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Income Taxes | 12 Months Ended
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Sep. 28, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consists of the following components (in millions):
| Fiscal Years Ended
| September 28, 2018 |  | September 29, 2017 |  | September 30, 2016
United States | $ | 712.2 |  |  | $ | 681.2 |  |  | $ | 697.5 |
Foreign | 619.9 |  |  | 575.8 |  |  | 503.1 |
Income before income taxes | $ | 1,332.1 |  |  | $ | 1,257.0 |  |  | $ | 1,200.6 |
The provision for income taxes consists of the following (in millions):
| Fiscal Years Ended
| September 28, 2018 |  | September 29, 2017 |  | September 30, 2016
Current tax expense (benefit): |  |  |  |  |
Federal | $ | 347.7 |  |  | $ | 215.7 |  |  | $ | 181.8 |
State | 0.3 |  |  | 0.3 |  |  | 0.1 |
Foreign | 31.2 |  |  | 24.4 |  |  | 25.8 |
| 379.2 |  |  | 240.4 |  |  | 207.7 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | 20.3 |  |  | 5.0 |  |  | (0.8 | )
Foreign | 14.2 |  |  | 1.4 |  |  | (1.5 | )
| 34.5 |  |  | 6.4 |  |  | (2.3 | )
Provision for income taxes | $ | 413.7 |  |  | $ | 246.8 |  |  | $ | 205.4 |
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 28, 2018 |  | September 29, 2017 |  | September 30, 2016
Tax expense at United States statutory rate | $ | 327.4 |  |  | $ | 439.9 |  |  | $ | 420.2 |
Foreign tax rate difference | (111.9 | ) |  | (174.6 | ) |  | (160.8 | )
Tax on deemed repatriation | 224.6 |  |  | — |  |  | — |
Effect of stock compensation | (25.6 | ) |  | — |  |  | — |
Change of tax rate on deferred taxes | 18.3 |  |  | — |  |  | — |
Research and development credits | (19.9 | ) |  | (16.3 | ) |  | (33.7 | )
Change in tax reserve | 6.7 |  |  | 12.6 |  |  | (2.5 | )
Domestic production activities deduction | (13.9 | ) |  | (19.8 | ) |  | (19.1 | )
Other, net | 8.0 |  |  | 5.0 |  |  | 1.3 |
Provision for income taxes | $ | 413.7 |  |  | $ | 246.8 |  |  | $ | 205.4 |
The Company operates in foreign jurisdictions with income tax rates lower than the United States tax rate for the fiscal years ended September 28, 2018, and September 29, 2017, which were 24.6% and 35.0%, respectively. The Company’s tax benefits related to foreign earnings taxed at a rate less than the United States federal rate were $111.9 million and $174.6 million for the fiscal years ended September 28, 2018, and September 29, 2017, respectively. The Tax Reform Act includes, among other things, a reduction of the United States corporate tax rate from 35% to 21%, a mandatory deemed repatriation tax on foreign earnings, repeal of the corporate alternative minimum tax and the domestic production activities deduction, and expensing of certain capital investments. The new law makes fundamental changes to the taxation of multinational entities, including a shift from worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime, a minimum tax on low-taxed foreign earnings, and new measures to deter base erosion and promote export from the United States. As a result of this legislation, the Company recognized a one-time transition tax related to the deemed repatriation of foreign earnings of $224.6 million, and a charge related to the revaluation of its deferred tax assets at the new corporate tax rate of $18.3 million. The $224.6 million deemed repatriation tax is payable over the next eight years, $18.0 million per year for each of the next five years, followed by payments of $33.6 million, $44.9 million, and $56.1 million in years six through eight, respectively. The Company has accrued $206.6 million of the deemed repatriation tax in long-term liabilities within the consolidated balance sheet as of September 28, 2018. Staff Accounting Bulletin 118 (“SAB 118”) provides a measurement period during which companies may analyze the impacts of newly enacted legislation when the company does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the new legislation, not to exceed one year. The Company does not expect to record any further adjustments within the measurement period as of September 28, 2018, but will continue to monitor the estimate if new guidance becomes available. In addition to the introduction of a modified territorial tax system, the Tax Reform Act includes two new sets of provisions aimed at preventing or decreasing U.S. tax base erosion—the global intangible low-taxed income (“GILTI”) provisions and the base erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company expects to make an accounting policy election to account for GILTI as a component of tax expense in the period in which the Company is subject to the rules and therefore will not provide any deferred tax impacts of GILTI in its consolidated financial statements for the year ended September 28, 2018. The BEAT provisions eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not presently expect that it will be subject to the minimum tax imposed by the BEAT provisions. The Company’s federal income tax returns for fiscal 2015 and fiscal 2016 are currently under IRS examination. As a result, the Company increased the reserve for uncertain tax positions by $18.9 million, including interest. 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 $38.4 million and $37.4 million for the fiscal years ended September 28, 2018, and September 29, 2017, respectively, which resulted in tax benefits of $0.21 and $0.20 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 28, 2018 |  | September 29, 2017
Deferred tax assets: |  |  |
Inventory | $ | 5.7 |  |  | $ | 7.4 |
Bad debts | 1.2 |  |  | 0.1 |
Accrued compensation and benefits | 4.9 |  |  | 7.1 |
Product returns, allowances and warranty | 4.6 |  |  | 5.2 |
Restructuring | — |  |  | 0.1 |
Intangible assets | — |  |  | 10.6 |
Share-based and other deferred compensation | 26.1 |  |  | 40.2 |
Net operating loss carry forwards | 15.5 |  |  | 7.7 |
Non-United States tax credits | 20.3 |  |  | 20.1 |
State tax credits | 97.0 |  |  | 71.0 |
Property, plant and equipment | 9.1 |  |  | 7.9 |
Other, net | 3.3 |  |  | 2.7 |
Deferred tax assets | 187.7 |  |  | 180.1 |
Less valuation allowance | (118.6 | ) |  | (90.9 | )
Net deferred tax assets | 69.1 |  |  | 89.2 |
Deferred tax liabilities: |  |  |
Prepaid insurance | (0.6 | ) |  | (0.9 | )
Property, plant and equipment | (25.6 | ) |  | (24.8 | )
Intangible assets | (19.3 | ) |  | (6.2 | )
Other, net | (2.0 | ) |  | — |
Net deferred tax liabilities | (47.5 | ) |  | (31.9 | )
Total net deferred tax assets | $ | 21.6 |  |  | $ | 57.3 |
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 28, 2018, the Company has a valuation allowance of $118.6 million. This valuation allowance is comprised of $100.5 million related to United States state tax credits, of which $1.5 million are state tax credits acquired from Avnera in fiscal 2018, and $18.1 million are 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 $118.6 million income tax benefit may be recognized. The Company will need to generate $88.5 million of future United States federal taxable income to utilize its United States deferred tax assets as of September 28, 2018. 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 28, 2018, the Company has United States federal net operating loss carry forwards of approximately $41.0 million, including $32.7 million related to the acquisition of Avnera. 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 $97.0 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. Due to the enactment of the Tax Reform Act, all of the Company’s previously undistributed earnings were deemed repatriated during the year ended September 28, 2018, resulting in a one-time transition tax of $224.6 million. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):
| Unrecognized tax benefits
Balance at September 29, 2017 | $ | 90.4 |
Increases based on positions related to prior years | 13.5 |
Decreases based on positions related to prior years | (0.5 | )
Increases based on positions related to current year | 0.5 |
Decreases relating to settlements with taxing authorities | — |
Decreases relating to lapses of applicable statutes of limitations | (10.5 | )
Balance at September 28, 2018 | $ | 93.4 |
Of the total unrecognized tax benefits at September 28, 2018, $77.7 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 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. Due to open examinations, an estimate of anticipated reversals within the next 12 months cannot be made. During the fiscal year ended September 28, 2018, the Company recognized $10.5 million of previously unrecognized tax benefits related to the expiration of the statute of limitations and $4.1 million of accrued interest or penalties related to unrecognized tax benefits. As of September 28, 2018, accrued interest and penalties of $7.5 million related to uncertain tax positions have been included in long-term tax liabilities within the consolidated balance sheet. The Company’s major tax jurisdictions as of September 28, 2018, 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 2000 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 2012. For Mexico, the Company has open tax years back to fiscal 2012. For Singapore, the Company has open tax years dating back to fiscal 2012. The Company is subject to audit examinations by the respective taxing authorities on a periodic basis, of which the results could impact its 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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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