INCOME TAXES

12 Months Ended

Dec. 28, 2024

INCOME TAXES

INCOME TAXES

NOTE 8  INCOME TAXES

Income (Loss) before income taxes included in the consolidated statements of operations and comprehensive income (loss)

	Year ended
	December 28,		December 30,		December 31,
U.S. dollars in millions	2024		2023		2022
Income (loss) before taxes:
U.S	$	(11)	$	(13)	$	(49)
Non-U.S		(3,152)		29		17
Total income (loss) before income taxes	$	(3,163)	$	16	$	(32)

Benefit (provision) for income taxes included in the consolidated statements of operations and comprehensive income (loss)

Benefit (provision) for income taxes for the years ended December 28, 2024, December 30, 2023, and December 31, 2022 was comprised of the following:

	Year ended
	December 28,		December 30,		December 31,
U.S. dollars in millions	2024		2023		2022
Current income taxes:
U.S	$	—	$	—	$	—
Non-U.S		(28)		(58)		(67)
Total current provision for income taxes		(28)		(58)		(67)

Deferred income taxes:
U.S.		54		(28)		(28)
Non-U.S.		47		43		45
Total deferred benefit (provision) for income taxes		101		15		17
Total benefit (provision) for income taxes	$	73	$	(43)	$	(50)

Effective income tax rate reconciliation

The difference between the tax provision at the statutory federal income tax rate and the benefit (provision) for income taxes as a percentage of loss before income taxes (effective tax rate) for each year was as follows:

	Year ended
	December 28,	December 30,	December 31,
	2024	2023	2022
	%
Statutory federal income tax rate	21.0	21.0	21.0
Increase (reduction) in rate resulting from:
Foreign rate differential	2.0	2.7	(1.2)
Technology incentives – current	0.1	(568.7)	312.7
Technology incentives – deferred	(3.1)	461.5	(230.6)
U.S. branch taxation of foreign operations	1.7	243.9	(127.3)
Changes in uncertain tax position, net	(0.2)	42.1	16.1
Share-based compensation related adjustments	—	(2.4)	(0.5)
Changes in valuation allowance	(0.3)	43.1	(151.9)
Non-deductible expenses and other	(0.1)	25.4	(6.5)
Withholding taxes, net of credit	—	—	12.1
Goodwill impairment*	(18.8)	—	—
Effective tax rate	2.3	268.6	(156.1)

*  The US tax impacts of the goodwill impairment is reflected in the U.S. branch taxation of foreign operations line item while the goodwill impairment line item reflects the Israeli tax impact.

In the fiscal years ended 2024, 2023 and 2022, certain Israeli operations are taxable in the U.S. as branch activities due to restructuring activities prior to Mobileye IPO. As a result, these operations are taxed both in the U.S. and locally in Israel. For U.S. tax purposes, due to cumulative losses, deferred tax assets have not been benefited which results in a residual tax provision associated with a deferred tax liability recorded for goodwill. Such deferred tax liability was reduced in 2024 due to goodwill impairment recorded for the Mobileye reporting unit, resulting in a tax benefit recorded in 2024.

The decrease in the effective tax rate for the year ended December 28, 2024, as compared to the year ended December 30, 2023, is mainly due to the deferred tax effects of goodwill impairment to the Mobileye reporting unit, as well as loss before income taxes compared to profit before income taxes in prior year, and an increase in unbenefited U.S. deferred tax assets subject to a valuation allowance.

In Israel, the Company benefits from a reduced tax rate under the Special Preferred Technological Enterprise status under the Law for the Encouragement of Capital Investments, 1959, or the Investment Law.

Under the Investment Law, income derived by Preferred Companies from ‘Special Preferred Technological Enterprises’ (as defined in the 2017 Amendment), would be subject to 6% tax rate on income deriving from intellectual property, subject to a number of conditions being fulfilled, including a minimal amount or ratio of annual research and development expenditures and research and development employees, as well as having at least 25% of annual income derived from exports. Special Preferred Technological Enterprise is defined as an enterprise which meets the aforementioned conditions and for which total consolidated revenue of its parent company and all subsidiaries are more than ILS 10 billion.

Deferred income taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and increase in unbenefited U.S. deferred tax assets subject to a valuation allowance.

Due to the fact that certain Israeli operations were taxable in the U.S. as branch activities, the Company recognized in the years ended December 28, 2024 and December 30, 2023 the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for U.S. income tax purposes which resulted in a net deferred tax liability after evaluation of deferred tax assets for realizability.

Significant components of the Company’s deferred tax assets and deferred tax liabilities were as follows:

	December 28,		December 30,
U.S. dollars in millions	2024		2023
Deferred tax assets:
Share-based compensation	$	119	$	105
Provisions for employee benefits		12		8
Net operating losses carryforward		147		103
Research and development expenses		631		455
Operating lease liabilities		11		12
Foreign tax credit and deferrals		5		13
Intangible assets		202		179
Other		6		15
Gross deferred tax assets		1,133		890
Valuation allowance		(1,007)		(579)
Total deferred tax assets		126		311
Deferred tax liabilities:
Intangible assets		(99)		(126)
Goodwill		(63)		(322)
Right of use assets		(10)		(11)
Other		(1)		—
Total deferred tax liabilities		(173)		(459)
Net deferred tax liabilities	$	(47)	$	(148)

Changes in valuation allowance for deferred tax assets were as follows:

	Year ended
	December 28,		December 30,		December 31,
U.S. dollars in millions	2024		2023		2022
Valuation allowance at beginning of year	$	579	$	533	$	229
Change in valuation allowance		428		46		304
Valuation allowance at end of year	$	1,007	$	579	$	533

Realization of deferred tax assets is based on the Company’s judgment and various factors including reversal of deferred tax liabilities, the ability to generate future taxable income in jurisdictions where such assets have arisen, and potential tax planning strategies. A valuation allowance is recorded in order to reduce the deferred tax assets to the amount expected to be realized in the future. The valuation allowance for the years presented are primarily related to U.S. branch deferred tax assets not currently expected to be realized given that the Company has sustained recent losses based on the separate return method.

For purposes of these financial statements, the income tax expense and deferred tax balances have been prepared as if the Company filed income tax returns on the separate return method. As of December 28, 2024, the Company has U.S. net operating loss carryforwards of $144 million, subject to separate return limitation year rules, which were generated before the Company joined its Parent’s consolidated income tax return on July 17, 2021. The Company also has $316 million of separate return method net operating loss carryforwards that were generated after joining its Parent’s consolidated income tax filing group which have been utilized by its Parent. These net operating losses generated by the Company that have been utilized as part of the Parent consolidated income tax return filings but have not been utilized by the Company under the separate return method approach, have been reflected in these consolidated financial statements because the Company will recognize a benefit for the separate return method net operating losses when determined to be realizable.

The Company has a non-U.S. net operating loss carryforward of $213 million as of December 28, 2024. This net operating loss carryforward amount relates primarily to operations in Israel and has an indefinite carry-forward period.

The Company intends to indefinitely reinvest undistributed foreign earnings into foreign operations and expects future U.S. cash generated to be sufficient to meet future U.S. cash needs. Therefore, the Company has not provided for deferred income taxes on undistributed foreign earnings. In making this determination, the Company evaluates both near-term and long-term fiscal needs of its U.S. domestic operations and its foreign subsidiaries. The estimation of the unrecognized deferred tax liability on undistributed foreign earnings is not practicable for the consolidated balance sheets dates presented.

Uncertain tax positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions was as follows:

	Year ended
	December 28,		December 30,		December 31,
U.S. dollars in millions	2024		2023		2022
Balance at the beginning of the year	$	7	$	—	$	4
Changes in balances related to tax positions taken during current period		6		7		—
Settlements with taxing authorities		—		—		—
Lapse of statute of limitations		—		—		(4)
Balance at the end of the year	$	13	$	7	$	—

If the remaining balance of unrecognized tax benefits were recognized in a future period, it would result in a tax benefit of $13 million as of December 28, 2024. The balance of uncertain tax positions, which also includes accrued penalties and interest, is included in other long-term liabilities on the consolidated balance sheets. There are no material changes anticipated in the uncertain tax positions in the next twelve months.

The Company files income tax returns in the U.S., Israel, and in other certain foreign jurisdictions. The Company is no longer subject to U.S. and Israeli tax examinations for years prior to 2021 and 2020, respectively.