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KLA Corp. Avoids $101.1 Million Tax Bill With IP Transfer
Semiconductor firm nets more than $300 million from intra-entity asset transfer that will benefit shareholders through 2036.
November 10, 2021
Net income for KLA Corp. (KLAC), a process control and yield management firm in the semiconductor space, jumped 58.3% in the latest quarter excluding a non-recurring tax benefit. The company paid no tax on that profit due to an intra-entity transfer of intellectual property (IP) rights. In the latest 10-Q, KLA revealed transferring certain IP rights to Singapore resulted in an effective tax rate for the quarter of (39.4%):

“...our Singapore subsidiary recognized deferred tax assets for the book and tax basis difference of the eligible transferred IP rights. As a result of these transactions, we recorded deferred tax assets and related tax benefits of $395 million, based on the fair value of the eligible IP rights transferred in September 2021.”

The move will benefit KLA shareholders through the year 2036. Under Singapore law, the tax-deductible amortization related to the transferred IP rights will be recognized over 15 years. The non-recurring tax benefit added $302.1 million to the company’s reported net income. Based on KLA’s 13.2% tax rate from the prior quarter, the move saved KLA and its shareholders from a $101.1 million quarterly tax bill.
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