Note 16 - Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
Note 16. Income Taxes For the three months ended June 30, 2026, the Company recorded an income tax expense of $1.3 million, compared with no income tax expense or benefit for the three months ended June 30, 2025. For the six months ended June 30, 2026, the Company recorded an income tax expense of $2.3 million, compared with no income tax expense or benefit for the six months ended June 30, 2025. The income tax expense for the current period was primarily attributable to income in China, as well as the impact of valuation allowances and discrete items.
For the three months ended June 30, 2026 and 2025, the effective tax rates were (6.0)% and 0.0%, respectively. For the six months ended June 30, 2026 and 2025, the effective tax rates were (6.7)% and 0.0%, respectively. The effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to the impact of valuation allowances recorded against deferred tax assets ("DTA") in the United States and Taiwan, and the China R&D Super Deduction.
The Company assesses the realizability of its DTAs, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s US and Taiwan net deferred tax assets remains appropriate as of June 30, 2026.
The Company expects any earnings of foreign subsidiaries to be indefinitely invested outside the United States. As of December 31, 2025, however, the Company does have any accumulated undistributed earnings generated by foreign subsidiaries and has estimated that its tax basis in foreign subsidiaries exceeds its book basis. The Company has concluded that no deferred tax asset (DTA) should be recorded because at the present time it does not expect that the temporary book-tax basis difference that would create this DTA will reverse in the foreseeable future.
Recent Tax Legislation
The Company continues to evaluate the provisions of the One Big Beautiful Bill Act ("OBBBA"), which was enacted on July 4, 2025. Consistent with its prior assessment, the Company does not expect the provisions related to domestic research and development expenditures, bonus depreciation, business interest expense limitations, or clean energy tax credits to have a material impact on its income tax provision or effective tax rate. |