Income Taxes

6 Months Ended

Jun. 29, 2019

7 Income Taxes

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 June 29, 2019. 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 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 six months ended June 29, 2019 and June 30, 2018 by $9 million and $13 million, respectively, and increased the Company’s net income per diluted share by $0.13 and $0.17, respectively.

The Company’s effective tax rate for the three months ended June 29, 2019 and June 30, 2018 was 15.9% and 10.8%, respectively.

The increase in the effective income tax rate can be attributed to a

million reduction in the three months ended June 30, 2018 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 and an additional

million tax benefit related to stock-based compensation. This reduction in income tax expense decreased the effective tax rate by

5.6

percentage points for the three months ended June

2018

. 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’s effective tax rate for the six months ended June 29, 2019 and June 30, 2018 was 12.4% and 15.1%, respectively. The effective tax rate for the six months ended June 29, 2019 includes a $3 million income tax benefit related to the finalization of certain regulations relating to the Tax Cuts and Jobs Act (the “2017 Tax Act”). This

income tax benefit decreased the effective tax rate by 1.0 percentage points for the six months ended June 29, 2019. The effective tax rate for the six months ended June 30, 2018 includes $4 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. This additional income tax expense increased the effective tax rate by 1.3 percentage points for the six months ended June 30, 2018. 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 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 three and six months ended June 29, 2019 and June 30, 2018 (in thousands):


	June 29, 2019			June 30, 2018
Balance at the beginning of the period	$	26,108		$	5,843
Net reductions for lapse of statutes taken during the period		(105	)		(191	)
Net additions for tax positions taken during the current period		801			408

Balance at the end of the period	$	26,804		$	6,060

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 June 29, 2019, the Company expects to record additional reductions in the measurement of its unrecognized tax benefits and related net interest and penalties of less than $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.