to, nor have we received any notice of, income tax examinations in any jurisdiction as of December 31, 2022.

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