Silvaco Group, Inc.SVCO

Silvaco Group, Inc. Income Taxes Disclosure

10-KFiled Mar 5, 20254 min read
Income Taxes
The domestic and foreign components of the Company's (loss) income before tax provision for the years ended December 31, 2024 and 2023, were as follows:
December 31,
20242023
(in thousands)
Domestic$(42,292)$(2,620)
Foreign3,372 3,130 
(Loss) income before income tax provision$(38,920)$510 
The components of the Company's income tax provision for the years ended December 31, 2024 and 2023, were as follows:
December 31,
20242023
(in thousands)
Current:
Federal$56 $393 
State36 62 
Foreign303 408 
Deferred:
Foreign89 (37)
Income tax provision
$484 $826 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows:
December 31,
20242023
(in thousands)
Deferred tax assets:
Accruals and reserves$3,436 $735 
Depreciable and amortizable assets5,767 3,765 
Net operating loss carryforward766 561 
Tax credits8,279 7,328 
Stock-based compensation expense492 — 
Total deferred tax asset$18,740 $12,389 
Valuation Allowance(18,621)(12,270)
Net deferred tax asset$119 $119 
Deferred tax liabilities
Revenue recognition(414)(349)
Net deferred tax liability$(295)$(230)
The following is a reconciliation of the federal statutory income tax rate to the Company's effective tax rate for the years ended December 31, 2024 and 2023:
December 31,
20242023
Tax at federal statutory rate
21 %21 %
Tax credits2 %(60)%
Other(10)%(65)%
Valuation allowance(14)%266 %
Effective tax rate (1)%162 %
Management establishes a valuation allowance for those deductible temporary differences when it is more likely than not that the benefit of such deferred tax assets will not be recognized. The ultimate realization of deferred tax assets is dependent upon the Company's ability to generate taxable income during periods in which the temporary differences become deductible. Management regularly reviews the deferred tax assets for recoverability and establishes a valuation allowance based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. Through the year ended December 31, 2024, management believes that it is more likely than not that the deferred tax assets will not be realized, such that a full valuation allowance has been recorded.
During the years ended December 31, 2024 and 2023, the valuation allowance increased by $6.4 million and $1.6 million, respectively.
As of December 31, 2024, the Company had net operating loss carryforwards for federal income tax purposes of $0.42 million and federal research and development credits of $6.9 million which begin expiring in 2028.
As of December 31, 2024 the Company had net operating loss carryforwards for state income tax purposes of $4.9 million which begin expiring in 2029 and state research and development credits of $8.6 million which begin expiring in 2025.
The Company has not recorded a provision for deferred U.S. tax expense that could result from the remittance of foreign undistributed earnings since the Company intends to reinvest the earnings in its foreign subsidiaries indefinitely.
The following table summarizes the activity related to the Company's gross unrecognized tax benefits:
December 31,
20242023
(in thousands)
Balance as of January 1,$7,247 $6,827 
Increases related to prior years' tax positions— 32 
Increases related to current year's tax positions712 388 
Decreases related to prior years' tax positions— — 
Balance as of December 31,$7,959 $7,247 
The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company recorded unrecognized tax benefits for uncertain tax positions of approximately $8.0 million as of December 31, 2024, of which $1.4 million, if recognized, would impact the effective tax rate.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. During the years ended December 31, 2024 and 2023, interest and penalties recorded in the consolidated statements of loss were $22,000 and $19,000, respectively. The amounts of accrued interest and penalties recorded on the consolidated balance sheets as of December 31, 2024 and 2023 were $99,000 and $77,000, respectively. The Company does not believe there will be material changes in its unrecognized tax positions over the next twelve months.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and certain foreign jurisdictions. The Company is not currently under audit by the Internal Revenue Service or other similar state, local, or foreign authorities. All tax years in the U.S. remain open to examination due to utilization of net operating losses and credits. Tax years from 2007 forward are subject to foreign income tax examinations by tax authorities.
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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.

Other Available Disclosures

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