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Income Taxes | 12 Months Ended
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Oct. 01, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income before income taxes, by geographic area, was as follows:
| Fiscal Year Ended
| October 1, 2017 |  | October 2, 2016 |  | September 27, 2015
| (in thousands)
Income before income taxes: |  |  |  |  |  |  |  |
United States | $ | 166,074 |  |  | $ | 113,576 |  |  | $ | 118,822 |
Foreign | 5,687 |  |  | 10,890 |  |  | (38,501 | )
Total income before income taxes | $ | 171,761 |  |  | $ | 124,466 |  |  | $ | 80,321 |
Income tax expense consisted of the following:
| Fiscal Year Ended
| October 1, 2017 |  | October 2, 2016 |  | September 27, 2015
|  |  | (in thousands) |  |
Current: |  |  |  |  |  |  |  |
Federal | $ | 45,604 |  |  | $ | 22,277 |  |  | $ | 23,836 |
State | 8,860 |  |  | 5,634 |  |  | 5,072 |
Foreign | 9,337 |  |  | 6,651 |  |  | 3,773 |
Total current income tax expense | 63,801 |  |  | 34,562 |  |  | 32,681 |
Deferred: |  |  |  |  |  |  |  |
Federal | (4,251 | ) |  | 6,231 |  |  | 7,218 |
State | (945 | ) |  | (16 | ) |  | 2,335 |
Foreign | (4,761 | ) |  | (164 | ) |  | (1,141 | )
Total deferred income tax expense | (9,957 | ) |  | 6,051 |  |  | 8,412 |
Total income tax expense | $ | 53,844 |  |  | $ | 40,613 |  |  | $ | 41,093 |
Total income tax expense was different from the amount computed by applying the U.S. federal statutory rate to pre-tax income as follows:
| Fiscal Year Ended
| October 1, 2017 |  | October 2, 2016 |  | September 27, 2015
Tax at federal statutory rate | 35.0% |  | 35.0% |  | 35.0%
State taxes, net of federal benefit | 3.4 |  | 3.1 |  | 5.0
Research and Development ("R&D") credit | (1.8) |  | (3.4) |  | (3.8)
Domestic production deduction | (0.7) |  | (0.7) |  | (0.8)
Tax differential on foreign earnings | — |  | (1.6) |  | (3.8)
Non-taxable foreign interest income | (2.9) |  | (3.9) |  | (5.9)
Non-deductible executive compensation | — |  | 2.0 |  | —
Goodwill and contingent consideration | — |  | — |  | 19.2
Stock compensation | (2.8) |  | 0.3 |  | 0.5
Valuation allowance | (0.5) |  | 2.4 |  | 5.7
Change in uncertain tax positions | 1.8 |  | (2.0) |  | —
Other | (0.2) |  | 1.4 |  | 0.1
Total income tax expense | 31.3% |  | 32.6% |  | 51.2%
The effective tax rates for fiscal 2017 and 2016 were 31.3% and 32.6%, respectively. During fiscal 2017, we adopted accounting guidance which requires excess tax benefits and deficiencies on share-based payments to be recorded as an income tax benefit or expense, respectively, in the statement of income rather than being recorded in additional paid-in capital on the balance sheet. As a result, we recognized an income tax benefit of $4.9 million in fiscal 2017. Excluding this items, the effective tax rate for fiscal 2017 was 34.2%. In fiscal 2017, the Internal Revenue Service (“IRS”) concluded their examination for fiscal years 2010 through 2013, and we recognized a related $1.2 million tax benefit in fiscal 2017. Additionally, as a result of prior-year tax examinations, we made payments to tax authorities totaling approximately $23 million in fiscal 2017. In fiscal 2016, we incurred $13.3 million of acquisition and integration expenses and debt pre-payment fees for which no tax benefit was recognized. Of this amount, $6.4 million resulted from acquisition expenses that were not tax deductible and $6.9 million resulted from integration expenses and debt pre-payment fees incurred in jurisdictions with current and historical net operating losses where the related deferred tax asset was fully reserved. Additionally, during the first quarter of fiscal 2016, the Protecting Americans from Tax Hikes Act of 2015 was signed into law which permanently extended the R&D credit retroactive to January 1, 2015. Our income tax expense for fiscal 2016 included an income tax benefit of $2.0 million attributable to operating income during the last nine months of fiscal 2015, primarily related to the retroactive recognition of the R&D credit. Excluding these items, the effective tax rate for fiscal 2016 was 30.9%. We are currently under examination by the Internal Revenue Service for fiscal years 2014 through 2016, and by the California Franchise Tax Board for fiscal years 2004 through 2009. We are also subject to various other state audits. With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for fiscal years before 2010. Temporary differences comprising the net deferred income tax liability shown on the accompanying consolidated balance sheets were as follows:
| Fiscal Year Ended
| October 1, 2017 |  | October 2, 2016
| (in thousands)
Deferred Tax Assets: |  |  |  |  |
State taxes | $ | 598 |  |  | $ | 697 |
Reserves and contingent liabilities | 2,941 |  |  | 2,539 |
Allowance for doubtful accounts | 4,273 |  |  | 3,817 |
Accrued liabilities | 22,466 |  |  | 24,663 |
Stock-based compensation | 10,069 |  |  | 10,684 |
Intangibles | — |  |  | — |
Loss carry-forwards | 28,261 |  |  | 23,514 |
Valuation allowance | (25,326 | ) |  | (25,447 | )
Total deferred tax assets | 43,282 |  |  | 40,467 |
Deferred Tax Liabilities: |  |  |  |  |
Unbilled revenue | (46,408 | ) |  | (54,638 | )
Prepaid expense | (6,253 | ) |  | (2,921 | )
Intangibles | (24,328 | ) |  | (33,268 | )
Property and equipment | (8,311 | ) |  | (9,358 | )
Total deferred tax liability | (85,300 | ) |  | (100,185 | )
Net deferred tax liabilities | $ | (42,018 | ) |  | $ | (59,718 | )
At October 1, 2017, undistributed earnings of our foreign subsidiaries, primarily in Canada, amounting to approximately $68.4 million are expected to be permanently reinvested. Accordingly, no provision for U.S. income taxes or foreign withholding taxes has been made. Upon distribution of those earnings, we would be subject to U.S. income taxes and foreign withholding taxes. Assuming the permanently reinvested foreign earnings were repatriated under the laws and rates applicable at October 1, 2017, the incremental federal tax applicable to those earnings would be approximately $6.2 million. At October 1, 2017, we had available unused state net operating loss ("NOL") carry forwards of $43.7 million that expire at various dates from 2023 to 2036; and available foreign NOL carry forwards of $92.9 million, of which $28.8 million expire at various dates from 2023 to 2037, and $64.0 million have no expiration date. We have performed an assessment of positive and negative evidence regarding the realization of the deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, availability of carrybacks, cumulative losses in recent years, and estimates of projected future taxable income. Although realization is not assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the assets related to the loss carry-forwards and certain foreign intangibles for which a valuation allowance of $25.3 million has been provided. At October 1, 2017, we had $9.3 million of unrecognized tax benefits. Included in the balance of unrecognized tax benefits at the end of fiscal year 2017 were $9.3 million of tax benefits that, if recognized, would affect our effective tax rate. It is not expected that there will be a significant change in the unrecognized tax benefits in the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Fiscal Year Ended
| October 1, 2017 |  | October 2, 2016 |  | September 27, 2015
| (in thousands)
Beginning balance | $ | 22,786 |  |  | $ | 21,618 |  |  | $ | 21,717 |
Additions for current year tax positions | 1,060 |  |  | 2,802 |  |  | 1,147 |
Additions for prior year tax positions | 2,365 |  |  | 1,466 |  |  | 2,309 |
Reductions for prior year tax positions | (6,875 | ) |  | (3,100 | ) |  | (23 | )
Settlements | (9,999 | ) |  | — |  |  | (3,532 | )
Ending balance | $ | 9,337 |  |  | $ | 22,786 |  |  | $ | 21,618 |
We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal years 2017 and 2016, we accrued additional interest expense of $0.4 million $0.2 million, respectively, and recorded reductions in accrued interest of $0.9 million and $0 million, respectively, as a result of audit settlements and other prior-year adjustments. The amount of interest and penalties accrued at October 1, 2017 and October 2, 2016 was $1.1 million and $1.0 million, respectively.

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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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