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Income Taxes (Tables)
 12 Months Ended
Jan. 02, 2021
Income Tax Disclosure [Abstract]  
Income before provision for income taxes
Cadence’s income before provision (benefit) for income taxes included income from the United States and from foreign subsidiaries for fiscal 2020, 2019 and 2018, was as follows:
202020192018
(In thousands)
United States$256,032 $139,306 $58,963 
Foreign subsidiaries376,716 339,662 317,427 
Total income before provision (benefit) for income taxes$632,748 $478,968 $376,390 
Components of income taxes provision
Cadence’s provision (benefit) for income taxes was comprised of the following items for fiscal 2020, 2019 and 2018:
202020192018
(In thousands)
Current:
Federal$15,083 $15,282 $902 
State and local6,401 2,716 (1,270)
Foreign46,737 48,729 42,657 
Total current68,221 66,727 42,289 
Deferred:
Federal(11,155)(9,001)(10,324)
State and local(24,186)6,593 886 
Foreign9,224 (574,330)(2,238)
Total deferred(26,117)(576,738)(11,676)
Total provision (benefit) for income taxes$42,104 $(510,011)$30,613 
Summary of income tax reconciliation
The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rates of 21% to income before provision (benefit) for income taxes for fiscal 2020, 2019, and 2018 as follows:
202020192018
(In thousands)
Provision computed at federal statutory income tax rate$132,877 $100,583 $79,042 
State and local income tax, net of federal tax effect20,936 23,221 15,540 
Intercompany transfers of intangible property rights— (575,618)— 
Foreign income tax rate differential(32,589)(37,786)(37,031)
Deemed repatriation transition tax— — (1,409)
U.S. tax on foreign entities43,615 57,225 28,846 
Stock-based compensation(51,226)(29,785)(13,539)
Change in deferred tax asset valuation allowance(9,101)16,796 13,234 
Tax credits(89,684)(87,793)(72,815)
Non-deductible research and development expense5,163 4,363 4,700 
Tax effects of intra-entity transfer of assets392 895 79 
Withholding taxes17,189 15,865 11,535 
Tax settlements, foreign1,193 458 — 
Increase (decrease) in unrecognized tax benefits159 (1,303)(1,545)
Other3,180 2,868 3,976 
Provision (benefit) for income taxes$42,104 $(510,011)$30,613 
Effective tax rate7 %(106)%8 %
Components of deferred tax assets and liabilities
The components of deferred tax assets and liabilities consisted of the following as of January 2, 2021 and December 28, 2019:
As of
January 2,
2021		December 28,
2019
(In thousands)
Deferred tax assets:
Tax credit carryforwards$197,436 $206,008 
Reserves and accruals60,272 47,562 
Intangible assets578,267 583,323 
Capitalized research and development expense for income tax purposes39,427 18,477 
Operating loss carryforwards5,935 6,201 
Deferred income21,170 16,704 
Capital loss carryforwards16,944 17,320 
Stock-based compensation costs14,656 15,097 
Depreciation and amortization4,402 8,721 
Investments2,521 2,459 
Lease liability31,278 25,016 
Total deferred tax assets972,308 946,888 
Valuation allowance(116,419)(125,520)
Net deferred tax assets855,889 821,368 
Deferred tax liabilities:
Intangible assets(44,549)(24,907)
Undistributed foreign earnings(41,957)(31,916)
ROU assets(31,278)(25,016)
Other(10,749)(8,350)
Total deferred tax liabilities(128,533)(90,189)
Total net deferred tax assets$727,356 $731,179 
Summary of operating loss carryforward As of January 2, 2021, Cadence’s operating loss carryforwards were as follows:
AmountExpiration Periods
(In thousands)
Federal$743 from 2021 through 2029
California27,093 from 2030 through 2039
Other states (tax effected, net of federal benefit)1,564 from 2021 through 2037
Foreign (tax effected)2,322 from 2025 through indefinite
Summary of tax credit carryforwards
As of January 2, 2021, Cadence had tax credit carryforwards of:
AmountExpiration Periods
(In thousands)
Federal*$96,417 from 2038 through 2040
California63,130 indefinite
Other states 12,023 from 2021 through indefinite
Foreign 25,866 from 2035 through indefinite
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*Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.
Earliest tax years open to examination by jurisdiction As of January 2, 2021, Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:
JurisdictionEarliest Tax Year Open to Examination
United States – Federal2015
United States – California2016
Ireland2016
Unrecognized tax benefits roll forward
The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2020, 2019 and 2018 are as follows:
202020192018
(In thousands)
Unrecognized tax benefits at the beginning of the fiscal year$106,041 $101,857 $110,179 
Gross amount of the increases (decreases) in unrecognized tax benefits of tax positions taken during a prior year*5,037 (3,143)(4,183)
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year3,344 8,951 2,370 
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes(1,316)(380)— 
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations(676)(1,692)(5,179)
Effect of foreign currency translation591 448 (1,330)
Unrecognized tax benefits at the end of the fiscal year$113,021 $106,041 $101,857 
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate$66,010 $61,527 $58,022 
_____________
* Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions
Interest and penalties recognized in consolidated income statements and balance sheets
The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision (benefit) for income taxes for fiscal 2020, 2019 and 2018 were as follows:
202020192018
(In thousands)
Interest$473 $490 $585 
Penalties(3)19 342 
The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of January 2, 2021 and December 28, 2019 were as follows:
As of
January 2,
2021		December 28,
2019
(In thousands)
Interest$3,555 $3,500 
Penalties12 12