SILICON LABORATORIES INC.SLAB
SILICON LABORATORIES INC. Income Taxes Disclosure
Income Taxes
Loss, inclusive of equity-method loss and before income taxes, includes the following components (in thousands):
| Year Ended | |||||||||||||||||
| January 3, 2026 | December 28, 2024 | December 30, 2023 | |||||||||||||||
| Domestic | $ | (25,449) | $ | (33,032) | $ | (14,539) | |||||||||||
| Foreign | (32,463) | (121,781) | (12,034) | ||||||||||||||
| $ | (57,912) | $ | (154,813) | $ | (26,573) | ||||||||||||
The provision for income taxes consists of the following (in thousands):
| Year Ended | |||||
| January 3, 2026 | |||||
| Current: | |||||
| Federal | $ | 182 | |||
| State and local | 86 | ||||
| Foreign | 5,846 | ||||
| Total Current | 6,114 | ||||
| Deferred: | |||||
| Federal | 109 | ||||
| State and local | (150) | ||||
| Foreign | 922 | ||||
| Total Deferred | 881 | ||||
| Provision for income taxes | $ | 6,995 | |||
| Year Ended | |||||||||||
| December 28, 2024 | December 30, 2023 | ||||||||||
| Current: | |||||||||||
| Domestic | $ | (252) | $ | 3,291 | |||||||
| Foreign | 6,978 | 15,599 | |||||||||
| Total Current | 6,726 | 18,890 | |||||||||
| Deferred: | |||||||||||
| Domestic | 29,745 | (9,036) | |||||||||
| Foreign | (274) | (1,911) | |||||||||
| Total Deferred | 29,471 | (10,947) | |||||||||
| Provision for income taxes | $ | 36,197 | $ | 7,943 | |||||||
The reconciliation of the federal statutory tax rate to the Company’s effective tax rate is as follows ($ in thousands):
Year Ended | |||||||||||
| January 3, 2026 | |||||||||||
| U.S. federal tax at statutory rate | $ | (12,161) | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | (64) | 0.1 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Singapore | |||||||||||
| Statutory tax rate difference | 2,254 | (3.9) | % | ||||||||
| Changes in valuation allowance | 10,128 | (17.5) | % | ||||||||
| Effect of cross-border tax laws | 652 | (1.1) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Enhanced research deduction | (1,741) | 3.0 | % | ||||||||
| Nondeductible amortization expense | 1,230 | (2.1) | % | ||||||||
| Other | (716) | 1.2 | % | ||||||||
| India | |||||||||||
| Effect of cross-border tax laws | 662 | (1.1) | % | ||||||||
| Other | 1,225 | (2.1) | % | ||||||||
| Other foreign jurisdictions | (14) | — | % | ||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Subpart F income and GILTI, net of foreign tax credit | (513) | 0.9 | % | ||||||||
| Other | (501) | 0.8 | % | ||||||||
| Tax Credits: | |||||||||||
| Research and development tax credit | (6,434) | 11.1 | % | ||||||||
| Changes in valuation allowance | 10,376 | (17.9) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Stock-based compensation | 3,145 | (5.4) | % | ||||||||
| Other nondeductible/nontaxable items | 367 | (0.6) | % | ||||||||
| Worldwide changes in unrecognized tax benefits | (567) | 1.0 | % | ||||||||
| Other adjustments | (333) | 0.5 | % | ||||||||
| Effective Tax Rate | $ | 6,995 | (12.1) | % | |||||||
____________________________________________
(1) No state jurisdictions were individually material.
| Year Ended | |||||||||||
| December 28, 2024 | December 30, 2023 | ||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| Foreign tax rate benefit | (9.2) | (33.2) | |||||||||
| Current period valuation allowance | (18.9) | — | |||||||||
| Change in prior period valuation allowance | (12.9) | (1.5) | |||||||||
| GILTI and Subpart F income, net of foreign tax credits | (4.3) | (24.2) | |||||||||
| (Nondeductible) nontaxable foreign items | (3.1) | (26.0) | |||||||||
| (Nondeductible) nontaxable domestic items | (0.9) | (3.6) | |||||||||
| Nondeductible officer compensation | (0.8) | 1.3 | |||||||||
| Return to provision adjustments | (0.3) | 16.5 | |||||||||
| State tax expense | — | (1.5) | |||||||||
| Base erosion and anti-abuse tax | — | (7.4) | |||||||||
| Other tax effects of equity compensation | 0.1 | 1.1 | |||||||||
| Foreign withholding taxes | 0.3 | (2.2) | |||||||||
| Excess tax benefit of stock-based compensation | 0.6 | 4.0 | |||||||||
| Release of prior year unrecognized tax benefits | 1.2 | — | |||||||||
| Research and development tax credits | 4.2 | 26.9 | |||||||||
| Other | (0.4) | (1.1) | |||||||||
| Effective tax rate | (23.4) | % | (29.9) | % | |||||||
The decrease in the provision for income taxes for fiscal 2025 as compared to fiscal 2024 was primarily due to a decrease in tax expense related to the valuation allowance during fiscal 2025. The increase in the provision for income taxes for fiscal 2024 as compared to fiscal 2023 was primarily due to the establishment of a valuation allowance against the majority of the Company’s U.S. and Singapore deferred tax assets during the second quarter of fiscal 2024.
On July 4, 2025, the U.S. government enacted tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”). The OBBBA extends and/or modifies many provisions first enacted via the Tax Cuts and Jobs Act (“TCJA”) in 2017, as well as introduces new modifications to U.S.federal tax law. Beginning with the 2025 tax year, the OBBBA permanently restores current deductibility for U.S. research and experimental (“R&E”) expenditures. A number of other changes enacted in the OBBBA will not take effect until the 2026 tax year, including various modifications to existing international tax provisions. The Company determined that its annual effective tax rate for the current year decreased due to the impacts of the OBBBA, primarily due to U.S. R&E expenditures no longer being capitalized within global intangible low-taxed income or “GILTI”, which the Company has elected to treat as a period cost.
The Company did not identify any material discrete tax impacts related to beginning-of-the-year deferred tax assets and liabilities or valuation allowances due to the enactment of the OBBBA.
Cash paid for income taxes (net of refunds) consisted of the following (in thousands):
| Year Ended | |||||
| January 3, 2026 | |||||
| U.S. Federal | $ | 7,932 | |||
| U.S. State and local | (2,668) | ||||
| Foreign | 5,694 | ||||
| Cash paid for income taxes (net of refunds) | $ | 10,958 | |||
Individual jurisdictions equaling 5% or more of the total income taxes paid (net of refunds) for the year ended January 3, 2026 include U.S. Federal at $7.9 million, Minnesota at $(2.7) million, India at $2.9 million, and Singapore at $0.7 million.
Deferred Income Taxes
Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. Significant components of the Company’s deferred taxes as of January 3, 2026 and December 28, 2024 were as follows (in thousands):
| January 3, 2026 | December 28, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Capitalized research and development | $ | 30,484 | $ | 28,613 | |||||||
| Tax credit carryforwards | 26,850 | 23,100 | |||||||||
| Net operating loss carryforwards | 25,986 | 17,484 | |||||||||
| Leases | 7,332 | 6,388 | |||||||||
| Intangible assets | 5,697 | 6,447 | |||||||||
| Accrued liabilities | 5,389 | 2,063 | |||||||||
| Deferred income on shipments to distributors | 4,824 | 2,153 | |||||||||
| Other | 7,138 | 6,130 | |||||||||
| 113,700 | 92,378 | ||||||||||
| Less: Valuation allowance | (81,069) | (60,760) | |||||||||
| 32,631 | 31,618 | ||||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | 14,624 | 13,718 | |||||||||
| Fixed assets | 6,323 | 6,812 | |||||||||
| Leases | 6,071 | 6,053 | |||||||||
| Prepaid expenses and other | 4,716 | 3,555 | |||||||||
| Stock-based compensation | 1,333 | 1,001 | |||||||||
| 33,067 | 31,139 | ||||||||||
| Net deferred tax assets (liabilities) | $ | (436) | $ | 479 | |||||||
As of January 3, 2026, the Company had foreign net operating loss and research and development tax credit carryforwards of approximately $230.3 million and $0.4 million, respectively. The foreign net operating loss carryforwards do not expire. The foreign research and development tax credits expire in fiscal years 2044 through 2045.
As of January 3, 2026, the Company had U.S. federal net operating loss, research and development tax credit and foreign tax credit carryforwards of approximately $8.0 million, $10.5 million and $3.6 million, respectively. All of the net operating loss and $0.2 million of the research and development tax credit carryforwards are subject to an annual limit, which may cause them to expire before they are used. The net operating loss and research and development tax credit carryforwards that are subject to limitation expire in fiscal years 2028 through 2030, the remaining research and development tax credit carryforwards expire in fiscal years 2044 through 2045, and the foreign tax credit carryforwards expire in fiscal years 2033 through 2034.
Additionally, the Company had state net operating loss and state research and development tax credit carryforwards of approximately $28.9 million and $14.2 million, respectively. Certain of these carryforwards expire in fiscal years 2026
through 2044, and others do not expire. Recognition of some of these loss and credit carryforwards is subject to an annual limit, which may cause them to expire before they are used.
A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. The Company maintains a valuation allowance with respect to the majority of deferred tax assets in the U.S. and Singapore and with respect to research and development tax credit carryforwards in Canada. During fiscal 2024, the Company determined that there is a need for a valuation allowance in the U.S. and Singapore due to a three-year cumulative pre-tax loss in conjunction with the recent downturn in the semiconductor industry. The Company intends to maintain the valuation allowance until its ability to forecast sufficient future sources of taxable income is reestablished. The following table summarizes the activity related to the valuation allowance for deferred tax assets (in thousands):
| Balance at Beginning of Period | Additions Charged to Expenses | Deductions | Balance at End of Period | ||||||||||||||||||||
| Year ended January 3, 2026 | $ | 60,760 | $ | 20,500 | (191) | $ | 81,069 | ||||||||||||||||
| Year ended December 28, 2024 | $ | 10,530 | $ | 50,230 | $ | — | $ | 60,760 | |||||||||||||||
| Year ended December 30, 2023 | $ | 9,409 | $ | 1,121 | $ | — | $ | 10,530 | |||||||||||||||
Uncertain Tax Positions
The following table summarizes the activity related to gross unrecognized tax benefits (in thousands):
| Year Ended | |||||||||||||||||
| January 3, 2026 | December 28, 2024 | December 30, 2023 | |||||||||||||||
| Beginning balance | $ | 4,427 | $ | 4,868 | $ | 4,109 | |||||||||||
| Additions based on tax positions related to current year | 1,108 | 970 | 737 | ||||||||||||||
| Additions based on tax positions related to prior years | 75 | — | 22 | ||||||||||||||
| Reductions based on tax positions related to prior years | (125) | (5) | — | ||||||||||||||
| Reductions for tax positions as a result of a lapse of the applicable statute of limitations | (1,390) | (1,406) | — | ||||||||||||||
| Ending balance | $ | 4,095 | $ | 4,427 | $ | 4,868 | |||||||||||
As of January 3, 2026, December 28, 2024 and December 30, 2023, the Company had gross unrecognized tax benefits, inclusive of interest, of $4.2 million, $4.7 million and $5.4 million, respectively, of which $1.8 million, $3.5 million and $5.1 million, respectively, would affect the effective tax rate if recognized.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented.
Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013 – 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The adjustment would have resulted in approximately 141.3 million Norwegian kroner, or $14.0 million, additional Norwegian income tax. The Company disagreed with the NTA’s findings and appealed the assessment, concluding that the Company’s position was more likely than not to be sustained in the appeal. During fiscal 2025, the Norwegian Tax Appeals Board issued a formal decision in favor of the Company, rejecting the proposed adjustment to its
2013 tax liability. Because the Company did not previously establish a reserve related to the NTA assessment, there was no resulting financial statement impact for the final resolution of this matter.
Tax years 2021 through 2025 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company’s 2022 tax year is currently under examination in the U.S., and the Company’s 2022 through 2023 tax years are currently under examination in India. Although the outcome of tax audits is always uncertain, the Company believes that the results of the examination will not materially impact its financial position or results of operations and that it has accrued adequate reserves related to all matters contained in tax periods open to examination. The Company is not currently under audit in any other major taxing jurisdiction.
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.