ICHOR HOLDINGS, LTD.ICHR
ICHOR HOLDINGS, LTD. Income Taxes Disclosure
Note 6 – Income Taxes | ||
Loss before provision of income taxes consisted of the following:
| Year Ended | |||||||||||||||||
| December 26, 2025 | December 27, 2024 | December 29, 2023 | |||||||||||||||
| United States | $ | (65,843) | $ | (58,245) | $ | (69,040) | |||||||||||
| Foreign | 18,277 | 40,191 | 37,962 | ||||||||||||||
| Loss before tax | $ | (47,566) | $ | (18,054) | $ | (31,078) | |||||||||||
Significant components of income tax expense consist of the following:
| Year Ended | |||||||||||||||||
| December 26, 2025 | December 27, 2024 | December 29, 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (220) | $ | (115) | $ | (56) | |||||||||||
| State | 572 | 585 | 16 | ||||||||||||||
| Foreign | 4,733 | 3,078 | 2,633 | ||||||||||||||
| Total current tax expense | 5,085 | 3,548 | 2,593 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 326 | 326 | 8,471 | ||||||||||||||
| State | 80 | 62 | 1,529 | ||||||||||||||
| Foreign | (276) | (1,170) | (686) | ||||||||||||||
| Total deferred tax expense (benefit) | 130 | (782) | 9,314 | ||||||||||||||
| Income tax expense | $ | 5,215 | $ | 2,766 | $ | 11,907 | |||||||||||
Deferred income taxes reflect the net tax effects of (i) temporary differences between the carrying amounts of assets and liabilities for the financial reporting purposes and the amounts used for income tax purposes, and (ii) operating losses and tax credit carryforwards.
| December 26, 2025 | December 27, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Inventory | $ | 6,717 | $ | 8,701 | |||||||
| Share-based compensation | 2,600 | 3,103 | |||||||||
| Accrued payroll | 1,555 | 1,580 | |||||||||
| Net operating loss carryforwards | 34,833 | 16,817 | |||||||||
| Tax credits | 8,478 | 6,678 | |||||||||
| Interest carryforwards | 7,056 | 6,298 | |||||||||
| Capitalized research expenses | 7,810 | 9,838 | |||||||||
| Intercompany interest | 3,144 | 2,906 | |||||||||
| Operating lease liabilities | 4,858 | 11,140 | |||||||||
| Other assets | 1,070 | 534 | |||||||||
| Deferred tax assets | 78,121 | 67,595 | |||||||||
| Valuation allowance | (58,321) | (42,281) | |||||||||
| Total deferred tax assets | 19,800 | 25,314 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | (6,997) | (5,438) | |||||||||
| Property, plant and equipment | (5,778) | (5,851) | |||||||||
| Operating lease right-of-use assets | (4,649) | (10,890) | |||||||||
| Other liabilities | — | (374) | |||||||||
| Total deferred tax liabilities | (17,424) | (22,553) | |||||||||
| Net deferred tax asset | $ | 2,376 | $ | 2,761 | |||||||
At December 26, 2025, we had federal, state, and foreign net operating loss carryforwards ("NOLs") of $139.7 million, $63.1 million and $6.8 million, respectively. The federal NOLs carry forward indefinitely. The state and foreign NOLs, if not utilized, will begin to expire in 2028 and 2039, respectively. At December 26, 2025, we had federal and state research and development credits of $3.1 million and $0.4 million, respectively, which, if not utilized, will begin to expire in 2042 and 2029, respectively. At December 26, 2025, we had foreign tax credits of $3.2 million, which, if not utilized, will begin to expire in 2033.
We have determined the amount of our valuation allowance based on our estimates of taxable income by jurisdiction in which we operate over the periods in which the related deferred tax assets will be recoverable. As of December 26, 2025, we believe it is not more-likely-than-not that our U.S. entities will generate sufficient taxable income to offset reversing deductible timing differences and to fully utilize carryforward tax attributes. Accordingly, we have recorded a valuation allowance against U.S. federal and state deferred tax assets, net of deferred tax liabilities related to indefinite-lived intangible assets for which no future realization can be expected. The valuation allowance increased by $16.0 million and $14.2 million during the years ended December 26, 2025 and December 27, 2024, respectively.
We were granted a tax holiday for our Singapore operations, which expires in 2026. The net impact of the tax holiday in Singapore as compared to the Singapore statutory rate was a benefit of $3.4 million, $7.1 million, and $5.0 million during 2025, 2024, and 2023, respectively. Our income tax fluctuates based on the geographic mix of earnings and is calculated quarterly based on actual results pursuant to ASC Topic 740‑270.
We recognize tax benefits from uncertain tax positions when it is more likely than not that the position will be sustained upon examination. As of December 26, 2025, we had reserves of $3.2 million related to these uncertain tax positions, which are included in the balance of other non-current liabilities on the accompanying consolidated balance sheet. If recognized, $1.4 million of this amount would impact our effective tax rate.
We recognize estimated accrued interest and penalties related to these unrecognized tax benefits in income tax expense. In 2025, we recognized no increase in estimated interest and penalties. At December 26, 2025, we had approximately zero and $0.6 million of accrued estimated interest and penalties, which are excluded from the unrecognized tax benefits table below.
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense consist of the following:
| Year Ended | |||||||||||||||||||||||||||||
| December 26, 2025 | December 27, 2024 | December 29, 2023 | |||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||
| Effective rate reconciliation: | |||||||||||||||||||||||||||||
| US federal statutory tax rate | $ | (9,989) | 21.0% | $ | (3,791) | 21.0% | $ | (6,526) | 21.0% | ||||||||||||||||||||
| State and local income taxes, net of federal income tax effect (1) | 515 | (1.1)% | (648) | 3.6% | (1,994) | 6.4% | |||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||
| Research and development tax credits | (603) | 1.3% | (869) | 4.8% | (1,530) | 4.9% | |||||||||||||||||||||||
| Foreign tax credit on withholding | (1,085) | 2.3% | (815) | 4.5% | (717) | 2.3% | |||||||||||||||||||||||
| Change in valuation allowance | 13,833 | (29.1)% | 14,243 | (78.9)% | 27,940 | (89.9)% | |||||||||||||||||||||||
| Nondeductible items | |||||||||||||||||||||||||||||
| Limitation on officers compensation | 511 | (1.1)% | 1,225 | (6.8)% | 597 | (1.9)% | |||||||||||||||||||||||
| Stock compensation | 1,513 | (3.2)% | (372) | 2.1% | 85 | (0.3)% | |||||||||||||||||||||||
| Other | 41 | (0.1)% | 177 | (1.0)% | 336 | (1.1)% | |||||||||||||||||||||||
| Worldwide changes in unrecognized tax benefits | (48) | 0.1% | 475 | (2.6)% | (331) | 1.1% | |||||||||||||||||||||||
| Other reconciling items | (31) | 0.1% | 158 | (0.9)% | 44 | (0.1)% | |||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||
| Other | 90 | (0.2)% | 68 | (0.4)% | (92) | 0.3% | |||||||||||||||||||||||
| Singapore | |||||||||||||||||||||||||||||
| Statutory tax rate difference | (846) | 1.8% | (1,112) | 6.2% | (1,415) | 4.6% | |||||||||||||||||||||||
| Tax holiday | (3,446) | 7.2% | (7,078) | 39.2% | (4,962) | 16.0% | |||||||||||||||||||||||
| Withholding tax | 1,083 | (2.3)% | 815 | (4.5)% | 717 | (2.3)% | |||||||||||||||||||||||
| Other | — | —% | 126 | (0.7)% | — | —% | |||||||||||||||||||||||
| Malaysia | |||||||||||||||||||||||||||||
| Statutory tax rate difference | 114 | (0.2)% | 290 | (1.6)% | 52 | (0.2)% | |||||||||||||||||||||||
| Permanent differences | 322 | (0.7)% | (336) | 1.9% | (365) | 1.2% | |||||||||||||||||||||||
| Return to provision | 278 | (0.6)% | 225 | (1.2)% | (224) | 0.7% | |||||||||||||||||||||||
| Other | 52 | (0.1)% | — | —% | — | —% | |||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||
| Change in valuation allowance | 1,665 | (3.5)% | — | —% | — | —% | |||||||||||||||||||||||
| Benefit from carry back claim | (509) | 1.1% | — | —% | — | —% | |||||||||||||||||||||||
| Other | (266) | 0.6% | (15) | 0.1% | 292 | (0.9)% | |||||||||||||||||||||||
| Netherlands | |||||||||||||||||||||||||||||
| Domestic top-up tax | 2,021 | (4.2)% | — | —% | — | —% | |||||||||||||||||||||||
| Income tax expense | $ | 5,215 | (11.0)% | $ | 2,766 | (15.3)% | $ | 11,907 | (38.3)% | ||||||||||||||||||||
(1) State taxes in California make up the majority of the tax effect in this category.
The cash paid for taxes, net of refunds, are as follows:
| Year Ended | |||||||||||||||||
| December 26, 2025 | December 27, 2024 | December 29, 2023 | |||||||||||||||
| Federal | $ | 4 | $ | — | $ | (483) | |||||||||||
| State and local | |||||||||||||||||
| California | 352 | 490 | (226) | ||||||||||||||
| Oregon | 130 | 71 | 315 | ||||||||||||||
| Texas | 153 | 80 | 199 | ||||||||||||||
| Other | 1 | 16 | 24 | ||||||||||||||
| Foreign | |||||||||||||||||
| Singapore | 1,166 | 794 | 1,037 | ||||||||||||||
| Malaysia | 1,203 | 1,068 | 1,350 | ||||||||||||||
| Korea | — | 188 | 55 | ||||||||||||||
| United Kingdom | — | 626 | 1,606 | ||||||||||||||
| Cash paid for taxes, net of refunds | $ | 3,009 | $ | 3,333 | $ | 3,877 | |||||||||||
The following table summarizes the activity related to our unrecognized tax benefits:
| Unrecognized tax benefits | |||||
| Balance at December 30, 2022 | $ | 3,595 | |||
| Increase related to current year tax positions | 488 | ||||
| Decrease in tax positions related to lapse of statute of limitations | (10) | ||||
| Decrease in tax positions related to settlements | (916) | ||||
| Balance at December 29, 2023 | 3,157 | ||||
| Increase related to current year tax positions | 435 | ||||
| Decrease in tax positions related to lapse of statute of limitations | (336) | ||||
| Balance at December 27, 2024 | 3,256 | ||||
| Increase related to current year tax positions | 149 | ||||
| Decrease in tax positions related to lapse of statute of limitations | (197) | ||||
| Balance at December 26, 2025 | $ | 3,208 | |||
We assert indefinite reinvestment of our U.S. and Netherlands unremitted earnings. With regard to these unremitted earnings, we have not, nor do we anticipate the need to repatriate funds from the U.S. to the Netherlands or from the Netherlands to the Cayman entity to satisfy liquidity needs. Determination of the amount of unrecognized withholding tax liability related to the indefinitely reinvested earnings is not practicable.
Our three major filing jurisdictions are the United States, Singapore, and Malaysia. We are no longer subject to U.S. Federal examination for tax years ending before 2022, to state examinations before 2021, or to foreign examinations before 2021. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward. As of December 26, 2025, we were under examination by the California tax authorities for fiscal years 2020-2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 5, 2021 | |
| 2019 | Mar 6, 2020 | |
| 2018 | Mar 8, 2019 | |
| 2017 | Mar 13, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.