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Income Taxes | 3 Months Ended
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Mar. 31, 2019
Income Taxes | T. INCOME TAXES The effective tax rate for the three months ended March 31, 2019 and April 1, 2018 was (16.1)% and 9.2%, respectively. The decrease in the effective tax rate from the three months ended April 1, 2018 to the three months ended March 31, 2019 resulted from discrete tax benefits from the release of reserves for uncertain tax positions, increases in benefits related to the U.S. foreign derived intangible income deduction and U.S. research and development tax credits, a decrease in expense related to the uncertain tax positions for transfer pricing and a reduction in discrete tax expense associated with remeasurement of deferred tax assets as a result of reductions in tax rates. These reductions were partially offset by a projected shift in the geographic distribution of income, which increases the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, an increase in the U.S. global intangible low-taxed income inclusion and a reduction in the discrete benefit from stock based compensation. The effective tax rate for the three months ended March 31, 2019 and April 1, 2018 was lower than the expected federal statutory rate because of the favorable effect of statutory rates applicable to income earned outside the United States, the benefit from U.S. research and development tax credits, the benefit from stock based compensation deductions, and the benefit of the U.S. foreign derived intangible income deduction partially offset by the U.S. global intangible low-taxed income inclusion. The effective tax rate for the three months ended March 31, 2019 was also reduced by discrete tax benefits from the release of reserves for uncertain tax positions. The effective rate for the three months ended April 1, 2018 was also increased by additions to the uncertain tax positions for transfer pricing. Discrete tax items recorded in the three months ended March 31, 2019 amounted to $30.2 million of net benefit. The $30.2 million of discrete tax benefit consisted of $ 28.8 million of benefit resulting from the release of reserves for uncertain tax positions, $3.8 million of benefit from stock based compensation, $2.9 million of expense from an increase in U.S. state valuation allowances and $0.5 million of other discrete tax benefit. The release of reserves for uncertain tax positions and the increase in U.S. state valuation allowances were associated with the conclusion of the U.S. Federal income tax audit for the year ended December 31, 2015. Discrete tax items recorded in the three months ended April 1, 2018 amounted to $6.0 million of net benefit. The $6.0 million of discrete tax benefit consisted of $7.6 million of benefit from stock based compensation, $1.7 million of expense from the write down of deferred tax assets as a result of reductions in tax rates, $0.7 million of other discrete tax benefits and $0.6 million of other discrete tax expenses. On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of March 31, 2019, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more-likely-than-not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets. As of March 31, 2019 and December 31, 2018, Teradyne had $13.5 million and $43.4 million, respectively, of reserves for uncertain tax positions. The $29.9 million net decrease in reserves for uncertain tax positions is composed of reductions in uncertain tax positions amounting to $22.4 million related to transfer pricing and $7.4 million associated with U.S. research and development tax credits. These reductions resulted from the conclusion of the U.S. Federal income tax audit for the year ended December 31, 2015. As of March 31, 2019, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $0.2 million in the next twelve months, as a result of a lapse of statutes of limitation. The estimated decrease is composed of reserves relating to local tax incentives. Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of March 31, 2019 and December 31, 2018, $0.6 million and $0.3 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the three months ended March 31, 2019 and April 1, 2018, expense of $0.3 million and $0.1 million, respectively, was recorded for interest and penalties related to income tax items. Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended March 31, 2019 was $2.1 million, or $0.01 per diluted share. The tax savings due to the tax holiday for the three months ended April 1, 2018 was $3.0 million, or $0.01 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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