LATTICE SEMICONDUCTOR CORP Income Taxes Disclosure

Note 12 - Income Taxes

We are subject to federal and state income tax as well as income tax in the various foreign jurisdictions in which we operate.

The domestic and foreign components of Income before income taxes were as follows:

The components of Income tax expense (benefit) are as follows:

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which require greater disaggregation of income tax disclosures around the effective rate reconciliation. The guidance in this update is effective for fiscal years beginning after December 15, 2024, and the Company adopted it prospectively for the year ended January 3, 2026. Income tax expense (benefit) for the year ended January 3, 2026 differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:

*State taxes in Oregon made up the majority (greater than 50 percent) of the tax effect in this category.

The increase in provision for income taxes in fiscal year 2025 compared to fiscal year 2024 was primarily due to nondeductible stock compensation and the recognition of uncertain tax benefits in the previous year.

As previously disclosed for the years ended December 28, 2024 and December 30, 2023, prior to the adoption of ASU 2023-09, income tax expense (benefit) differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:

The decrease in benefit for income taxes in fiscal year 2024 compared to fiscal year 2023 was primarily due to the release of the US federal valuation allowance in fiscal year 2023 and the recognition of uncertain tax benefits in fiscal year 2024.

On July 4, 2025, the United States enacted tax legislation (the “Tax Act”). The Tax Act includes significant provisions, such as the permanent extension of certain expiring provisions of The 2017 Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates with certain provisions effective in 2025. The impacts of provisions effective in 2025 have been incorporated into the income tax provision in fiscal 2025 and did not have a material impact on our effective tax rate.

We updated our evaluation of the valuation allowance position in the United States through January 3, 2026 and concluded that we should continue to maintain a full valuation allowance against our state deferred tax assets due to insufficient income sources. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the deferred tax assets. The amount of the deferred tax asset considered realizable could be adjusted if sufficient positive evidence exists. We don't have a valuation allowance on a significant portion of our U.S. Federal deferred tax assets or in any foreign jurisdictions as we have concluded that it is more likely than not that we will realize the net deferred tax assets in the future periods.

The components of our net deferred tax assets and liabilities are as follows:

The following table displays the activity related to changes in our valuation allowance for deferred tax assets:

As of  January 3, 2026, we had U.S. federal net operating loss ("NOL") carryforwards (pretax) of approximately $5.7 million which will expire between 2027 and 2031. We had state NOL carryforwards (pretax) of approximately $125.5 million that substantially all expire at various dates from 2026 through 2044. We also had federal credit carryforwards of $47.4 million that expire at various dates from 2036 through 2045, and $88.2 million state credit carryforwards of which substantially all do not expire.

Future utilization of federal and state net operating losses and tax credit carryforwards may be limited if cumulative changes to ownership exceed 50% within any three-year period, which has not occurred through fiscal 2025. However, if there is a significant change in ownership, future tax attribute utilization may be limited and NOL carryforwards and/or R&D credits will be reduced to reflect the limitation.

At January 3, 2026 and December 28, 2024, our unrecognized tax benefits associated with uncertain tax positions were $30.1 million, and $29.3 million, respectively, of which $27.0 million and $26.3 million, respectively, if recognized, would affect the effective tax rate, subject to valuation allowance. As of January 3, 2026 and December 28, 2024, interest and penalties associated with unrecognized tax benefits were $0.3 million and $0.4 million, respectively, which are not reflected in the table below. We accrue interest and penalties related to uncertain tax positions in Income tax expense.

The following table summarizes the changes to unrecognized tax benefits for the fiscal years presented:

Our liability for uncertain tax positions (including penalties and interest) was $2.1 million and $2.5 million at  January 3, 2026 and December 28, 2024, respectively, and is recorded as a component of Other long-term liabilities on our Consolidated Balance Sheets.

The years that remain subject to examination are 2022 for federal income taxes, 2021 for state income taxes, and 2020 for foreign income taxes, including years ending thereafter. 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 amount.

Cash Taxes Paid