INCOME TAXES

12 Months Ended

Oct. 31, 2022

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 11 - INCOME TAXES

Income before the income tax provisions consists of the following:

	Year Ended
	October 31, 2022		October 31, 2021			October 31, 2020
United States	$	1,813	$	(19,447	)	$	(10,672	)
Foreign		237,220		121,453			72,273
	$	239,033	$	102,006		$	61,601

Income Tax Provision

The components of our income tax provisions are presented below.

	Year Ended
	October 31, 2022		October 31, 2021			October 31, 2020
Current:
Federal	$	-	$	-		$	-
State		1		4			4
Foreign		58,981		25,296			21,698
		58,982		25,300			21,702
Deferred:
Federal		-		-			-
State		10		103			8
Foreign		799		(2,213	)		(452	)
		809		(2,110	)		(444	)
Total	$	59,791	$	23,190		$	21,258

The table below presents a reconciliation of income taxes calculated by applying the statutory U.S. federal income tax rate to our income tax provisions of the reporting periods.

	Year Ended
	October 31, 2022			October 31, 2021			October 31, 2020
U.S. federal income tax at statutory rate	$	50,197		$	21,421		$	12,936
Changes in valuation allowances		(1,462	)		364			6,942
Foreign tax rate differentials		7,941			3,244			1,718
Tax credits		(1,368	)		(3,942	)		(1,562	)
Uncertain tax positions, including reserves, settlements and resolutions		3,214			1,037			1,637
Income tax holiday		-			-			(318	)
Other, net		1,269			1,066			(95	)
Income tax provision	$	59,791		$	23,190		$	21,258

Reporting Period	U.S. Statutory Tax Rates			Photronics Effective Tax Rates			Primary Reasons for Differences
2022		21.0	%		25.0	%	Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions; and the establishment of uncertain tax positions in non-U.S. jurisdiction.
2021		21.0	%		22.7	%	Loss jurisdiction pre-tax losses not being benefited due to valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and investment credits in foreign jurisdictions.
2020		21.0	%		34.5	%	Loss jurisdiction pre-tax losses not being benefited due to valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions (partially offset by the benefits of a tax holiday), and investment credits in foreign jurisdictions.

Deferred Income Tax Assets and Liabilities

The net deferred income tax assets consist of the following:

	As of
	October 31, 2022			October 31, 2021
Deferred income tax assets
Net operating losses	$	29,410		$	31,657
Reserves not currently deductible		8,528			8,201
Tax credit carryforwards		9,660			9,877
Share-based compensation		1,560			1,500
Property, plant and equipment		6,591			7,566
Lease liabilities		7,367			9,134
Other		-			157
		63,116			68,092
Valuation allowances		(32,895	)		(34,337	)
		30,221			33,755
Deferred income tax liabilities
ROU assets		(8,930	)		(9,698	)
Other		(1,722	)		-
		(10,652	)		(9,698	)
Net deferred income tax assets	$	19,569		$	24,057
Classification
Deferred income tax assets	$	19,816		$	24,353
Other liabilities		(247	)		(296	)
	$	19,569		$	24,057

We have established a valuation allowance for a portion of our deferred tax assets because we believe, based on the weight of all available evidence, that it is more likely than not that a portion of our deferred tax assets will expire prior to utilization. In 2022 the valuation allowance decreased as a result of management’s determination that tax benefits on deferred tax assets would more likely than not be realized and, therefore, decreased the valuation allowance to include these deferred tax assets.

Due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, as of fiscal year end 2018, U.S. deferred taxes were no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. Therefore, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and foreign withholding tax expense on those earnings, the amount of which is not practicable to compute.

Tax Credits and Carryforwards

The following tables present our available operating loss and credit carryforwards as of October 31, 2022, and their related expiration periods.

Operating Loss Carryforwards	Amount		Expiration Period
Federal	$	95,822	2029-Indefinite
State	$	170,198		2023-Indefinite
Foreign	$	107		2024-2032

Tax Credit Carryforwards	Amount		Expiration Period
Federal research and development	$	5,576		2024-2042
State	$	5,169		2023-2036

Uncertain Tax Positions

We include unrecognized tax benefits in Other liabilities, and we include any applicable interest and penalties related to uncertain tax positions in our income tax provision.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented below. The amounts in the table include settlements of non-U.S. audits.

	Year Ended
	October 31, 2022			October 31, 2021			October 31, 2020
Balance at beginning of year before interest and penalties	$	3,534		$	2,550		$	1,758
(Reductions) additions of tax positions in prior years		(355	)		181			227
Additions based on current year tax positions		2,892			1,313			1,576
Settlements		(848	)		(489	)		(992	)
Lapses of statutes of limitations		(19	)		(21	)		(19	)
Balance at end of year before interest and penalties		5,204			3,534			2,550
Interest and penalties		395			223			131
Balance at end of year including interest and penalties	$	5,599		$	3,757		$	2,681

The following table presents additional information on our uncertain tax positions, as of the balance sheet dates.

	October 31, 2022		October 31, 2021
Unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	5,599	$	3,757
Accrued interest and penalties related to uncertain tax positions	$	395	$	223

Although the timing of the reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits or expirations of statutes of limitations, the Company believes that the amount of uncertain tax positions (including accrued interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is $0.4 million. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2017.

Income Tax Payments and Refunds

The table below presents income taxes paid and refunds of income taxes received during the reporting periods.

	Year Ended
	October 31, 2022		October 31, 2021		October 31, 2020
Income taxes paid	$	37,770	$	22,684	$	22,954
Income tax refunds received	$	388	$	713	$	4,258