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Income Taxes | 3 Months Ended
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Mar. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes |
7 | Income Taxes
In December 2017, the U.S. enacted legislation informally referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). For the year ended December 31, 2017 the Company accrued a $550 million tax provision related to the 2017 Tax Act. The $550 million expense was comprised of $490 million related to the federal toll charge, $40 million for state income taxes and foreign withholding taxes and $20 million for the revaluation of the Company’s deferred tax assets and liabilities at the new federal tax rate of 21%. The Company continues to analyze its information and review new guidance from the Internal Revenue Service and state tax authorities. The Company has not made any adjustment to its provisional accrual established at December 31, 2017 during the three months ended March 31, 2018. As part of the 2017 Tax Act, there is a provision for the taxation of certain off-shore earnings referred to as the Global Intangible Low-Taxed Income (“GILTI”) provision. This new provision taxes the off-shore earnings at a rate of 10.5%, partially offset with foreign tax credits. In connection with this new provision, the Company has adopted an accounting policy to treat this new tax as a current period cost. The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the statutory tax rates are 21%, 12.5%, 19% and 17%, respectively, as of March 31, 2018. The Company has a contractual tax rate of 0% on qualifying activities in Singapore through March 2021, based upon the achievement of certain contractual milestones, which the Company expects to continue to meet. The effect of applying the contractual tax rate rather than the statutory tax rate to income from qualifying activities in Singapore increased the Company’s net income for the three months ended March 31, 2018 and April 1, 2017 by $6 million and $5 million, respectively, and increased the Company’s net income per diluted share by $0.07 and $0.06, respectively. The Company’s effective tax rate for the three months ended March 31, 2018 and April 1, 2017 was 20.3% and 7.0%, respectively. The effective tax rate for the three months ended March 31, 2018 reflects the enactment of the 2017 Tax Act. The most significant changes applicable to the Company under the new law are the reduction in the U.S. federal income tax rate from 35% to 21% and the new GILTI provision described above. The impact of the GILTI provision is an increase of approximately 2.3 percentage points to our effective tax rate as of March 31, 2018. In addition, the tax provision for the three months ended March 31, 2018 includes a $6 million tax benefit related to stock-based compensation and $12 million of additional income tax expense related to the change in foreign currency exchange rates on the earnings taxed in December 2017 under the toll charge of the 2017 Tax Act. The net impact of these two discrete items in the three months ended March 31, 2018 was an increase in the effective tax rate of 4.7 percentage points. The effective tax rate for the three months ended April 1, 2017 included a $7 million tax benefit related to stock-based compensation. This 2017 tax benefit reduced the effective tax rate by 6.3 percentage points. The remaining differences between the effective tax rates can primarily be attributed to differences in the proportionate amounts of pre-tax income recognized in jurisdictions with different effective tax rates. The Company accounts for its uncertain tax return reporting positions in accordance with the accounting standards for income taxes, which require financial statement reporting of the expected future tax consequences of uncertain tax reporting positions on the presumption that all concerned tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of unrecognized tax benefits associated with those reporting positions for the time value of money. The Company continues to classify interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The following is a summary of the activity of the Company’s unrecognized tax benefits for the three months ended March 31, 2018 and April 1, 2017 (in thousands):
|  | March 31, 2018 |  |  | April 1, 2017 |
Balance at the beginning of the period |  | $ | 5,843 |  |  | $ | 9,964 |
Net changes in uncertain tax benefits |  |  | 94 |  |  |  | (717 | )
Balance at the end of the period |  | $ | 5,937 |  |  | $ | 9,247 |
With limited exceptions, the Company is no longer subject to tax audit examinations in significant jurisdictions for the years ended on or before December 31, 2013. However, carryforward tax attributes that were generated in years beginning on or before January 1, 2014 may still be adjusted upon examination by tax authorities if the attributes are utilized. The Company continuously monitors the lapsing of statutes of limitations on potential tax assessments for related changes in the measurement of unrecognized tax benefits, related net interest and penalties, and deferred tax assets and liabilities. As of March 31, 2018, the Company expects to record additional reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of approximately $1 million within the next twelve months due to potential tax audit settlements and the lapsing of statutes of limitations on potential tax assessments. The Company does not expect to record any other material reductions in the measurement of its unrecognized tax benefits within the next twelve months. The Company adopted new accounting guidance which eliminates the deferral of tax effects on intra-entity transfers other than inventory and requires an entity to recognize the income tax consequences when the transfer occurs. The Company adopted this standard as of January 1, 2018 with a $4 million charge to beginning retained earnings in the consolidated balance sheet.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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