Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 – Income Taxes

The table below sets forth our (loss) income before taxes for the years ended December 31:

Income (loss) before income taxes	2021		2020		2019
U.S.	$	122,127	$	45,526	$	73,352
Foreign		192,968		74,815		124,894
Total	$	315,095	$	120,341	$	198,246

The table below sets forth the components of our income tax provision (benefit) for the years ended December 31:

	2021			2020			2019
Current tax provision
Federal	$	15,691		$	631		$	259
Foreign		25,489			17,115			28,829
State		(17	)		56			92
		41,163			17,802			29,180
Deferred tax provision (benefit)
Federal		(1,116	)		6,411			886
Foreign		31,222			(6,210	)		11,994
State		-			65			30
		30,106			266			12,910
Liability for unrecognized tax benefits		7,538			3,044			2,041
Total income tax provision	$	78,807		$	21,112		$	44,131

Effective Tax Rate Reconciliation

The table below sets forth a reconciliation between the effective tax rate and the statutory tax rates for the years ended December 31:

	2021						2020						2019
				Percent						Percent						Percent
				of pretax						of pretax						of pretax
	Amount			earnings*			Amount			earnings*			Amount			earnings*
Federal tax	$	66,170			21.0		$	25,272			21.0		$	41,632			21.0
State income taxes, net of federal tax    provision		(474	)		(0.2	)		(378	)		(0.3	)		1,389			0.7
Foreign income taxed at different tax rates		(2,018	)		(0.6	)		81			0.1			(5,786	)		(2.9	)
U.S. tax impact of foreign operations		(17,375	)		(5.5	)		(3,031	)		(2.5	)		(3,340	)		(1.7	)
Foreign withholding taxes		33,175			10.5			(1,798	)		(1.5	)		22,685			11.4
Research and development		(6,310	)		(2.0	)		(4,210	)		(3.5	)		(3,686	)		(1.9	)
Liability for unrecognized tax benefits		7,538			2.4			3,044			2.5			2,041			1.0
Valuation allowance		(1,068	)		(0.3	)		2,199			1.8			(10,563	)		(5.3	)
Employee stock-based compensation		(812	)		(0.3	)		(660	)		(0.5	)		(52	)		-
Other		(19	)		-			593			0.5			(189	)		(0.1	)
Income tax provision	$	78,807			25.0		$	21,112			17.5		$	44,131			22.3

* The sum of the amounts in the table may not equal to the effective tax rate due to rounding.

Uncertain Tax Positions

In accordance with the provisions related to accounting for uncertainty in income taxes, we recognize the benefit of a tax position if the position is “more likely than not” to prevail upon examination by the relevant tax authority. The table below sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	2021			2020			2019
Balance at January 1,	$	42,466		$	35,652		$	32,209
Additions based on tax positions related to the    current year		9,244			7,495			9,274
Additions for prior year tax positions		138			4,952			39
Reductions for prior year tax positions		(8,470	)		(5,633	)		(5,870	)
Balance at December 31,	$	43,378		$	42,466		$	35,652

If the $43.4 million of unrecognized tax benefits as of December 31, 2021, is recognized, approximately $41.3 million would affect the effective tax rate. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012 or tax year 2015. We are no longer subject to China income tax examinations by tax authorities for tax years before 2011. With respect to state and local jurisdictions and countries outside of the U.S., with limited exceptions, we are no longer subject to income tax audits for years before 2016. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve for any adjustments that may result from future tax audits. We recognize accrued interest and penalties, if any, related to unrecognized tax benefits in interest expense. We had an immaterial amount of accrued interest and penalties at December 31, 2021, 2020 and 2019.

Deferred Taxes

The table below sets forth our deferred tax assets and liabilities as of December 31:

	2021			2020
Deferred tax assets
Inventory cost	$	21,692		$	15,154
Accrued expenses and accounts receivable		5,966			5,294
Research and development tax credits		9,613			15,807
Net operating loss carryforwards		42,068			42,734
Lease obligations		2,050			2,982
Plant, equipment and intangible assets		-			162
Accrued pension		3,878			6,386
Share based compensation and others		14,809			8,810
		100,076			97,329
Valuation allowances		(45,232	)		(45,591	)
Total deferred tax assets, non-current		54,844			51,738
Deferred tax liabilities
Plant, equipment and intangible assets		(1,330	)		-
Right of use assets		(1,975	)		(2,936	)
Outside basis differences and others		(50,773	)		(13,467	)
Total deferred tax liabilities, non-current		(54,078	)		(16,403	)
Net deferred tax assets	$	766		$	35,335

ASU No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The $11.0 million net deferred tax liabilities presented in the balance sheet as of December 31, 2021, is net of $11.7 million of unrecognized tax benefits. The $0.8 million and $35.3 million net deferred tax asset presented above for December 31, 2021 and 2020, respectively, is prior to the net balance sheet presentation required by ASU 2013-11.

At December 31, 2021, we had no federal research credit carryforward and approximately $10.0 million of state tax credit and research credit carryforwards, which are available to offset future income tax liabilities. The state tax credit carryforwards will begin to expire in 2021. Consistent with prior years, we determined that it is more likely than not that our state research credit carryforwards will expire before they are utilized. The valuation allowances recorded against the related deferred tax assets totaled $9.0 million as of December 31, 2021 and 2020.

At December 31, 2021, we had state net operating loss (“NOL”) carryforwards of approximately $1 million, and foreign NOL carryforwards of $210 million which are available to offset future taxable income. The state NOL carryforward will begin to expire in 2021. We determined that it is more likely than not that the state NOL carryforwards will expire before they are fully utilized and recorded a full valuation allowance on the related deferred tax assets. The foreign NOL carryforwards will begin to expire in 2021. We determined that it is more likely than not that a portion of the foreign NOL carryforwards will expire before they are fully utilized. The valuation allowances recorded against the related deferred tax assets totaled $36 million and $32 million as of December 31, 2021 and 2020, respectively.

Supplemental Information

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. As of December 31, 2021, we had undistributed earnings from non-U.S. operations of approximately $1.5 billion (including approximately $207 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $449 million of this total. Additional Chinese withholding taxes of approximately $45 million would be required should the $449 million of such earnings be distributed out of China as dividends.

The impact of tax holidays decreased our tax expense by approximately ($0.2) million, $0.9 million and $3.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. The benefit of the tax holidays on basic and diluted earnings per share was $0.00, $0.02 and $0.06 for the twelve months ended December 31, 2021, 2020 and 2019, respectively.