
	October 3, 2020		September 28, 2019		September 29, 2018
(In thousands)
Domestic	$	(15,194)	$	(858)	$	2,803
Foreign	(4,889)		(218)		(17,351)
Loss before provision for income taxes	$	(20,083)	$	(1,076)	$	(14,548)


	October 3, 2020		September 28, 2019		September 29, 2018
(In thousands)
Current:
U.S. Federal	$	(1,388)	$	1,366	$	—
U.S. State	724		1,132		177
Foreign	1,220		1,463		816
Total current	556		3,961		993
Deferred:
U.S. Federal	—		—		(168)
U.S. State	—		—		—
Foreign	(524)		(271)		231
Total deferred	(524)		(271)		63
Provision for (benefit from) income taxes	$	32	$	3,690	$	1,056

The Company is subject to income taxes in the U.S. and foreign jurisdictions in which it operates. The Company’s tax provision is impacted by the jurisdictional mix of earnings as its foreign subsidiaries have statutory tax rates different from those in the U.S. The Company has made an accounting policy election to treat Global Intangible Low Taxed Income (“GILTI”) as a period expense. The Company's accounting for the elements of U.S. Tax Reform is completed based on all published tax law and corresponding guidance. However. proposed and final clarifying guidance is anticipated for various aspects of U.S. Tax Reforms which could be relevant to the Company. The effects of any additional guidance will be recorded in the period such guidance is issued.


	October 3, 2020		September 28, 2019
(In thousands)
Deferred tax assets
Accrued expenses and reserves	$	12,014	$	12,582
Deferred revenue	11,831		11,185
U.S. net operating loss carryforwards	8,242		15,112
Foreign net operating loss carryforwards	12,183		3,414
Tax credit carryforwards	53,543		43,411
Stock-based compensation	11,018		10,368
Right-of-Use Liability	14,377		—
Amortization	7,648		4,131
Depreciation	1,101		672
Other	603		453
Total deferred tax assets	132,560		101,328
Valuation allowance	(113,939)		(95,088)
Deferred tax assets, net of valuation allowance	18,621		6,240
Deferred tax liabilities
Tax accounting method change	(2,946)		(5,086)
Right-of-Use Asset	(9,914)		—
Amortization	(6,093)		—
Depreciation	(187)		—
Other	(115)		—
Total deferred tax liabilities	(19,255)		(5,086)
Net deferred tax assets (liabilities)	$	(634)	$	1,154

Reported as
Deferred tax assets	$	1,800	$	1,154
Deferred tax liabilities	(2,434)		—
Net deferred tax assets (liabilities)	$	(634)	$	1,154

After considering all available positive and negative evidence, the Company has determined it is more likely than not that deferred tax assets in the U.S. and certain foreign entities will not be realized as a result of cumulative book losses incurred in these jurisdictions. Therefore, the Company maintains a full valuation allowance against the net deferred tax assets in these jurisdictions. It is possible that within the next 12 months there may be sufficient positive evidence to release a portion or all of the valuation allowance. Release of the U.S. valuation allowance would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment and prospective earnings in the U.S.

As of October 3, 2020, the Company had gross federal and post-apportioned state net operating loss carryforwards of $30.8 million and $26.9 million, respectively, available to reduce future taxable income. The earliest federal and state net operating loss carryforwards expire in varying amounts beginning in 2035 and 2027, respectively. As of October 3, 2020, the Company had gross foreign net operating loss carryforwards of $52.2 million, of which $37.6 million have an indefinite life and $14.6 million will expire in 2027. The Company also has gross federal and state research and development tax credit carryforwards of $41.8 million and $31.8 million, respectively. The federal research credits will begin to expire in the year 2025, and the state research credits will begin to expire in the year 2024.

Because of the change of ownership provisions of Sections 382 and 383 of the Code, use of a portion of the Company’s domestic net operating losses and tax credit carryforwards may be limited in future periods depending upon future changes in


(In thousands)	October 3, 2020		September 28, 2019		September 29, 2018
Beginning balance	$	95,088	$	72,380	$	94,956
Increase (decrease) during the period	18,851		22,708		(22,576)
Ending balance	$	113,939	$	95,088	$	72,380


(In thousands)	October 3, 2020		September 28, 2019		September 29, 2018
U.S. federal income taxes at statutory rate	$	(4,217)	$	(226)	$	(3,570)
U.S. state and local income taxes	(2,798)		(9,315)		(1,441)
Foreign income tax rate differential	(75)		129		(53)
Stock-based compensation	869		(2,399)		4,025
Federal research tax credits	(8,012)		(8,418)		(4,333)
Unrecognized federal tax benefits	815		(2,806)		1,990
Change in tax rate	—		1,161		25,725
Net Impact of GILTI	—		239		—
BEAT	(781)		781		—
Other	598		822		259
Change in valuation allowance	13,633		23,722		(21,546)
Provision for income taxes	$	32	$	3,690	$	1,056

In January 2017, the Company entered into a unilateral Advance Pricing Agreement (the "APA") with the Dutch Tax Administration. The APA establishes an intercompany licensing arrangement whereby the operating profit or loss, as determined under U.S. GAAP, of Sonos Europe B.V. and Sonos, Inc. will be allocated between the two companies based on relative contribution to the development of marketing and technology intangibles. The APA has a five-year term that commenced on October 2, 2016 and ends on September 30, 2021.


	October 3, 2020		September 28, 2019		September 29, 2018
(In thousands)
Beginning balance	$	12,527	$	17,794	$	13,780
Increase (decrease) - tax positions in prior periods	(768)		(8,226)		$	636
Increase (decrease) - tax positions in current periods	2,962		2,959		$	3,378
Ending balance	$	14,721	$	12,527	$	17,794

The Company does not anticipate changes to unrecognized benefits within the next 12 months that would result in a material change to the Company’s financial position. The unrecognized tax benefits as of October 3, 2020 would have no impact on the effective tax rate if recognized.

The Company conducts business in a number of tax jurisdictions and, as such, is required to file income tax returns in multiple jurisdictions globally. U.S. federal income tax returns for the 2016 tax year and earlier are no longer subject to examination by the U.S. Internal Revenue Service (the "IRS"). All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and state purposes.

The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. There were no accrued interest or penalties as of October 3, 2020 and September 28, 2019.

As of October 3, 2020, we continue to assert that the unremitted earnings in our foreign subsidiaries are permanently reinvested and therefore no deferred taxes or withholding taxes have been provided. If, in the future, the Company decides to repatriate its $7.9 million of undistributed earnings from these subsidiaries in the form of dividends or otherwise, the Company could be subject to withholding taxes payable at that time. The amount of withholding tax liability is dependent upon circumstances existing if and when a remittance occurs but could be reasonably estimated to be $0.2 million.