Company: CRUS
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0000772406-25-000041
Chunk: 15

Company: CIRRUS LOGIC, INC.
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 2
Chunk 15
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 the second quarter of fiscal year 2026 was $21.8 million compared to $37.9 million for the second quarter of fiscal year 2025, resulting in effective tax rates of 14.2 percent and 27.0 percent, respectively.  Our income tax expense was $41.7 million and $52.4 million for the first six months of fiscal years 2026 and 2025, respectively, resulting in effective tax rates of 17.8 percent and 26.6 percent, respectively. 

Effective tax rates for fiscal year 2025 were unfavorably impacted by a provision in the Tax Cuts and Jobs Act of 2017 that required research and development (“R&D”) expenditures incurred in tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years depending on the location in which the research activities are conducted, which resulted in increased GILTI inclusions in these periods.  In addition, those periods were unfavorably impacted by U.S. tax rules related to refundable tax credits, including R&D expenditure credits available to us in the United Kingdom, that reduce the amount of foreign tax credits available to offset GILTI.  

The effective tax rates for the second quarter and first six months of fiscal year 2026 were lower than the prior periods presented due to the current quarter enactment of the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), which was signed into law on July 4, 2025.  The OBBBA includes a broad range of tax reform provisions and extends or modifies several provisions initially enacted by the Tax Cuts and Jobs Act of 2017.  Beginning with fiscal year 2026, the OBBBA permanently eliminates the requirement to capitalize and amortize U.S. R&D expenditures.  A number of other provisions of the OBBBA, including modifications to existing international tax provisions, will take effect in fiscal year 2027. 

In connection with its initial analysis of the OBBBA, the Company determined that its forecasted annual effective tax rate for fiscal year 2026 decreased, primarily due to U.S. R&D expenditures no longer being capitalized within GILTI (renamed by the OBBBA as net controlled foreign corporation tested income), which the Company has elected to treat as a period cost. 

Liquidity and Capital Resources 

We require cash to fund our operating expenses and working capital requirements, including outlays for inventory,