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Income Taxes | 12 Months Ended
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Sep. 29, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consists of the following components (in millions):
| Fiscal Years Ended
| September 29, 2017 |  | September 30, 2016 |  | October 2, 2015
United States | $ | 681.2 |  |  | $ | 697.5 |  |  | $ | 602.1 |
Foreign | 575.8 |  |  | 503.1 |  |  | 421.5 |
Income before income taxes | $ | 1,257.0 |  |  | $ | 1,200.6 |  |  | $ | 1,023.6 |
The provision for income taxes consists of the following (in millions):
| Fiscal Years Ended
| September 29, 2017 |  | September 30, 2016 |  | October 2, 2015
Current tax expense (benefit): |  |  |  |  |
Federal | $ | 215.7 |  |  | $ | 181.8 |  |  | $ | 199.5 |
State | 0.3 |  |  | 0.1 |  |  | (0.5 | )
Foreign | 24.4 |  |  | 25.8 |  |  | 33.9 |
| 240.4 |  |  | 207.7 |  |  | 232.9 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | 5.0 |  |  | (0.8 | ) |  | (2.0 | )
Foreign | 1.4 |  |  | (1.5 | ) |  | (5.6 | )
| 6.4 |  |  | (2.3 | ) |  | (7.6 | )
Provision for income taxes | $ | 246.8 |  |  | $ | 205.4 |  |  | $ | 225.3 |
The actual income tax expense is different than that which would have been computed by applying the federal statutory tax rate to income before income taxes. A reconciliation of income tax expense as computed at the United States federal statutory income tax rate to the provision for income tax expense is as follows (in millions):
| Fiscal Years Ended
| September 29, 2017 |  | September 30, 2016 |  | October 2, 2015
Tax expense at United States statutory rate | $ | 439.9 |  |  | $ | 420.2 |  |  | $ | 358.3 |
Foreign tax rate difference | (179.4 | ) |  | (164.1 | ) |  | (120.9 | )
Research and development credits | (16.3 | ) |  | (33.7 | ) |  | (15.0 | )
Change in tax reserve | 12.6 |  |  | 18.9 |  |  | 25.5 |
Change in valuation allowance | 11.8 |  |  | 13.9 |  |  | 4.4 |
Domestic production activities deduction | (19.8 | ) |  | (19.1 | ) |  | (19.7 | )
Audit settlements and adjustments | — |  |  | (21.4 | ) |  | — |
Other, net | (2.0 | ) |  | (9.3 | ) |  | (7.3 | )
Provision for income taxes | $ | 246.8 |  |  | $ | 205.4 |  |  | $ | 225.3 |
The Company operates in foreign jurisdictions with income tax rates lower than the United States tax rate of 35.0%. The Company’s tax benefits related to foreign earnings taxed at a rate less than the United States federal rate were $179.4 million and $164.1 million for the fiscal years ended September 29, 2017, and September 30, 2016, respectively. The Company concluded a Canadian examination of its federal income tax returns for fiscal years 2010 and 2011 during fiscal 2017. As a result, the Company decreased the reserve for uncertain tax positions which resulted in the recognition of an income tax benefit of $1.2 million in fiscal 2017. During the fiscal year ended September 30, 2016, the Company concluded an IRS examination of its federal income tax returns for fiscal years 2012 and 2013. The Company agreed to various adjustments to its fiscal year 2012 and 2013 tax returns that resulted in the recognition of tax expense of $2.6 million during the fiscal year ended September 30, 2016. With the conclusion of the audit, the Company decreased the reserve for uncertain tax positions, which resulted in the recognition of an income tax benefit of $24.0 million in fiscal 2016. In December 2015, the United States Congress enacted the Protecting Americans from Tax Hikes Act of 2015, extending numerous tax provisions that had expired. This legislation included a permanent extension of the federal research and experimentation tax credit. As a result of the enactment of this legislation, $11.6 million of federal research and experimentation tax credits that were earned in the fiscal year ended October 2, 2015 reduced the Company’s tax expense and tax rate during the fiscal year ended September 30, 2016. The federal tax credit available under the Internal Revenue Code for research and development expenses expired on December 31, 2014. As of October 2, 2015, the United States Congress had not taken action to extend the Research and Experimentation Tax Credit. Accordingly, the income tax provision for the year ended October 2, 2015, did not reflect the impact of any research and development tax credits that would have been earned after December 31, 2014, had the federal tax credit not expired. On December 19, 2014, the Tax Increase Prevention Act of 2014 was signed into law, extending the Research and Experimentation Tax Credit to reinstate and retroactively extend credits earned in calendar year 2014. As a result of the enactment of this law, $11.0 million of federal research and development tax credits that were earned in fiscal 2014 reduced the tax rate during fiscal 2015. These credits were not reflected in the fiscal 2014 tax rate. On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore. The Company operates under a tax holiday in Singapore, which is effective through September 30, 2020 and is conditional upon the Company’s compliance with certain employment and investment thresholds in Singapore. The impact of the tax holiday decreased Singapore’s taxes by $37.4 million and $30.8 million for the fiscal years ended September 29, 2017, and September 30, 2016, respectively, which resulted in tax benefits of $0.20 and $0.16 of diluted earnings per share, respectively. Deferred income tax assets and liabilities consist of the tax effects of temporary differences related to the following (in millions):
| Fiscal Years Ended
| September 29, 2017 |  | September 30, 2016
Deferred tax assets: |  |  |
Inventory | $ | 7.4 |  |  | $ | 8.1 |
Bad debts | 0.1 |  |  | 0.2 |
Accrued compensation and benefits | 7.1 |  |  | 5.4 |
Product returns, allowances and warranty | 5.2 |  |  | 8.6 |
Restructuring | 0.1 |  |  | 0.8 |
Intangible assets | 10.6 |  |  | 11.6 |
Share-based and other deferred compensation | 40.2 |  |  | 40.2 |
Net operating loss carry forwards | 7.7 |  |  | 7.4 |
Non-United States tax credits | 20.1 |  |  | 14.7 |
State tax credits | 71.0 |  |  | 64.0 |
Property, plant and equipment | 7.9 |  |  | — |
Other, net | 2.7 |  |  | 5.6 |
Deferred tax assets | 180.1 |  |  | 166.6 |
Less valuation allowance | (90.9 | ) |  | (79.1 | )
Net deferred tax assets | 89.2 |  |  | 87.5 |
Deferred tax liabilities: |  |  |
Prepaid insurance | (0.9 | ) |  | (0.8 | )
Property, plant and equipment | (24.8 | ) |  | (16.5 | )
Intangible assets | (6.2 | ) |  | (8.4 | )
Net deferred tax liabilities | (31.9 | ) |  | (25.7 | )
Total net deferred tax assets | $ | 57.3 |  |  | $ | 61.8 |
In accordance with GAAP, management has determined that it is more likely than not that a portion of its historic and current year income tax benefits will not be realized. As of September 29, 2017, the Company has maintained a valuation allowance of $90.9 million. This valuation allowance is comprised of $71.0 million related to United States state tax credits, and $19.9 million related to foreign deferred tax assets. The Company does not anticipate sufficient taxable income or tax liability to utilize these state and foreign credits. If these benefits are recognized in a future period the valuation allowance on deferred tax assets will be reversed and up to a $90.9 million income tax benefit may be recognized. The Company will need to generate $141.6 million of future United States federal taxable income to utilize its United States deferred tax assets as of September 29, 2017. The Company believes that future reversals of taxable temporary differences, and its forecast of continued earnings in its domestic and foreign jurisdictions, support its decision to not record a valuation allowance on other deferred tax assets. Deferred tax assets are recognized for foreign operations when management believes it is more likely than not that the deferred tax assets will be recovered during the carry forward period. The Company will continue to assess its valuation allowance in future periods. As of September 29, 2017, the Company has United States federal net operating loss carry forwards of approximately $8.8 million. The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions. The United States federal net operating loss carry forwards expire at various dates through 2035. The Company also has state income tax credit carry forwards of $71.0 million, net of federal benefits, for which the Company has provided a valuation allowance. The state tax credits relate primarily to California research tax credits that can be carried forward indefinitely. The Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities will increase the Company’s earnings attributable to foreign jurisdictions. As of September 29, 2017, no provision has been made for United States federal, state, or additional foreign income taxes related to approximately $2,260.4 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested due to its foreign operations. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):
| Unrecognized tax benefits
Balance at September 30, 2016 | $ | 79.7 |
Decreases based on positions related to prior years | (0.9 | )
Increases based on positions related to current year | 14.5 |
Decreases relating to settlements with taxing authorities | (2.6 | )
Decreases relating to lapses of applicable statutes of limitations | (0.3 | )
Balance at September 29, 2017 | $ | 90.4 |
Of the total unrecognized tax benefits at September 29, 2017, $72.9 million would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance and certain positions that were required to be capitalized. The Company concluded a Canadian examination of its federal income tax returns for fiscal years 2010 and 2011 during fiscal 2017. As a result, the Company decreased the uncertain tax positions by $2.6 million in fiscal 2017. The Company anticipates reversals within the next 12 months related to items such as the lapse of the statute of limitations, audit closures, and other items that occur in the normal course of business. During the fiscal year ended September 29, 2017, the Company recognized $0.3 million of previously unrecognized tax benefits related to the expiration of the statute of limitations and $2.6 million of accrued interest or penalties related to unrecognized tax benefits. The Company’s major tax jurisdictions as of September 29, 2017, are the United States, California, Canada, Luxembourg, Mexico, Japan, and Singapore. For the United States, the Company has open tax years dating back to fiscal 1999 due to the carry forward of tax attributes. For California, the Company has open tax years dating back to fiscal 1999 due to the carry forward of tax attributes. For Canada, the Company has open tax years dating back to fiscal 2012. For Luxembourg, the Company has open tax years back to fiscal 2011. For Mexico, the Company has open tax years back to fiscal 2009. For Singapore, the Company has open tax years dating back to fiscal 2011. The Company is subject to audit examinations by the respective taxing authorities on a periodic basis, of which the results could impact our financial position, results of operations or cash flows.

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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 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 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 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=65882285&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=65882285&loc=d3e32537-109319 + Details
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