XML 38 R21.htm IDEA: XBRL DOCUMENT v3.25.2
Income Taxes
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
    The domestic and foreign components of income before taxes are:

 Year Ended June 30, 
 202520242023
(in thousands)
U.S. operations$8,229 $9,079 $19,001 
Non-U.S. operations(36,025)(11,722)711 
Net income (loss) before income taxes
$(27,796)$(2,643)$19,712 

    The provision for income taxes is comprised of:
Year Ended June 30, 
202520242023
(in thousands)
U.S. federal taxes:
Current$721 $485 $1,093 
Deferred190 1,652 549 
Non-U.S. taxes:
Current3,972 3,187 4,620 
Deferred(13,502)(1,669)(404)
State taxes, net of federal benefit:
Current(6)(6)79 
Total provision (benefit) for income taxes$(8,625)$3,649 $5,937 
The reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows (in percentage):

 Year Ended June 30,
 202520242023
United States statutory rate21.0 %21.0 %21.0 %
Stock-based compensation(0.3)(3.7)0.2 
Foreign taxes, net(38.9)(186.9)13.5 
Outside basis difference on equity method investment45.1 27.4 (1)
Tax credits 7.7 86.2 (13.3)
Non-deductible expenses(1.0)(6.9)1.5 
Tax exempt income— 2.8 (1.5)
Withholding taxes— — 9.0 
Non-deductible executive compensation(6.0)(78.6)7.3 
Foreign derived intangible income deduction2.0 0.0 (7.2)
Other1.4 0.6 0.6 
 31.0 %(138.1)%30.1 %
    
As shown in the above effective tax rate analysis, the Company’s effective tax rate was 31.0%, (138.1)%, and 30.1% for fiscal year 2025, 2024 and 2023, respectively. The primary reason for the large percentage differences in the overall effective tax rate reconciliation between the fiscal 2024 year and fiscal 2025 year as well as between the fiscal 2024 year and fiscal 2023 year is mainly due to the smaller amount of pretax book loss of $2.6 million as the denominator in the calculation of effective tax rate reconciliation in fiscal 2024, as compared to the larger amount of pretax book loss of $27.8 million in fiscal 2025 as the
denominator as well as the pretax book income of $19.7 million in fiscal 2023 as the denominator in calculating the effective tax rates for these two years.

When comparing the effective tax rate impact on the differences in pretax book loss between fiscal 2025 versus fiscal 2024, the net value of the fiscal 2025 loss is approximately 10.5 times higher than the pretax book loss in fiscal 2024. Therefore, the percentage impact on the effective tax rate in fiscal 2025 is approximately 10.5 times higher than in fiscal 2024, simply due to the large variance in pretax book loss between the two years. The impact of the pretax book loss denominator effect also fully explains the differences in the effective tax rate differences between the fiscal 2025 and 2024 years for tax credits and non-deductible executive compensation expense. The differences between “Foreign Taxes, net” is a result of changes in the mix of earnings in various geographic jurisdictions between fiscal 2025 and fiscal 2024. The differences concerning “Outside Basis Differences on Equity Method Investment” between the two years is a result of the larger amount of equity method loss in fiscal 2025 in comparison with that of fiscal 2024.
    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 used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:
 June 30, 
 20252024
(in thousands)
Deferred tax assets:
Accrued compensation$2,327 $2,188 
Net operating loss carryforwards— — 
Depreciation7,210 6,286 
Tax credits16,957 16,161 
Operating lease liabilities3,953 4,574 
Capitalized R&D costs1,302 1,398 
Accruals and reserves434 445 
Total deferred tax assets32,183 31,052 
Valuation allowance(8,751)(7,266)
Total deferred tax assets, net of valuation allowance23,432 23,786 
Deferred tax liabilities:
Depreciation and amortization(18,538)(19,062)
Right of use assets(3,724)(4,328)
Investments(13,763)(26,263)
Total deferred tax liabilities(36,025)(49,653)
Net deferred tax liabilities
$(12,593)$(25,867)
The breakdown between deferred tax assets and liabilities is as follows:
 June 30, 
 20252024
(in thousands)
Deferred tax assets$599 $549 
Deferred tax liabilities(13,192)(26,416)
Net deferred tax liabilities$(12,593)$(25,867)

The Company’s valuation allowance related to deferred income taxes as reflected in the consolidated balance sheets was $8.8 million and $7.3 million as of June 30, 2025 and 2024, respectively. The change in valuation allowance for June 30, 2025 and 2024 was an increase of $1.5 million and an increase of $0.6 million, respectively.
At June 30, 2025 and 2024, the Company provided a valuation allowance for its state research and development credit carryforward deferred tax assets of $8.8 million and $7.3 million, respectively, as it generated more state tax credits each year than it can utilize. The Company intends to maintain a valuation allowance equal to the state research and development credit carryforwards in excess of the state net deferred tax liabilities on all other state book and tax differences and net operating loss carryforward.

At June 30, 2025, the Company had federal research and development tax credit carryforwards of approximately $8.1 million. The federal tax credits begin to expire in 2042, if not utilized.  At June 30, 2025, the Company had state tax credit carryforwards of approximately $11.1 million, of which $9.9 million carryforward indefinitely, $0.9 million have a 10 to 15 year life (beginning to expire in 2033) and $0.3 million with a 20 year life, (beginning to expire in 2038).

The Company intends to reinvest the undistributed earnings of its foreign subsidiaries indefinitely, except for Alpha and Omega Semiconductor (Cayman) Ltd. and AOS International LP. As of June 30, 2025, Alpha and Omega Semiconductor (Cayman) and AOS International LP have a cumulative loss. As of June 30, 2025, the cumulative amount of undistributed earnings of its foreign entities considered permanently reinvested is $433.5 million. Should the Company decide to remit this income to its Bermuda parent company in a future period, its provision for income taxes may increase materially in that period. The determination of the unrecognized deferred tax liability on these earnings is not practicable due to the complexity and variety of assumptions necessary to estimate the tax. As of June 30, 2025, the Company has recorded a deferred tax liability of $13.8 million for the basis difference related to our investment in the JV Company.
A reconciliation of the beginning and ending amount of unrecognized tax benefits from July 1, 2022 to June 30, 2025 is as follows:
 Year Ended June 30, 
 202520242023
(in thousands)
Balance at beginning of year$10,088 $9,335 $8,609 
Additions based on tax positions related to the current year826 764 804 
Reductions based on tax positions related to prior years(5)(11)(68)
Reductions due to lapse of applicable statute of limitations(167)— (10)
Balance at end of year$10,742 $10,088 $9,335 
At June 30, 2025, the total unrecognized tax benefits of $10.7 million included $7.3 million of unrecognized tax benefits that have been netted against the related deferred tax assets. The remaining $3.4 million of unrecognized tax benefits was recorded within long-term income tax payable on the Company's consolidated balance sheet as of June 30, 2025. The Company cannot reasonably estimate the timing and amount of potential cash settlements on the unrecognized tax benefits.

The total unrecognized tax benefits of $10.7 million at June 30, 2025 included $7.4 million that, if recognized, would reduce the effective income tax rate in future periods. It is reasonably possible that the Company will recognize approximately $0.2 million reduction to its uncertain tax positions during the next twelve months due to a lapse in the applicable statute of limitations.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The amount of interest and penalties accrued at June 30, 2025 was $0.8 million, of which $0.2 million was recognized in the year ended June 30, 2025. The amount of interest and penalties accrued at June 30, 2024 was $0.5 million, of which $0.2 million was recognized in the year ended June 30, 2024.

The Company files its income tax returns in the United States and in various foreign jurisdictions. The tax years 2004 to 2025 remain open to examination by U.S. federal and state tax authorities due to tax attribute carryovers. The tax years 2019 to 2025 remain open to examination by foreign tax authorities.

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If
events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.

One Big Beautiful Bill Act, Enacted July 4, 2025

On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. This includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. The key provisions include allowing immediate expensing of domestic research and experimental expenditures, new limitations on interest expense deductibility, reinstatement of 100% bonus depreciation for qualified assets placed in service in the United States after January 19, 2025 as well as changes to the calculation of taxable income resulting from the foreign derived intangible income deduction. ASC 740 Income Taxes requires the effects of changes in tax rates and laws to be recognized in the period in which the relevant legislation is enacted. The OBBB was enacted after the June 30, 2025 year end. As of June 30, 2025, we are continuing to assess the potential impact of the OBBB.