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Income Taxes | 9 Months Ended
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Sep. 30, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 4. INCOME TAXES The Company’s effective tax rate changed from a benefit of 8.8% of pre-tax loss for the three months ended September 30, 2022, to a benefit of 18.0% of pre-tax loss for the three months ended September 30, 2023 and changed from a benefit of 9.4% of pre-tax loss for the nine months ended September 30, 2022, to a benefit of 19.2% of pre-tax loss for the nine months ended September 30, 2023. The change in the effective tax rate for the three and nine months ended September 30, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with Adtran Networks during the third quarter of 2022, as well as the release of our domestic valuation allowance during the fourth quarter of 2022, with exception for certain research and development credits in a particular state in which we do not have sufficient activity to utilize them prior to expiration. During the second quarter of 2023, the Company concluded a review with the Internal Revenue Services of its amended tax returns previously filed related to refund claims arising from the Company’s request to revoke an IRC Section 59(e) election made on the Company’s originally filed 2018 U.S. federal tax return. The Company had previously received an unfavorable response to its Private Letter Ruling request, in which it requested the Commissioner's approval for revoking the election. As a result of that review, and after taking into consideration other factors, including weighing the potential benefits with projected costs to litigate and the hazards of litigation, management has concluded that it will not pursue the claims any further. As a result, the Company has removed the previously recorded receivable of $15.2 million and related research and development credit carryforward of $1.8 million, as well as the offsetting uncertain tax position reserves against them of $17.0 million during the second quarter of 2023. The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes. As of September 30, 2023, the Company had net deferred tax assets totaling $57.3 million, and a valuation allowance totaling $5.0 million against those deferred tax assets. The remaining $52.3 million in deferred tax assets are primarily related to capitalized R&D expenses in the U.S., partially offset by net purchase price intangibles from the Business Combination closed with Adtran Networks during the third quarter of 2022. Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results, as well as the evaluation of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies. Should management’s conclusion change in the future and an additional valuation allowance, or a partial or full release of the valuation allowance becomes necessary, it may have a material effect on our consolidated financial statements. Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:
|  | As of September 30, 2023 |
(In thousands) |  | Deferred Tax Assets (Liabilities) |  |  | Valuation Allowance |  |  | Deferred Tax Assets (Liabilities), net |
Domestic |  | $ | 84,274 |  |  | $ | (3,177 | ) |  | $ | 81,097 |
International |  |  | (26,975 | ) |  |  | (1,839 | ) |  |  | (28,814 | )
Total |  | $ | 57,299 |  |  | $ | (5,016 | ) |  | $ | 52,283 |
|  | As of December 31, 2022 |
(In thousands) |  | Deferred Tax Assets (Liabilities) |  |  | Valuation Allowance |  |  | Deferred Tax Assets (Liabilities), net |
Domestic |  | $ | 61,726 |  |  | $ | (3,177 | ) |  | $ | 58,549 |
International |  |  | (50,315 | ) |  |  | (2,024 | ) |  |  | (52,339 | )
Total |  | $ | 11,411 |  |  | $ | (5,201 | ) |  | $ | 6,210 |

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