Income Taxes

3 Months Ended

Mar. 30, 2019

Income Taxes

16. Income Taxes

Intevac recorded income tax provisions of $553,000 for the three months ended March 30, 2019 and $160,000 for the three months ended March 31, 2018. The income tax provisions for the three month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which Intevac operates. For the three-month period ended March 30, 2019 Intevac recorded a $362,000 income tax provision on earnings of its international subsidiaries and recorded $191,000 for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as a discrete item. For the three-month period ended March 31, 2018 Intevac recorded $145,000 for withholding taxes as a discrete item. For all periods presented Intevac utilized net operating loss carry-forwards to offset the impact of the global intangible low-taxed income (“GILTI”). Intevac’s tax rate differs from the applicable statutory rates due primarily to establishment of a valuation allowance, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effective income tax rate depends on various factors, including the level of Intevac’s projected earnings, the geographic composition of worldwide earnings, tax regulations governing each region, net operating loss carry-forwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effective income tax rate.

The Inland Revenue Authority of Singapore (“IRAS”) is currently conducting a review of various fiscal year tax returns of the Company’s wholly-owned subsidiary, Intevac Asia Pte. Ltd. in 2009 and 2010. IRAS has challenged the Company’s tax position with respect to certain aspects of the Company’s transfer pricing. Under Singapore tax law, the Company must pay all contested taxes and the related interest to have the right to defend its position. The contested tax deposits of $730,000 at March 30, 2019 and $723,000 at December 29, 2018 are included in other long-term assets on the condensed consolidated balance sheets. The Company’s management and its advisors continue to believe that the Company is “more likely than not” to successfully defend that the tax treatment was proper and in accordance with Singapore tax regulations. Presently, there are no other active income tax examinations in the jurisdictions where Intevac operates.