Note 8 - INCOME TAXES

3 Months Ended

Mar. 31, 2022

INCOME TAXES

INCOME TAXES

8. INCOME TAXES

Income tax expense increased $0.2 million for the three months ended March 31, 2022, to a $1.2 million income tax expense as compared to an income tax expense of $1.0 million for the three months ended March 31, 2021. The Company’s effective tax rate expense was (40%) and (14%) for the three months ended March 31, 2022 and 2021, respectively. The Company’s effective tax rate expense increased in the three months ended March 31, 2022, as compared to the same period in 2021, primarily due to increases in foreign withholding taxes and changes in the geographic mix of worldwide income, which is subject to taxation at different statutory tax rates.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of March 31, 2022, was $15.0 million, of which $2.0 million, if recognized, would affect the Company’s effective tax rate. The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of December 31, 2021, was $14.7 million, of which $1.9 million, if recognized, would affect the Company’s effective tax rate. As of March 31, 2022, the Company has recorded unrecognized tax benefits of $2.6 million, including interest and penalties of $0.7 million, as long-term taxes payable in its Condensed Consolidated Balance Sheet. The remaining $13.1 million has been recorded net of the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $51.6 million as of March 31, 2022 and December 31, 2021, which was related to U.S. net federal and state DTAs. The worldwide net deferred tax assets balance as of March 31, 2022 and December 31, 2021 were not significant.

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal, various state and foreign jurisdictions. For U.S. federal and California income tax purposes, the statute of limitations currently remains open for the tax years ending 2018 to present and 2017 to present, respectively. In addition, due to NOL carryback claims, the tax years 2013 through 2015 may be subject to federal examination and all of the net operating loss and research and development credit carryforwards that may be utilized in future years may be subject to federal and state examination. The Company is not subject to income tax examinations in any other of its major foreign subsidiaries’ jurisdictions.