Semiconductor Equipment & Materials Intl

Part X, Line 2:

“Although SEMI has been recognized by the IRS and FTB as exempt from U.S. federal and California income and franchise taxes on activities related to its exempt purpose, it is not exempt from income taxes in its foreign jurisdictions or on its Unrelated Business Income. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that those assets will be realized. In evaluating uncertain tax positions, the Group recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. The Group evaluated all tax positions for which the statute of limitations remained open and determined the impact on the financial statements for any years still subject to a potential tax audit. Any interest and penalties are classified as general and administrative expense in the consolidated statements of activities and changes in net assets. SEMI is a not-for-profit trade association recognized by the IRS and FTB as exempt from federal and state income taxes in the United States. However, certain activities in other countries, such as trade shows, are subject to foreign income taxes on income generated in their respective jurisdictions. Accordingly, foreign income taxes are included in general and administrative expenses for regional offices in the accompanying consolidated statements of activities and changes in net assets. Net income tax expense was as follows for the years ended December 31 (in thousands): 2016 2015 ----- ----- Current $ 400 $ 480 Deferred $ 10 $ 10 ----- ----- Total $ 410 $ 490 ===== ===== Net deferred tax assets (liabilities) included in the consolidated statements of financial position approximated $70,000 and $(20,000) at December 31, 2016 and 2015, respectively. The amounts consist principally of deferred revenues and deferred expenses related to exhibitions, accruals, and depreciation. No valuation allowance was recorded at December 31, 2016 and 2015, as the Group concluded that all of the deferred tax assets will be realized in future years. Net deferred assets are recorded as deferred expenses and other current assets on the consolidated statements of financial position and any change is recorded with current year tax expense as general and administrative expenses for international offices on the consolidated statements of activities and changes in net assets. Additionally, SEMI generates unrelated business income, primarily from its advertising activities. These activities have historically generated losses and SEMI has accumulated net operating loss carryforwards ("NOLs"). As of December 31, 2016 and 2015, SEMI had NOLs of approximately $5,420,000 and $5,400,000, respectively. There is no limitation on the use of these NOLs and they will begin”