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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 10 Income Taxes Income tax data for the years ended December 31, 2018, 2017 and 2016 is as follows (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
The components of income from operations before income taxes are as follows: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 57,822 |  |  | $ | 55,751 |  |  | $ | 35,154 |
Foreign |  |  | 624,324 |  |  |  | 585,346 |  |  |  | 564,960 |
Total |  | $ | 682,146 |  |  | $ | 641,097 |  |  | $ | 600,114 |
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
The current and deferred components of the provision for income taxes on operations are as follows: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 85,947 |  |  | $ | 575,276 |  |  | $ | 77,407 |
Deferred |  |  | 2,405 |  |  |  | 45,510 |  |  |  | 1,204 |
Total |  | $ | 88,352 |  |  | $ | 620,786 |  |  | $ | 78,611 |
The jurisdictional components of the provision for income taxes on operations are as follows: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 24,021 |  |  | $ | 535,777 |  |  | $ | 19,693 |
State |  |  | (9,717 | ) |  |  | 26,561 |  |  |  | 3,090 |
Foreign |  |  | 74,048 |  |  |  | 58,448 |  |  |  | 55,828 |
Total |  | $ | 88,352 |  |  | $ | 620,786 |  |  | $ | 78,611 |
The differences between income taxes computed at the United States statutory rate and the provision for income taxes are summarized as follows for the years ended December 31, 2018, 2017 and 2016 (in thousands):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Federal tax computed at U.S. statutory income tax rate |  | $ | 143,251 |  |  | $ | 224,384 |  |  | $ | 210,040 |
Enactment of the 2017 Tax Act |  |  | (6,059 | ) |  |  | 550,000 |  |  |  | — |
Foreign currency exchange impact on distributed earnings |  |  | 7,495 |  |  |  | — |  |  |  | — |
GILTI, net of foreign tax credits |  |  | 13,727 |  |  |  | — |  |  |  | — |
Settlement of tax audits |  |  | — |  |  |  | 706 |  |  |  | 345 |
State income tax, net of federal income tax benefit |  |  | 2,910 |  |  |  | 1,289 |  |  |  | 2,008 |
Net effect of foreign operations |  |  | (66,092 | ) |  |  | (134,117 | ) |  |  | (133,518 | )
Effect of stock-based compensation |  |  | (9,089 | ) |  |  | (19,566 | ) |  |  | — |
Other, net |  |  | 2,209 |  |  |  | (1,910 | ) |  |  | (264 | )
Provision for income taxes |  | $ | 88,352 |  |  | $ | 620,786 |  |  | $ | 78,611 |
The four principal jurisdictions in which the Company manufactures are the U.S., Ireland, the U.K. and Singapore, where the statutory tax rates were 21%, 12.5%, 19% and 17%, respectively, as of December 31, 2018. The Company has a contractual tax rate in Singapore 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 during the years ended December 31, 2018, 2017 and 2016 by $28 million, $25 million and $23 million, respectively, and increased the Company’s net income per diluted share by $0.36, $0.31 and $0.29, respectively. The Company’s effective tax rates were 13.0%, 96.8% and 13.1% for the years ended December 31, 2018, 2017 and 2016, respectively, and were impacted by the following:
| • |  | 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 consisted of $490 million related to the federal transition tax, $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%. This provision reduced net income per diluted share by $6.82 in 2017, and the Company’s effective tax rate was 11.0% excluding this $550 million provision.
| • |  | During 2018, the Internal Revenue Service issued proposed regulations on the federal transition tax and various other aspects of the Tax Reform law. The Company finalized its analysis of the transition tax and related liabilities, including uncertain tax positions, in the fourth quarter of 2018 pursuant to U.S. Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 118. As a result of the new guidance issued and additional work to complete the calculation of its federal transition tax, the Company reduced its provisional accrual for federal, state and foreign taxes by net $24 million during 2018. In addition, the Company also assessed its uncertain tax positions related to these taxes and accrued income tax reserves of $18 million during 2018. The net favorable impact to the 2018 provision for income taxes is $6 million.
| • |  | The provision for income taxes for 2018 includes a $7 million expense related to the 2017 Tax Act. This additional tax results from the change in foreign currency exchange rates on the earnings taxed on December 31, 2017 under 2017 Tax Act as compared with the foreign currency exchange rates on the date of distribution of assets into the U.S. We do not expect this expense to recur in future periods.
| • |  | The 2018 effective income tax rate of 13.0% was impacted by the reduction in the U.S. federal income tax rate from 35% to 21% as a result of the 2017 Tax Act, which decreased the Company’s effective tax rate by 2.0 percentage points as compared to 2017. The 2017 Tax act also added a new Global Intangible Low-Taxed Income (GILTI) tax, which increased the Company’s 2018 effective tax rate by approximately 2.0 percentage points.
| • |  | After the completion of the Company’s review of its capital allocation strategy in the fourth quarter of 2018, the Company determined that it will provide income taxes on all future foreign earnings from 2018 forward. As a result, this change added 0.6 percentage points to the 2018 effective tax rate as compared to 2017.
| • |  | In addition, the reduction in the U.S. federal income tax rate from 35% to 21% as a result of the 2017 Tax Act also reduced the 2018 tax benefit on stock compensation. The Company recorded a tax benefit on stock-based compensation in 2018 and 2017 that decreased income tax expense by $9 million and $20 million, respectively, and added $0.11 and $0.24 to net income per diluted share, respectively.
| • |  | The difference between the 2017 and 2016 effective tax rates can be attributed primarily to the 2016 provision for income taxes including a $3 million tax benefit (0.7 percentage points) related to the release of a valuation allowance on certain net operating loss carryforwards.
The remaining differences between 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 tax effects of temporary differences and carryforwards which give rise to deferred tax assets and deferred tax liabilities are summarized as follows (in thousands):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses and credits |  | $ | 63,052 |  |  | $ | 75,630 |
Depreciation |  |  | 7,495 |  |  |  | 5,952 |
Amortization |  |  | 3,633 |  |  |  | — |
Stock-based compensation |  |  | 9,984 |  |  |  | 9,815 |
Deferred compensation |  |  | 27,939 |  |  |  | 21,434 |
Revaluation of equity investments and licenses |  |  | 3,148 |  |  |  | 3,465 |
Inventory |  |  | 4,588 |  |  |  | 4,864 |
Accrued liabilities and reserves |  |  | 7,213 |  |  |  | 8,230 |
Other |  |  | 8,727 |  |  |  | 11,873 |
Total deferred tax assets |  |  | 135,779 |  |  |  | 141,263 |
Valuation allowance |  |  | (53,893 | ) |  |  | (62,098 | )
Deferred tax assets, net of valuation allowance |  |  | 81,886 |  |  |  | 79,165 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Capitalized software |  |  | (19,491 | ) |  |  | (19,630 | )
Amortization |  |  | — |  |  |  | (3,394 | )
Indefinite-lived intangibles |  |  | (13,753 | ) |  |  | (13,254 | )
Deferred tax liability on foreign earnings |  |  | (20,443 | ) |  |  | (21,000 | )
Total deferred tax liabilities |  |  | (53,687 | ) |  |  | (57,278 | )
Net deferred tax assets |  | $ | 28,199 |  |  | $ | 21,887 |
The Company has gross foreign net operating losses of $240 million that do not expire under current laws. As of December 31, 2018, the Company has provided a deferred tax valuation allowance of $54 million, of which $51 million relates to certain foreign net operating losses. The Company’s net deferred tax assets associated with net operating losses and tax credit carryforwards are approximately $12 million as of December 31, 2018, which represent the future tax benefit of foreign net operating loss carryforwards that do not expire under current law. As a result of the adoption of new accounting guidance related to stock-based compensation in 2017, the Company no longer records excess tax benefits related to stock-based compensation in equity. The income tax benefits associated with equity compensation expense recognized for tax purposes and credited to income tax expense were $9 million and $20 million for the years ended December 31, 2018 and 2017, respectively. For the year ended December 31, 2016, the income tax benefit recognized for tax purposes and credited to additional paid-in capital was $14 million. The Company accounts for its uncertain tax positions in accordance with the accounting standards for income taxes, which require financial statement reporting of the expected future tax consequences of uncertain tax positions on the presumption that all concerned tax authorities possess full knowledge of those tax positions, as well as all of the pertinent facts and circumstances, but prohibit any discounting of unrecognized tax benefits associated with those 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 uncertain tax positions for the years ended December 31, 2018, 2017 and 2016 (in thousands):
|  | 2018 |  |  | 2017 |  |  | 2016 |
Balance at the beginning of the period |  | $ | 5,843 |  |  | $ | 9,964 |  |  | $ | 14,450 |
Net reductions for settlement of tax audits |  |  | — |  |  |  | (22 | ) |  |  | (828 | )
Net reductions for lapse of statutes taken during the period |  |  | (436 | ) |  |  | (5,178 | ) |  |  | (4,998 | )
Net additions for tax positions taken during the prior period |  |  | 17,651 |  |  |  | — |  |  |  | — |
Net additions for tax positions taken during the current period |  |  | 3,050 |  |  |  | 1,079 |  |  |  | 1,340 |
Balance at the end of the period |  | $ | 26,108 |  |  | $ | 5,843 |  |  | $ | 9,964 |
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 December 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. In addition, upon completion of the Company’s review of its capital allocation strategy in the fourth quarter of 2018, the Company has determined that it will provide income taxes on all future foreign earnings. However, the Company will continue to be permanently reinvested in relation to the cumulative historical outside basis difference that is not related to earnings. The determination of the unrecognized deferred tax liability on cumulative historical outside basis differences that are not related to earnings is not practicable. 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://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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