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Income Taxes | 9 Months Ended
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Sep. 28, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Effective 2018, the Tax Cuts and Jobs Act (“Tax Act”) reduced U.S. federal tax from 35% to 21% and created new taxes on certain foreign-source earnings (referred to as “GILTI”) and certain related-party payments. The Company recorded reasonable estimates as provisional amounts arising from the Tax Act in the fourth quarter of fiscal 2017. As of the third quarter of fiscal 2018, the Company made immaterial adjustments to its provisional tax estimates to reflect the impact of additional analysis of the transition tax liability. The Company continues to perform necessary analysis by incorporating ongoing legislative guidance and accounting interpretations. Additionally, the Company has not yet determined its policy election as to whether it will recognize deferred taxes for basis differences expected to reverse as GILTI or whether GILTI will be accounted for as a period cost. The accounting remains provisional and the Company expects to complete its analysis for the tax effects of the Tax Act by the end of fiscal 2018. For the third quarter of fiscal 2018, the Company’s effective income tax rate resulted in a benefit of 15%, compared to an expense of 20% in the corresponding period in fiscal 2017. The change is primarily due to a benefit from reserve releases due to expiration of the U.S. federal statute of limitations for certain tax years of approximately twenty-two percentage points, a benefit from the 2017 federal return to provision adjustments of approximately nine percentage points, and a benefit from the reduced U.S. federal tax rate of approximately eight percentage points, partially offset by increased U.S. tax on certain foreign earnings of four percentage points related mainly to a provisional GILTI tax. For the first three quarters of fiscal 2018, the Company’s effective income tax rate was 6% as compared to 23% in the corresponding period in fiscal 2017, primarily due to the reduced U.S. federal tax rate of approximately eight percentage points, a benefit from reserve releases of approximately seven percentage points due to expiration of the U.S. federal statute of limitations, a benefit from 2017 federal return to provision adjustments of approximately three percentage points, and a benefit from other items of approximately two percentage points, partially offset by increased U.S. tax on certain foreign earnings of three percentage points related mainly to a provisional GILTI tax. The Company's effective tax rate is lower than the newly enacted U.S. federal statutory rate of 21% primarily due to reserve releases, favorable tax rates associated with certain earnings from operations in lower-tax jurisdictions, a benefit from U.S. federal R&D credit and stock-based compensation deductions. The Company and its subsidiaries are subject to U.S. federal and state and foreign income tax. The Company is currently in different stages of multiple year examinations by the Internal Revenue Service (the "IRS") as well as various state and foreign taxing authorities. In addition, as discussed below, the Company has a pending matter in U.S. tax court regarding fiscal 2011. The Company believes its reserves are more likely than not to be adequate to cover final resolution of all open tax matters. In the first quarter of fiscal 2015, the Company received a Notice of Proposed Adjustment from the IRS for the fiscal years 2010 and 2011. The proposed adjustments primarily relate to the valuations of intercompany transfers of acquired intellectual property. The assessments of tax and penalties for the years in question total $67.0 million. In January 2018, the Company and IRS reached agreement to settle certain aspects of the assessments constituting $15.8 million of the total $67.0 million assessment. The Company has paid $8.6 million during 2018 to settle the $15.8 million assessment. The Company’s reserves were adequate to cover the partial agreement. On March 7, 2018 the Company received a formal Notice of Deficiency for fiscal year 2011, assessing tax and penalties totaling $51.2 million for the remainder of the assessment. The Company does not agree with the IRS position. Accordingly, on June 1, 2018, the Company filed a petition with the U.S. tax court relating to the Notice of Deficiency. On August 3, 2018, the IRS filed its response to the Company’s petition, with no changes to its position. Although timing of the resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease (whether by payment, release or a combination of both) in the next 12 months by up to $7.0 million primarily related to release of U.S. federal tax reserve due to the statute of limitation expiration of fiscal year 2013. Unrecognized tax benefits of $62.9 million and $68.5 million as of the end of the third quarter of fiscal 2018 and fiscal year end 2017, respectively, if recognized, would favorably affect the effective income tax rate in future periods. Unrecognized tax benefits are recorded in Other non-current liabilities and in the deferred tax accounts in the accompanying Condensed Consolidated Balance Sheets. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of the end of the third quarter of fiscal 2018 and fiscal year end 2017, the Company had accrued $12.0 million and $12.7 million, respectively, for interest and penalties, which are recorded in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.

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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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