INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

20.INCOME TAXES:

The components of income before income taxes are as follows (in thousands):

	Year ended December 31,
	2022		2021		2020
United States	$	77,205	$	60,066	$	38,839
Foreign		191,025		168,181		124,690
Income before income taxes	$	268,230	$	228,247	$	163,529

The components of the income tax expense are as follows (in thousands):

	Year ended December 31,
	2022			2021			2020
Current income tax (expense) benefit:
Federal	$	(51,980	)	$	(16,433	)	$	(14,773	)
State		(1,833	)		(641	)		(568	)
Foreign		(31,302	)		(25,212	)		(19,262	)
		(85,115	)		(42,286	)		(34,603	)
Deferred income tax (expense) benefit:
Federal		25,916			(844	)		4,883
State		1,216			(734	)		(34	)
Foreign		(186	)		(170	)		(403	)
		26,946			(1,748	)		4,446
Income tax expense	$	(58,169	)	$	(44,034	)	$	(30,157	)

Reconciliation of the statutory U.S. federal tax rate to the Company's effective tax rate is as follows:

	Year ended December 31,
	2022			2021			2020
Statutory U.S. federal income tax rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal benefit		0.1			0.2			0.2
Effect of foreign operations		(4.9	)		(5.0	)		(5.2	)
Accruals and reserves		—			(0.8	)		(1.0	)
Nondeductible employee compensation		1.9			3.0			2.6
Research tax credits		(1.9	)		(1.4	)		(1.8	)
Stock based compensation		0.2			(0.3	)		(0.9	)
U.S. International Tax (Sub F, GILTI, FDII)		4.2			2.1			3.5
Other		1.1			0.5			—
Effective tax rate		21.7	%		19.3	%		18.4	%

The following table summarizes Company tax credit carry forwards for tax return purposes as of December 31, 2022 (in thousands):

	Tax Benefit		Expiration Date
Tax credit carry forwards:
State research tax credits	$	8,100	2029-2037
Total credit carry forwards	$	8,100

Significant components of the Company's net deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2022			2021
Deferred tax asset:
Capitalized research expenditures	$	38,485		$	3,150
Retirement plan		13,495			14,560
Tax credit carry forwards		8,100			6,156
Lease Liabilities		7,230			5,360
Accruals and reserves		6,944			4,733
Deferred revenue		2,077			11,361
Stock-based compensation		1,454			1,110
Other		3,400			1,020
		81,185			47,450
Valuation allowance		(11,087	)		(5,911	)
Deferred tax assets		70,098			41,539
Deferred tax liability:
Accruals and reserves		(11,937	)		(8,086	)
Deferred tax liabilities		(11,937	)		(8,086	)
Net deferred tax assets	$	58,161		$	33,453

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. At this time there is no evidence to release the valuation allowance that has been recorded for the New Jersey research and development credit and unrealized loss on investments.

The U.S.-Korean Mutual Agreement Procedure (MAP) for the years ended December 31, 2010 to December 31, 2017 was closed in September 2022, resulting in a refund of the Korean withholding taxes previously withheld. The Company will amend the U.S. federal tax returns to reflect the refund and to redetermine the foreign tax credit amount. In November 2022, the Company prepaid $18.8 million to the IRS under Rev. Proc. 2005-18 to offset the tax payable amount. As a result, the Company has recorded a long-term asset of $3.0 million and $36.9 million and a long-term payable of none and $16.2 million for the years ended December 31, 2022 and December 31, 2021, respectively, for the estimated amounts due to the U.S. federal government. The Company also recorded a reduction of deferred tax assets for foreign tax credits and research and development credits of $20.7 million on the December 31, 2022 and December 31, 2021 Consolidated Balance Sheets.

On December 27, 2018, regarding the withholding taxes for the years 2018 to 2022, the Korean Supreme Court, citing prior cases, held that only royalties paid with respect to Korean registered patents are considered Korean source income and subject to Korean withholding tax under the applicable law and interpretation of the Korea-U.S. Tax Treaty. The Company has incurred Korean withholding tax of $14.9 million for the years ended December 31, 2018 to December 31, 2022. Based on the Korean Supreme Court decision, a tax refund request on behalf of the Company was filed during October 2021 with the Korean National Tax Service (KNTS) for over-withheld taxes from January 1, 2018 to the second quarter of 2021. The Company has since been advised by a prominent Korean law firm that there is a more-likely-than-not chance of success. The Company has also filed an administrative hearing request with the Korean Tax Tribunal in order to expedite the refund process and the case remains pending. The Company plans to file a refund request for over-withheld taxes from the third quarter of 2021 to December 31, 2022.

The Company will also amend U.S. federal tax returns for the 2018 to 2020 years when the anticipated refund from KNTS is received to offset the additional tax liability and to redetermine the research and development credit utilization. In November 2022, the Company prepaid $16.0 million to the IRS under Rev. Proc. 2005-18 that relates to the anticipated tax payable. As a result, the Company has recorded a long-term asset of $60.9 million and $53.2 million for the years ended December 31, 2022 and December 31, 2021, respectively. Also, as of December 31, 2022 and December 31, 2021, the Company recorded a long-term liability of $14.6 million and $31.6 million, respectively, for the estimated amounts due to the U.S. federal government based on the amendment of the Company's U.S. tax returns indicating that lower withholding amounts were required.

On October 30, 2018, the KNTS concluded a tax audit with LG Display that pertained to the licensing and royalty payments made to UDC Ireland during the years 2015 through 2017. The KNTS questioned whether UDC Ireland was the beneficial owner of these payments and assessed UDC Ireland a charge of $13.2 million for withholding taxes and interest for the three-year period. UDC Ireland engaged a prominent Korean law firm which believed it was more-likely-than-not that UDC Ireland had beneficial ownership of the

underlying intellectual property. Based on this authority, UDC Ireland paid the assessment which was recorded as a long-term asset as of December 31, 2021. In September 2020, the Korean District Court ruled in favor of UDC Ireland on the beneficial ownership issue and the ruling was affirmed by the Korean High Court in August 2021, upon which the KNTS appealed the ruling to the Korean Supreme Court. On January 13, 2022, the Korean Supreme Court dismissed the appeal from the KNTS which resulted in UDC Ireland recovering the charge of $13.2 million for withholding taxes plus interest for the three-year period in February 2022.

The Company is not subject to examinations by the U.S. federal tax authority for the years prior to 2010. The Company's state and foreign tax returns are open for a period of generally three to four years. The Company is currently under a California state tax audit for the years 2019 and 2020, which is in the information-collecting stage.

The above estimates may change in the future and upon settlement.