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Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income before provision for income taxes
Cadence’s income before provision for income taxes included income from the United States and from foreign subsidiaries for fiscal 2022, 2021 and 2020, was as follows:
202220212020
(In thousands)
United States$402,083 $376,037 $256,032 
Foreign subsidiaries643,280 392,398 376,716 
Total income before provision for income taxes$1,045,363 $768,435 $632,748 
Components of income taxes provision
Cadence’s provision for income taxes was comprised of the following items for fiscal 2022, 2021 and 2020:
202220212020
(In thousands)
Current:
Federal$212,380 $19,957 $15,083 
State and local7,280 25,246 6,401 
Foreign84,357 70,455 46,737 
Total current304,017 115,658 68,221 
Deferred:
Federal(79,170)(16,415)(11,155)
State and local(50,640)(30,406)(24,186)
Foreign22,204 3,643 9,224 
Total deferred(107,606)(43,178)(26,117)
Total provision for income taxes$196,411 $72,480 $42,104 
Summary of income tax reconciliation
The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rates of 21% to income before provision for income taxes for fiscal 2022, 2021, and 2020 as follows:
202220212020
(In thousands)
Provision computed at federal statutory income tax rate$219,526 $161,880 $132,877 
State and local income tax, net of federal tax effect29,622 24,640 20,936 
Foreign income tax rate differential(49,949)(26,887)(32,589)
Foreign-derived intangible income deduction(2,335)(22,050)(3,762)
U.S. tax on foreign entities132,563 51,112 43,615 
Stock-based compensation(17,023)(55,091)(51,226)
Change in deferred tax asset valuation allowance(38,073)(8,262)(9,101)
Tax credits(105,366)(90,054)(89,684)
Non-deductible research and development expense— 4,443 5,163 
Withholding taxes17,459 23,495 17,189 
Other9,987 9,254 8,686 
Provision for income taxes$196,411 $72,480 $42,104 
Effective tax rate19 %9 %7 %
Components of deferred tax assets and liabilities
The components of deferred tax assets and liabilities consisted of the following as of December 31, 2022 and January 1, 2022:
As of
December 31,
2022		January 1,
2022
(In thousands)
Deferred tax assets:
Tax credit carryforwards$142,374 $147,248 
Reserves and accruals75,543 72,287 
Intangible assets538,424 568,199 
Capitalized research and development expense for income tax purposes149,625 34,467 
Operating loss carryforwards11,081 6,630 
Deferred income64,897 42,753 
Capital loss carryforwards16,777 16,957 
Stock-based compensation costs22,830 17,690 
Depreciation and amortization9,176 5,005 
Investments9,016 6,833 
Lease liability37,758 27,362 
Prepaid expenses14,699 53,893 
Total deferred tax assets1,092,200 999,324 
Valuation allowance(70,085)(108,158)
Net deferred tax assets1,022,115 891,166 
Deferred tax liabilities:
Intangible assets(82,971)(55,178)
Undistributed foreign earnings(51,394)(45,460)
ROU assets(37,758)(27,362)
Other(11,060)(8,528)
Total deferred tax liabilities(183,183)(136,528)
Total net deferred tax assets$838,932 $754,638 
Summary of operating loss carryforward As of December 31, 2022, Cadence’s operating loss carryforwards were as follows:
AmountExpiration Periods
(In thousands)
Federal$297 from 2027 through 2033
California30,603 from 2025 through 2041
Other states (tax effected, net of federal benefit)1,462 from 2023 through indefinite
Foreign (tax effected)6,394 indefinite
Summary of tax credit carryforwards
As of December 31, 2022, Cadence had tax credit carryforwards of:
AmountExpiration Periods
(In thousands)
Federal*$39,055 from 2031 through 2032
California51,190 indefinite
Other states 11,465 from 2028 through indefinite
Foreign 41,634 from 2040 through indefinite
_____________
*Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.
Earliest tax years open to examination by jurisdiction As of December 31, 2022, Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:
JurisdictionEarliest Tax Year Open to Examination
United States – Federal2017
United States – California2018
Ireland2018
Israel2017
Korea2019
Unrecognized tax benefits roll forward
The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2022, 2021 and 2020 are as follows:
202220212020
(In thousands)
Unrecognized tax benefits at the beginning of the fiscal year$130,530 $113,021 $106,041 
Gross amount of the increases in unrecognized tax benefits of tax positions taken during a prior year*2,152 15,414 5,037 
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year2,660 5,100 3,344 
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes— (270)(1,316)
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations(7,430)(2,778)(676)
Effect of foreign currency translation(1,839)43 591 
Unrecognized tax benefits at the end of the fiscal year$126,073 $130,530 $113,021 
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate$121,415 $79,654 $66,010 
_____________
* Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions
Interest and penalties recognized in consolidated income statements and balance sheets
The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision for income taxes for fiscal 2022, 2021 and 2020 were as follows:
202220212020
(In thousands)
Interest$434 $1,171 $473 
Penalties7 (11)(3)
The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 31, 2022 and January 1, 2022 were as follows:
As of
December 31,
2022		January 1,
2022
(In thousands)
Interest$5,133 $4,921 
Penalties— —