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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19 Income Taxes The geographical sources of income before income taxes were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
United States |  | $ | (122,766 | ) |  | $ | 47,636 |  |  | $ | 60,388 |
Outside United States |  |  | 139,395 |  |  |  | 116,191 |  |  |  | 103,786 |
Total |  | $ | 16,629 |  |  | $ | 163,827 |  |  | $ | 164,174 |
The provision (benefit) for income taxes consists of the following (in thousands):
|  | Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 5,752 |  |  | $ | 9,556 |  |  | $ | 17,744 |
State |  |  | 3,442 |  |  |  | 808 |  |  |  | 1,324 |
Foreign |  |  | 19,346 |  |  |  | 11,638 |  |  |  | 14,258 |
Total current |  |  | 28,540 |  |  |  | 22,002 |  |  |  | 33,326 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (37,772) |  |  |  | 7,118 |  |  |  | 8,656 |
State |  |  | (5,657) |  |  |  | 289 |  |  |  | 375 |
Foreign |  |  | (911) |  |  |  | 193 |  |  |  | (80) |
Total deferred |  |  | (44,340) |  |  |  | 7,600 |  |  |  | 8,951 |
Total |  | $ | (15,800) |  |  | $ | 29,602 |  |  | $ | 42,277 |
The provision for income taxes differs from the amount computed by applying the U.S. statutory Federal income tax rate of 35% to income before income taxes. A reconciliation of the provision for income taxes is below (in thousands):
|  | Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Provision computed at statutory rate |  | $ | 5,820 |  |  | $ | 57,339 |  |  | $ | 57,461 |
State income tax, net of Federal tax benefit |  |  | (844) |  |  |  | 1,191 |  |  |  | 1,353 |
Asset impairment charge |  |  | 0 |  |  |  | 0 |  |  |  | 3,190 |
Acquisition related items |  |  | 6,499 |  |  |  | 0 |  |  |  | 322 |
Tax credits |  |  | (3,263) |  |  |  | (970) |  |  |  | 0 |
Foreign rate differential |  |  | (32,970) |  |  |  | (26,798) |  |  |  | (21,598) |
Change in valuation allowance |  |  | 2,987 |  |  |  | 0 |  |  |  | 0 |
Section 162(m) limitation |  |  | 740 |  |  |  | 111 |  |  |  | 0 |
Change in contingent income tax reserves |  |  | 3,105 |  |  |  | 0 |  |  |  | 0 |
Other |  |  | 2,126 |  |  |  | (1,271) |  |  |  | 1,549 |
Provision for income taxes |  | $ | (15,800) |  |  | $ | 29,602 |  |  | $ | 42,277 |
The primary reason for the difference between the US statutory rate of 35% and Zebra’s effective tax rate is due to a combination of higher profits in lower rate international jurisdictions, the Singapore tax holiday, the research & experimental credit, which is offset by changes in the valuation allowance, uncertain tax positions, the non-deductible portion of the acquisition expenses and other items. In conjunction with the opening of Zebra’s Singapore distribution center and the establishment of Singapore as a regional headquarter location in 2009, Zebra negotiated a 10% income tax rate with the Singapore Economic Development Board. The negotiated rate is a reduction from the then current statutory rate of 17%. This agreement reduced Zebra’s consolidated income taxes by approximately $2.0 million, $1.9 million and $2.0 million in 2014, 2013 and 2012, respectively. Due to Zebra’s increased business operations in Malaysia, it is unclear whether Zebra’s Singapore headquarters will meet the additional requirements necessary to qualify for the 10% rate in 2015 and 2016. Tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands):
|  | As of December 31, |
|  | 2014 |  |  | 2013 |
Deferred tax assets: |  |  |  |  |  |  |  |
Deferred rent |  | $ | 752 |  |  | $ | 409 |
Accrued vacation |  |  | 5,318 |  |  |  | 2,153 |
Accrued bonus |  |  | 11,642 |  |  |  | 2,916 |
Deferred compensation |  |  | 2,208 |  |  |  | 1,816 |
Inventory items |  |  | 1,493 |  |  |  | 6,061 |
Allowance for doubtful accounts and other receivables |  |  | 5,361 |  |  |  | 118 |
Other accruals |  |  | 50,491 |  |  |  | 5,680 |
Deferred revenue |  |  | 78,351 |  |  |  | 5,469 |
Equity based compensation expense |  |  | 14,189 |  |  |  | 12,337 |
Unrealized gain on securities |  |  | 4,621 |  |  |  | 558 |
Unrealized loss on other investments |  |  | 4,075 |  |  |  | 410 |
Net operating loss carry-forwards |  |  | 27,016 |  |  |  | 597 |
Tax credits |  |  | 62,040 |  |  |  | 0 |
Valuation allowance |  |  | (56,712) |  |  |  | (267) |
Total deferred tax assets |  |  | 210,845 |  |  |  | 38,257 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Unrealized loss on other investments |  |  | (1,332) |  |  |  | (1,450) |
Depreciation and amortization |  |  | (283,847) |  |  |  | (42,489) |
Undistributed Earnings |  |  | (2,747) |  |  |  | 0 |
Total deferred tax liabilities |  |  | (287,926) |  |  |  | (43,939) |
Net deferred tax liabilities |  | $ | (77,081) |  |  | $ | (5,682) |
Zebra earns a significant amount of our operating income outside the U.S. With the exception of the acquired unrepatriated earnings related to the Enterprise acquisition, it is the company’s policy to consider foreign earnings and profits to be permanently reinvested in foreign jurisdictions. As part of Enterprise, the acquired earnings & profits and previously taxed income (“PTI”), including excess cash balances pursuant to the Master Acquisition Agreement (“MAA”) of the newly acquired MSI foreign subsidiaries will not be permanently reinvested. As a result, Zebra has established a deferred tax liability in purchase accounting in the amount of $2.7 million. Zebra has not recognized deferred tax liabilities for unremitted earnings of approximately $466.4 million and $354.2 million as of December 31, 2014 and 2013, respectively. It is not practicable to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. Included in deferred tax assets are amounts related to federal and state net operating losses (“NOL”) that resulted from Zebra’s acquisition of WhereNet Corp and Enterprise. As of December 31, 2014, Zebra has approximately $156.3 million of net operating loss carry-forwards, of which $8.8 million is limited by Section 382, available to offset future taxable income that begin to expire in 2022. As of December 31, 2014, Zebra had approximately $26.8 million of state net operating loss carry-forwards that begin to expire in 2017. Zebra has approximately $30.1 million of research & experimental credits that begin to expire in 2025 and approximately $1.7 million of foreign tax credits that begin to expire in 2017. Lastly, Zebra has approximately $3.9 million of alternative minimum tax credits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2014 |  | $ | 4,000 |
Additions for tax positions related to the current year |  |  | 700 |
Additions for tax positions related to prior years |  |  | 2,400 |
Additions related to 2014 acquisition |  |  | 11,800 |
Reductions for tax positions of prior years |  |  | 0 |
Balance at December 31, 2014 |  | $ | 18,900 |
The total impact of unrecognized tax benefits, if recognized, that would impact the effective tax rate is $0.7 million. Zebra believes it is reasonably possible that the recorded amount of gross unrecognized tax benefit may decrease by $2.8 million within the next twelve months as a result of tax planning. The Singapore tax authorities have issued an assessment resulting in additional withholding tax and penalties relating to royalty payments made from 2009 to 2013. These royalty payments relate to commercial rights not covered by the current royalty exemption in place resulting in a withholding tax of approximately $3.2 million and penalties of approximately $0.6 million. The withholding tax will be offset as a foreign tax credit in the U.S. resulting in no impact to the effective tax rate. Zebra’s continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. Zebra has accrued $3.1 million and $0 of interest and penalties in the consolidated balance sheet as of December 31, 2014 and 2013, respectively. Zebra is currently undergoing an audit of the 2013 US federal income tax returns. The tax years 2010 through 2014 remain open to examination by multiple state taxing jurisdictions. Below is a summary of open tax years by major jurisdiction outside of the United States.
China |  | 2002 - 2014
France |  | 2010 - 2014
Germany |  | 2008 - 2014
India |  | 1997 - 2014
Japan |  | 2011 - 2014
United Kingdom |  | 2008 - 2014

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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