| Income Taxes | 18. Income Taxes The Inflation Reduction Act. In August 2022, the previous U.S. President signed into law the IRA, which revised U.S. tax law by, among other things, including a new CAMT of 15% on certain large corporations, imposing a 1% excise tax on stock buybacks, and providing various incentives to address climate change, including the introduction of the advanced manufacturing production credit under Section 45X of the IRC. The provisions of the IRA are generally effective for tax years beginning after 2022. Certain developments to regulations include the following: • In March 2024, the U.S. Treasury Department and the IRS issued final regulations on the direct payment election under Section 6417 of the IRC. The final regulations apply to tax years ending on or after March 11, 2024, but taxpayers may choose to apply the rules in the final regulations in taxable years ending before March 11, 2024, provided the final regulations are applied in their entirety and in a consistent manner. • In April 2024, the U.S. Treasury Department and the IRS issued final regulations on the elective transfer provisions under Section 6418 of the IRC. The final regulations apply to taxable years ending on or after April 30, 2024, but taxpayers may choose to apply the rules in the final regulations in taxable years ending before April 30, 2024, provided the final regulations are applied in their entirety and in a consistent manner. • In October 2024, the U.S. Treasury Department and the IRS issued final regulations for the advanced manufacturing production credit under Section 45X of the IRC. These final regulations apply to eligible components for which production is completed and sales occur after December 31, 2022, and during taxable years ending on or after October 28, 2024. Foreign Tax Credit Regulations. In November 2022, the U.S. Treasury Department released proposed foreign tax credit (“FTC”) regulations addressing various aspects of the U.S. FTC regime. Among other items, these proposed regulations provide certain exceptions for determining creditable foreign withholding taxes. Taxpayers may rely on these proposed regulations, which apply to tax years beginning on or after December 28, 2021. As a result of these proposed regulations, foreign withholding taxes will continue to be creditable. In July 2023, the U.S. Treasury Department issued Notice 2023-55, which provides temporary relief for taxpayers in determining whether a foreign tax is eligible for a foreign tax credit for taxable years beginning on or after December 28, 2021 and ending before December 31, 2023. In December 2023, the U.S. Treasury Department issued Notice 2023-80, which extends this relief period until future guidance is issued. Pillar Two . In December 2021, the OECD released model rules for a new global minimum tax framework (“Pillar Two”). Certain governments in countries in which we operate have enacted local Pillar Two legislation, with effective dates between January 1, 2024 and April 1, 2024; such local legislation may also include qualified domestic minimum top-up tax. As these legislative changes develop and expand, we expect to continue to monitor the changes and evaluate their potential impact to our results of operations. Global Intangible Low-Taxed Income. In December 2017, the United States enacted the Tax Cuts and Jobs Act, changing how foreign earnings are subject to tax in the U.S. and enacting a tax on GILTI earned by foreign corporate subsidiaries. We record taxes due on U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred. During the year ended December 31, 2024, we reversed our position to indefinitely reinvest the accumulated earnings of a foreign subsidiary and recorded tax expense of $6.2 million. There were no other changes to our indefinite reinvestment assertions during the period. The U.S. and non-U.S. components of our income or loss before income taxes for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands): 2024 2023 2022 U.S. income (loss) $ 1,217,274 $ 787,598 $ (17,652) Non-U.S. income 189,064 103,692 26,250 Income before taxes $ 1,406,338 $ 891,290 $ 8,598 The components of our income tax expense or benefit for the years ended December 31, 2024, 2023, and 2022 were as follows (in thousands): 2024 2023 2022 Current expense: Federal $ 64,108 $ 44,693 $ 8,434 State 48,255 8,285 399 Foreign 21,834 20,767 49,984 Total current expense 134,197 73,745 58,817 Deferred (benefit) expense: Federal (16,840) (23,390) (13,928) State (17,505) (1,413) (700) Foreign 14,442 11,571 8,575 Total deferred benefit (19,903) (13,232) (6,053) Total income tax expense $ 114,294 $ 60,513 $ 52,764 Our Malaysian subsidiary has been granted a long-term tax holiday that expires in 2027. The tax holiday, which generally provides for a full exemption from Malaysian income tax, is conditional upon our continued compliance with certain employment and investment thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday in 2027. Our Vietnamese subsidiary has been granted a long-term tax incentive that generally provides a full exemption from Vietnamese income tax through 2023, followed by reduced annual tax rates of 5% through 2032 and 10% through 2036. Such long-term tax incentive is conditional upon our continued compliance with certain revenue and R&D spending thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday. Our income tax results differed from the amount computed by applying the relevant U.S. statutory federal corporate income tax rate to our income or loss before income taxes for the following reasons for the years ended December 31, 2024, 2023, and 2022 (in thousands): 2024 2023 2022 Tax Percent Tax Percent Tax Percent Statutory income tax expense $ 295,331 21.0 % $ 187,171 21.0 % $ 1,806 21.0 % Changes in valuation allowance 22,680 1.6 % 10,873 1.2 % 22,239 258.6 % GILTI inclusion 16,174 1.2 % — — % — — % State tax, net of federal benefit 14,850 1.1 % 5,468 0.6 % 700 8.1 % Change in tax contingency 12,110 0.9 % 9 — % 4,326 50.3 % Non-deductible expenses (1) 8,373 0.6 % 20,283 2.3 % 10,776 125.3 % OECD Pillar Two global minimum tax 8,319 0.6 % — — % — — % Foreign dividend income 4,774 0.3 % 9,115 1.0 % 2,857 33.2 % Foreign tax rate differential 4,141 0.3 % 1,018 0.1 % (4,227) (49.1) % Share-based compensation (5,760) (0.4) % (11,955) (1.4) % (1,017) (11.8) % Return to provision adjustments (6,804) (0.5) % (3,972) (0.4) % (1,767) (20.5) % Tax credits (21,909) (1.6) % (9,337) (1.0) % (12,654) (147.2) % Effect of tax holiday (29,180) (2.1) % (11,501) (1.3) % 27,424 318.9 % Section 45X production credit (209,510) (14.9) % (138,546) (15.5) % — — % Other 705 — % 1,887 0.2 % 2,301 26.9 % Reported income tax expense $ 114,294 8.1 % $ 60,513 6.8 % $ 52,764 613.7 % —————————— (1) Includes, among other things, excess compensation for executive officers that is not deductible for tax purposes pursuant to Section 162(m) of the IRC. During the years ended December 31, 2024 and 2023, we made net tax payments of $94.2 million and $90.9 million, respectively. During the year ended December 31, 2022, we received net tax refunds of $3.9 million. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities calculated under U.S. GAAP and the amounts calculated for preparing our income tax returns. The items that gave rise to our deferred taxes as of December 31, 2024 and 2023 were as follows (in thousands): 2024 2023 Deferred tax assets: Long-term contracts $ 351,260 $ 211,974 Net operating losses 163,408 119,822 Capitalized research and development 110,262 53,146 Inventory 50,283 30,787 Accrued expenses 38,161 29,503 Tax credits 22,783 14,800 Compensation 12,006 16,451 Equity in earnings 4,052 4,464 Deferred expenses 1,544 1,590 Other 31,650 28,908 Deferred tax assets, gross 785,409 511,445 Valuation allowance (167,866) (149,424) Deferred tax assets, net of valuation allowance 617,543 362,021 Deferred tax liabilities: Property, plant and equipment (439,545) (234,394) Investment in foreign subsidiaries (9,799) (6,034) Acquisition accounting / basis difference (4,170) (3,964) Restricted marketable securities and derivatives (1,983) (2,087) Capitalized interest (1,357) (1,294) Other (6,577) (14,200) Deferred tax liabilities $ (463,431) $ (261,973) Net deferred tax assets $ 154,112 $ 100,048 We use the deferral method of accounting for investment tax credits under which the credits are recognized as reductions in the carrying value of the related assets. The use of the deferral method also results in a basis difference from the recognition of a deferred tax asset and an immediate income tax benefit for the future tax depreciation of the related assets. Such basis differences are accounted for pursuant to the income statement method. The following table shows changes in the valuation allowance against our deferred tax assets during the years ended December 31, 2024, 2023, and 2022 (in thousands): 2024 2023 2022 Valuation allowance, beginning of year $ 149,424 $ 135,763 $ 123,917 Additions 24,445 15,109 58,922 Reversals (6,003) (1,448) (47,076) Valuation allowance, end of year $ 167,866 $ 149,424 $ 135,763 We maintained a valuation allowance of $167.9 million and $149.4 million as of December 31, 2024 and 2023, respectively, against certain of our deferred tax assets, as it is more likely than not that such amounts will not be fully realized. During the year ended December 31, 2024, the valuation allowance increased by $18.4 million primarily due to current year operating losses in certain jurisdictions, partially offset by the partial release of the valuation allowance in jurisdictions with current year operating income. As of December 31, 2024, we had federal and aggregate state net operating loss carryforwards of $6.2 million and $143.0 million, respectively. As of December 31, 2023, we had federal and aggregate state net operating loss carryforwards of $7.6 million and $74.1 million, respectively. If not used, the federal net operating loss carryforwards incurred prior to 2018 will begin to expire in 2030, and the state net operating loss carryforwards will begin to expire in 2029. Federal net operating losses arising in tax years beginning in 2018 may be carried forward indefinitely, and the associated deduction is limited to 80% of taxable income. The utilization of our net operating loss carryforwards is also subject to an annual limitation under Section 382 of the IRC due to changes in ownership. Based on our analysis, we do not believe such limitation will impact our realization of the net operating loss carryforwards as we anticipate utilizing them prior to expiration. As of December 31, 2024, we also had U.S. foreign tax credit carryforwards of $22.8 million. If not used, these credits will begin to expire in 2034. The following table shows a reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2024, 2023, and 2022 (in thousands): 2024 2023 2022 Unrecognized tax benefits, beginning of year $ 16,723 $ 14,493 $ 7,811 Increases related to prior year tax positions 1,007 2,516 4,569 Decreases related to prior year tax positions (651) (437) — Decreases from lapse in statute of limitations — — (361) Decreases relating to settlements with authorities (4,237) (2,122) — Increases related to current tax positions 11,030 2,273 2,474 Unrecognized tax benefits, end of year $ 23,872 $ 16,723 $ 14,493 If recognized, $22.3 million of unrecognized tax benefits, excluding interest and penalties, would reduce our annual effective tax rate. Due to the uncertain and complex application of tax laws and regulations, it is possible that the ultimate resolution of uncertain tax positions may result in liabilities that could be materially different from these estimates. In such an event, we will record additional tax expense or benefit in the period in which such resolution occurs. Our policy is to recognize any interest and penalties that we may incur related to our tax positions as a component of income tax expense or benefit. During the years ended December 31, 2024, 2023, and 2022, we recognized interest and penalties of $0.3 million, $0.4 million, and $0.3 million, respectively, related to unrecognized tax benefits. We are subject to audit by federal, state, local, and foreign tax authorities. We are currently under examination in India, Chile, the United States, and the States of Georgia and Tennessee. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed by our tax examinations are not resolved in a manner consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which we operate: Tax Years Vietnam 2014 - 2023 United States 2016 - 2018; 2020 - 2023 India 2018 - 2023 Singapore 2019 - 2023 Malaysia 2020 - 2023 In certain of the jurisdictions noted above, we operate through more than one legal entity, each of which has different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, tax years are not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination. |
