Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes [Abstract]

Income Taxes

Note 5 – Income Taxes

Changes in Tax Laws and Regulations

United States

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted in the United States.  Under previous law, companies could indefinitely defer U.S. income taxation on unremitted foreign earnings. The TCJA imposed a one-time transition tax on deferred foreign earnings, payable in defined increments over eight years.  Installments of $37,622 were paid in 2024, $27,670 were paid in 2023, and $14,757 in each of 2022, 2021, 2020, 2019, and 2018. The Company expects to pay the final installment payment of $47,027 in 2025.

The U.S. Internal Revenue Service continues to issue regulations to address the provisions of the TCJA.  The Company has elected to account for Global Intangible Low-Taxed Income ("GILTI") tax in the period in which it is incurred and, therefore, does not provide any deferred taxes in the consolidated financial statements at December 31, 2024, 2023, or 2022.

Changes in Indefinite Reversal Assertion

The Company made the determination during the fourth fiscal quarter of 2021 that substantially all unremitted foreign earnings in Israel were no longer indefinitely reinvested.  The Company repatriated $81,243 to the United States in 2022 pursuant to this repatriation program.  The Company paid withholding taxes, foreign taxes, and Israeli clawback taxes of $25,201 due to the repatriation.

The Company made the determination during the fourth fiscal quarter of 2022 that substantially all unremitted earnings in Germany were no longer indefinitely reinvested.  Additional tax expense was recorded during the fourth fiscal quarter of 2022 to accrue the $59,642 of withholding taxes necessary to distribute these approximately $360,000 of accumulated earnings to the United States.

These changes in this indefinite reinvestment assertion provide greater access to the Company's worldwide cash balances to fund its growth plan and its Stockholder Return Policy.  While the change in assertion provides access to these balances, these amounts will be repatriated only as needed.  The withholding taxes associated with any distribution to the United States is payable upon distribution.  During the fourth fiscal quarter of 2023, the Company repatriated $325,000 of accumulated earnings to the United States and paid withholding taxes, in Germany and Israel, of $63,600. The Company repatriated $120,000 of accumulated earnings to the United States in the second fiscal quarter of 2024 and paid withholding taxes, in Israel, of $15,000.

At December 31, 2024, approximately $204,407 of German earnings and approximately $310,945 of Israeli earnings are deemed not indefinitely reinvested.  The aggregate tax liability recorded for unremitted earnings at December 31, 2024 is approximately $77,000, which includes amounts accrued subsequent to the changes in indefinite reinvestment determinations described above.

There are amounts of unremitted foreign earnings in countries other than Israel and Germany, which continue to be reinvested indefinitely, and the Company has made no provision for incremental foreign income taxes and withholding taxes payable to foreign jurisdictions related to these amounts.  Determination of the amount of the unrecognized deferred foreign tax liability for these amounts is not practicable because of the complexities associated with its hypothetical calculation.

Income before taxes consists of the following components:

	Years ended December 31,
	2024				2023			2022
Domestic		$	(172,519	)		$	67,938		$	132,426
Foreign			170,130				399,464			461,079
		$	(2,389	)		$	467,402		$	593,505

Significant components of income taxes are as follows:

	Years ended December 31,
	2024			2023			2022
Current:
Federal	$	1,936		$	14,594		$	24,423
State and local		407			1,769			3,313
Foreign		63,537			152,343			121,810
		65,880			168,706			149,546
Deferred:
Federal		(24,492	)		(4,871	)		(40,136	)
State and local		(788	)		(3,651	)		532
Foreign		(13,234	)		(18,295	)		53,080
		(38,514	)		(26,817	)		13,476
Total income tax expense	$	27,366		$	141,889		$	163,022

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2024			2023
Deferred tax assets:
Pension and other retiree obligations	$	27,779		$	29,400
Inventories		26,004			23,836
Net operating loss carryforwards		74,244			81,497
Tax credit carryforwards		67,192			54,363
Research and development costs		25,582			17,829
Interest		23,886			20,039
Other accruals and reserves		36,232			25,179
Total gross deferred tax assets		280,919			252,143
Less valuation allowance		(92,876	)		(99,663	)
		188,043			152,480
Deferred tax liabilities:
Property and equipment		(20,032	)		(9,429	)
Tax deductible goodwill		(7,889	)		(7,040	)
Intangibles other than goodwill		(8,937	)		(6,327	)
Earnings not indefinitely reinvested		(78,977	)		(88,004	)
Other - net		(8,802	)		(62	)
Total gross deferred tax liabilities		(124,637	)		(110,862	)
Net deferred tax assets	$	63,406		$	41,618

The Company makes significant judgments regarding the realizability of its deferred tax assets (principally net operating losses and tax credits). The carrying value of deferred tax assets is based on the Company’s assessment that it is more likely than not that the Company will realize these assets after consideration of all available positive and negative evidence.  

A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax provision is as follows:

	Years ended December 31,
	2024			2023			2022
Tax at statutory rate	$	(502	)	$	98,154		$	124,636
State income taxes, net of U.S. federal tax benefit		(301	)		(1,487	)		3,038
Effect of foreign operations		(962	)		9,260			13,422
Impairment of goodwill		13,962			-			-
Tax on earnings not indefinitely reinvested		9,016			37,061			71,141
Change in valuation allowance on deferred tax assets		-			(1,770	)		(58,696	)
Foreign income taxable in the U.S.		16,571			11,829			14,925
Foreign tax credit		(11,506	)		(29,997	)		(20,408	)
U.S. Base Erosion Anti-Abuse Tax		1,063			16,837			20,918
Other		25			2,002			(5,954	)
Total income tax expense	$	27,366		$	141,889		$	163,022

Vishay operates in a global environment with significant operations in various locations outside the United States.  Accordingly, the consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various locations where we operate.  Part of Vishay's historical strategy has been to achieve cost savings through the transfer and expansion of manufacturing operations to countries where it can take advantage of lower labor costs.  With the reduction in the U.S. statutory rate to 21% beginning January 1, 2018, Vishay expects that its effective tax rate will be higher than the U.S. statutory rate, excluding unusual transactions. 

Income tax expense for the year ended December 31, 2022 includes certain discrete tax items for changes in uncertain tax positions, valuation allowances, tax rates, and other related items. These items total $20,032 in 2022.  There were no unusual tax items for the years ended December 31, 2024 and 2023.

For the year ended December 31, 2022, the discrete items include tax expense of $59,642 due to the Company's change in its assertion that earnings of its subsidiaries in Germany are indefinitely reinvested, tax benefits of $5,941 for changes in uncertain tax positions following the resolution of a tax audit and a  $33,669 tax benefit recognized upon the release of a valuation allowance.

At December 31, 2024, the Company had the following significant net operating loss carryforwards for tax purposes:

			Expires
Belgium	$	144,966	No expiration
Israel		3,576	No expiration
Italy		8,356	No expiration
Japan		3,592		2025 - 2033
Netherlands		9,452	No expiration
The Republic of China (Taiwan)		7,676		2027 - 2028
United Kingdom		76,940	No expiration
California		15,841		2028 - 2037
Pennsylvania		497,048		2025 - 2044
Arizona		15,999		2032 - 2044

At December 31, 2024, the Company had the following significant tax credit carryforwards available:

			Expires
U.S. Foreign Tax Credit	$	42,425		2028 - 2034
California Research Credit		22,822	No expiration

Net income taxes paid were $136,784, $224,232, and $134,199 for the years ended December 31, 2024, 2023, and 2022, respectively.  Net income taxes paid for the years ended December 31, 2024 and 2023 include withholding taxes for repatriation activity.  Net income taxes paid for the years ended December 31, 2024, 2023, and 2022 also includes $37,622, $27,670, and $14,757, respectively, for the TCJA transition tax.

The following table summarizes changes in the liabilities associated with unrecognized tax benefits:

	Years ended December 31,
	2024			2023			2022
Balance at beginning of year	$	12,857		$	18,429		$	26,719
Addition based on tax positions related to the current year		922			1,210			-
Addition based on tax positions related to prior years		19,905			5,455			3,197
Currency translation adjustments		(185	)		230			(366	)
Reduction for settlements		-			(10,000	)		(9,420	)
Reduction for lapses of statute of limitation		(999	)		(2,467	)		(1,701	)
Balance at end of year	$	32,500		$	12,857		$	18,429

In 2024, the Company recorded a deferred tax asset and offsetting liability for unrecognized tax benefits related to an acquired net operating loss carryover.

All of the unrecognized tax benefits of $32,500 and $12,857, as of December 31, 2024 and 2023, respectively, would reduce the effective tax rate if recognized.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2024 and 2023, the Company had accrued interest and penalties related to the unrecognized tax benefits of $1,564 and $1,947, respectively. During the years ended December 31, 2024, 2023, and 2022, the Company recognized $303, $821, and $376, respectively, in interest and penalties. 

The Company and its subsidiaries file U.S. federal income tax returns, as well as tax returns in multiple states and foreign jurisdictions.  During the years ended December 31, 2024, 2023, and 2022, certain tax examinations were concluded and certain statutes of limitations lapsed.  The tax provision for those years includes adjustments related to the resolution of these matters, as reflected in the table above.  During 2023, the Company settled an examination of its U.S. federal income tax returns for the years ended December 31, 2017 through 2019.  The federal income tax returns for the years 2021 through 2023 remain subject to examination.  The tax returns of significant non-U.S. subsidiaries currently under examination are located in the following jurisdictions: Israel (2021), Germany (2017 through 2021), India (2004 through 2021), and Philippines (2017 through 2023).  The Company and its subsidiaries also file income tax returns in other taxing jurisdictions in the U.S. and around the world, many of which are still open to examination.

The timing of the resolution of income tax examinations is highly uncertain, as are the amounts and timing of tax payments that result from such examinations.  These events could cause large fluctuations in the balance sheet classification of current and non-current unrecognized tax benefits.  The Company believes that in the next 12 months it is reasonably possible that certain income tax examinations will conclude or the statutes of limitation on certain income tax periods open to examination will expire, or both.  Given the uncertainties described above, the Company can only determine an estimate of potential decreases in unrecognized tax benefits ranging from $8,634 to $8,744.