United States statutory federal income tax rate

[Table of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)Cadence’s provision (benefit) for income taxes was comprised of the following items for fiscal 2021, 2020 and 2019:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
|  | (In thousands) |
| Current: |  |  |  |  |  |
| Federal | $ | 19,957  |  |  | $ | 15,083  |  |  | $ | 15,282  |  |
| State and local | 25,246  |  |  | 6,401  |  |  | 2,716  |  |
| Foreign | 70,455  |  |  | 46,737  |  |  | 48,729  |  |
| Total current | 115,658  |  |  | 68,221  |  |  | 66,727  |  |
|  |  |  |  |  |  |
| Deferred: |  |  |  |  |  |
| Federal | (16,415) |  |  | (11,155) |  |  | (9,001) |  |
| State and local | (30,406) |  |  | (24,186) |  |  | 6,593  |  |
| Foreign | 3,643  |  |  | 9,224  |  |  | (574,330) |  |
| Total deferred | (43,178) |  |  | (26,117) |  |  | (576,738) |  |
|  |  |  |  |  |  |
| Total provision (benefit) for income taxes | $ | 72,480  |  |  | $ | 42,104  |  |  | $ | (510,011) |  |

During the fourth quarter of fiscal 2021, Cadence recognized a tax benefit of approximately $10.5 million due to a release of the valuation allowance on our Massachusetts research and development tax credit deferred tax assets. Cadence expects to utilize these tax credits prior to expiration based on strong current earnings and future taxable income projections.During the third quarter of fiscal 2020, Cadence recognized a tax benefit of approximately $22.2 million due to a partial release of the valuation allowance on our California research and development tax credit deferred tax assets as a result of certain tax elections made in Cadence’s 2019 California tax return.During the fourth quarter of fiscal 2019, Cadence completed intercompany transfers of certain intangible property rights to its Irish subsidiary, which resulted in the establishment of a deferred tax asset and the recognition of an income tax benefit of $575.6 million. Cadence expected to realize the Irish deferred tax asset in future years and did not provide for a valuation allowance. Cadence considered all available positive and negative evidence, including its past operating results, forecasted earnings, future taxable income, and any prudent and feasible tax planning strategies in making this determination. The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rates of 21% to income before provision (benefit) for income taxes for fiscal 2021, 2020, and 2019 as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
|  | (In thousands) |
| Provision computed at federal statutory income tax rate | $ | 161,880  |  |  | $ | 132,877  |  |  | $ | 100,583  |  |
| State and local income tax, net of federal tax effect | 24,640  |  |  | 20,936  |  |  | 23,221  |  |
| Intercompany transfers of intangible property rights | —  |  |  | —  |  |  | (575,618) |  |
| Foreign income tax rate differential | (26,887) |  |  | (32,589) |  |  | (37,786) |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
| Foreign-derived intangible income deduction | (22,050) |  |  | (3,762) |  |  | (1,201) |  |
| U.S. tax on foreign entities | 51,112  |  |  | 43,615  |  |  | 57,225  |  |
| Stock-based compensation | (55,091) |  |  | (51,226) |  |  | (29,785) |  |
| Change in deferred tax asset valuation allowance | (8,262) |  |  | (9,101) |  |  | 16,796  |  |
| Tax credits | (90,054) |  |  | (89,684) |  |  | (87,793) |  |
| Non-deductible research and development expense | 4,443  |  |  | 5,163  |  |  | 4,363  |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
| Withholding taxes | 23,495  |  |  | 17,189  |  |  | 15,865  |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
| Other | 9,254  |  |  | 8,686  |  |  | 4,119  |  |
| Provision (benefit) for income taxes | $ | 72,480  |  |  | $ | 42,104  |  |  | $ | (510,011) |  |
| Effective tax rate | 9  | % |  | 7  | % |  | (106) | % |

  
  
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