TAXES

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

TAXES

TAXES

For interim financial statement purposes, U.S. GAAP provision (benefit) for taxes related to ordinary income is determined by applying an estimated annual effective income tax rate against a company’s ordinary income, subject to certain limitations on the benefit of losses. Provision (benefit) for taxes related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company’s income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company’s estimated annual effective income tax rate may be revised, if necessary, in each interim period.

The worldwide effective income tax rates for the fiscal six months ended June 30, 2024 and July 2, 2023 were 3.37% and 4.41%, respectively. The decrease for the six months ended June 30, 2024 as compared to the six months ended July 2, 2023 primarily relates to the Company’s valuation allowance impacts against pre-tax losses prior to the Spin-off.

As discussed in Note 1 — Organization And Description Of Business and Note 2 — Summary Of Significant Accounting Policies — Basis of Presentation, prior to June 30, 2024, for tax purposes, the Company operated as a subsidiary of Illumina and not as a separately regarded taxable entity. Accordingly, the effective worldwide income tax rate for the six months ended July 2, 2023 was calculated using the separate return method as if the Company filed income tax returns on both a standalone basis and on a carve-out basis.

During the period that Illumina held the Company, the Company’s activity generated various tax attributes recognized as deferred tax assets (“DTAs”), due primarily to the generation of NOLs, IRC 174 capitalized research and experimental expenditures, and research and development (“R&D”) tax credits that could not be specifically utilized by the Company as it did not yet generate positive taxable income and it was not a separately regarded tax paying entity from Illumina. Because the Company was not a separately regarded taxable entity from Illumina, these tax attributes were either utilized by or will be utilized by Illumina when filing its consolidated tax return; therefore, the tax attributes were only presented in the Company’s stand-alone financial statements to allow the users to understand the financial position of the Company as a stand-alone taxable entity under the Separate-Return Method. The total tax-effected value of the tax attributes, net of FIN48 liabilities and valuation allowance that were deemed to be the property of Illumina, was $447.2 million. In connection with the Spin-off, the underlying $447.2 million of tax attributes were adjusted through an entry of $447.2 million to additional paid in capital.