Ultra Clean Holdings, Inc.UCTT
Ultra Clean Holdings, Inc. Income Taxes Disclosure
INCOME TAXES
Income before provision for income taxes was generated from the following geographic areas:
| Year Ended | |||||||||||||||||
| (In millions) | December 26, 2025 | December 27, 2024 | December 29, 2023 | ||||||||||||||
| United States | $ | (175.2) | $ | (106.4) | $ | (133.5) | |||||||||||
| Foreign | 29.5 | 173.6 | 122.2 | ||||||||||||||
| Total pretax income | $ | (145.7) | $ | 67.2 | $ | (11.3) | |||||||||||
The provision for income taxes consisted of the following:
| Year Ended | |||||||||||||||||
| (In millions) | December 26, 2025 | December 27, 2024 | December 29, 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 2.2 | $ | (0.1) | $ | 0.1 | |||||||||||
| State | 0.6 | 0.5 | 0.3 | ||||||||||||||
| Foreign | 25.8 | 35.1 | 22.7 | ||||||||||||||
| Total current | 28.6 | 35.5 | 23.1 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (0.7) | 0.4 | (9.4) | ||||||||||||||
| State | (1.6) | 0.1 | (1.5) | ||||||||||||||
| Foreign | (0.4) | (3.3) | (1.3) | ||||||||||||||
| Total deferred | (2.7) | (2.8) | (12.2) | ||||||||||||||
| Total provision | $ | 25.9 | $ | 32.7 | $ | 10.9 | |||||||||||
| Federal | $ | 1.5 | $ | 0.3 | $ | (9.3) | |||||||||||
| State | (1.0) | 0.6 | (1.2) | ||||||||||||||
| Foreign | 25.4 | 31.8 | 21.4 | ||||||||||||||
| Total provision | $ | 25.9 | $ | 32.7 | $ | 10.9 | |||||||||||
The effective tax rate differs from the U.S. federal statutory tax rate as follows:
| Year Ended | ||||||||
| December 26, 2025 | ||||||||
| Tax provision at the U.S. federal statutory rate | $ | (30.6) | 21.0 | % | ||||
| State and local income taxes, net of federal (national) income tax effect (1) | (1.3) | 0.9 | % | |||||
| Foreign tax effects | ||||||||
| China | ||||||||
| Withholding tax | 4.9 | (3.4) | % | |||||
| Other | (0.4) | 0.2 | % | |||||
| Czech Republic | ||||||||
| Foreign exchange gain/(loss) | (2.3) | 1.6 | % | |||||
| Other | 0.4 | (0.3) | % | |||||
| Israel | ||||||||
| Statutory tax rate difference between Israel and U.S. | (1.9) | 1.3 | % | |||||
| Tax incentive rate | 3.0 | (2.1) | % | |||||
| Goodwill impairment | 17.9 | (12.3) | % | |||||
| Other | (1.0) | 0.7 | % | |||||
| Malaysia | ||||||||
| Malaysia Pioneer tax holiday incentive | 2.1 | (1.4) | % | |||||
| Deferred tax true up | 1.8 | (1.2) | % | |||||
| Change in valuation allowance | (1.8) | 1.2 | % | |||||
| Singapore | ||||||||
| Statutory tax rate difference between Singapore and U.S. | (2.0) | 1.4 | % | |||||
| Development and expansion incentive tax rate | (2.2) | 1.5 | % | |||||
| Other | 0.7 | (0.5) | % | |||||
| Other foreign jurisdictions | 1.4 | (1.0) | % | |||||
| Effect of cross-border tax laws | ||||||||
| Global intangible low-taxed income | 13.6 | (9.3) | % | |||||
| Subpart F income | 2.2 | (1.5) | % | |||||
| Other | 0.5 | (0.3) | % | |||||
| Tax credits | ||||||||
| R&D tax credit | (1.1) | 0.8 | % | |||||
| Changes in valuation allowances | 10.7 | (7.4) | % | |||||
| Non-taxable or non-deductible items | ||||||||
| Equity Compensation | 1.7 | (1.2) | % | |||||
| Goodwill impairment | 3.8 | (2.6) | % | |||||
| Other | 1.0 | (0.7) | % | |||||
| Changes in unrecognized tax benefits | 4.4 | (3.0) | % | |||||
| Other Adjustments | 0.4 | (0.2) | % | |||||
| Effective Tax Rate | $ | 25.9 | (17.8) | % | ||||
(1) California makes up the majority (greater than 50 percent) of the state income tax expense.
| Year Ended | |||||||||||
| December 27, 2024 | December 29, 2023 | ||||||||||
| Federal income tax provision at statutory rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal benefit | (8.1) | % | 48.5 | % | |||||||
| Effect of foreign operations | (11.0) | % | 21.5 | % | |||||||
| Change in valuation allowance | 37.4 | % | (34.0) | % | |||||||
| Foreign income inclusions | 18.9 | % | (141.2) | % | |||||||
| Nondeductible executive compensation | 1.4 | % | (7.0) | % | |||||||
| Stock-based compensation | (0.5) | % | (3.7) | % | |||||||
| Acquisition related expenses | (9.1) | % | (8.0) | ||||||||
| Tax credits | (0.7) | % | 6.2 | % | |||||||
| Tax reserves | (1.5) | % | (0.1) | % | |||||||
| Other | 0.9 | % | 0.3 | % | |||||||
| Effective Tax Rate | 48.7 | % | (96.5) | % | |||||||
Income taxes paid are as follows ($ in millions):
| Year Ended | |||||
| (In millions) | December 26, 2025 | ||||
| Federal | $ | 1.4 | |||
| State | 0.5 | ||||
| Foreign | |||||
| Czech Republic | 11.6 | ||||
| China | 14.0 | ||||
| Singapore | 5.6 | ||||
| Korea | 4.6 | ||||
| Israel | 2.6 | ||||
| Foreign other | 1.7 | ||||
| Total cash tax paid for income taxes (net of refunds) | $ | 42.0 | |||
Significant components of deferred tax assets and liabilities are as follows:
| Year Ended | |||||||||||
| (In millions) | December 26, 2025 | December 27, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Interest expense limitation | $ | 44.8 | $ | 39.5 | |||||||
| Operating lease liabilities | 27.7 | 28.3 | |||||||||
| Tax loss carryforwards | 39.5 | 40.4 | |||||||||
| Capitalized research and development costs | 9.1 | 12.5 | |||||||||
| Inventory valuation and basis difference | 6.8 | 7.4 | |||||||||
| Accruals | 4.2 | 4.6 | |||||||||
| Tax credits | 7.5 | 6.5 | |||||||||
| Other timing differences | 6.2 | 8.2 | |||||||||
| 145.8 | 147.4 | ||||||||||
| Valuation allowance | (104.2) | (96.3) | |||||||||
| Total deferred tax assets | 41.6 | 51.1 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Goodwill | (10.1) | (21.7) | |||||||||
| Operating lease right-of-use assets | (25.4) | (27.2) | |||||||||
| Intangibles | (7.6) | (9.6) | |||||||||
| Depreciation | (6.6) | (3.6) | |||||||||
| Other | (2.2) | (2.0) | |||||||||
| Total deferred tax liabilities | (51.9) | (64.1) | |||||||||
| Net deferred tax liabilities | $ | (10.3) | $ | (13.0) | |||||||
As of December 26, 2025, the Company had undistributed earnings of foreign subsidiaries of approximately $596.7 million, approximately $577.3 million of which are considered indefinitely reinvested and on which we have not recognized deferred taxes. It is not practicable to determine the tax liability that might be incurred if these earnings were to be distributed. For undistributed earnings of foreign subsidiaries which are not considered indefinitely reinvested deferred taxes have been accrued.
As of December 26, 2025, a valuation allowance of $104.2 million was established for deferred tax assets related to U.S. federal and state assets and certain foreign assets. For fiscal 2025, the valuation allowance increased by $7.9 million. The increase in the valuation allowance is primarily due to an increase in deferred tax assets attributable to U.S. limitations on the deductibility of interest expense.
The Company’s gross liability for unrecognized tax benefits as of December 26, 2025 and December 27, 2024 was $5.6 million and $2.3 million, respectively. If the remaining balance of unrecognized tax benefits were recognized in a future period, it would result in a tax benefit of $1.0 million as of December 26, 2025 ($1.4 million as of December 27, 2024) and a reduction in the effective tax rate. Increases or decreases to interest and penalties on uncertain tax positions are included in the income tax provision in the Consolidated Statements of Operations. Interest related to uncertain tax positions for the periods ended December 26, 2025, December 27, 2024 and December 29, 2023, was not material. There are no penalties accrued within the liability for unrecognized benefits.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
| Balance as of December 31, 2022 | $ | 2.7 | |||
| Increases related to current year tax positions | 0.3 | ||||
| Settlements | (0.1) | ||||
| Balance at December 29, 2023 | $ | 2.9 | |||
| Increases related to prior year tax positions | 0.1 | ||||
| Increases related to current year tax positions | 0.5 | ||||
| Reduction due to lapse statute of limitations | (1.2) | ||||
| Balance at December 27, 2024 | $ | 2.3 | |||
| Increases related to prior year tax positions | 3.7 | ||||
| Increases related to current year tax positions | 0.6 | ||||
| Settlements | (1.0) | ||||
| Balance at December 26, 2025 | $ | 5.6 | |||
As of December 26, 2025, the Company had U.S. federal, state and foreign net operating loss carryforwards (“NOLs”) of approximately $34.3 million, $197.8 million and $32.1 million, respectively. The Company's U.S. valuation allowance includes the deferred tax asset on the NOL carryforwards. The U.S. federal NOL’s can be carried forward indefinitely. The state NOLs begin expiring after 2029 and the foreign NOLs begin expiring after 2026. The Company also had federal tax credit carryforwards of approximately $7.1 million which expire in various years from fiscal 2028 through 2045. As of December 26, 2025, the Company had a foreign capital loss carryforward of approximately $56.4 million which can be carried forward indefinitely. The Company’s foreign valuation allowance includes the deferred tax asset on the capital loss carryforward.
The Company files federal, state and foreign income tax returns in several U.S. and foreign jurisdictions. The federal statute of limitation has closed for years prior to 2022. State statutes of limitation are generally closed for years prior to 2021. The statute of limitation for significant foreign jurisdictions has closed for years prior to 2021.
The Company is operating under a Development and Expansion Incentive (“DEI”) in Singapore that is in effect through 2028. The DEI reduces the local tax on certain Singapore income from a statutory rate of 17% to 5% until December 31, 2025 and 6% from 2026 through 2028. The Company has also been granted a tax holiday in Malaysia, subject to certain conditions. The Malaysia tax holiday period which provides a zero rate of tax on qualifying income commenced in fiscal year 2022 and is effective through February 28, 2037. The tax holidays in Singapore and Malaysia are conditional upon meeting certain employment and investment thresholds. The Singapore DEI decreased foreign taxes by $2.4 million, $5.4 million, and $4.1 million for fiscal years 2025, 2024 and 2023, respectively. The tax benefit of the Singapore DEI on net income per share (diluted) was approximately $0.05, $0.12 and $0.09 in fiscal years 2025, 2024 and 2023, respectively. The benefit of the tax holiday in Malaysia is zero for fiscal years 2025, 2024 and 2023 due to losses incurred in these years.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Mar 6, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Mar 11, 2020 | |
| 2018 | Mar 22, 2019 | |
| 2017 | Mar 14, 2018 | |
| 2016 | Mar 15, 2017 | |
| 2015 | Mar 9, 2016 | |
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.