Income Taxes

Domestic and foreign components of income (loss) before income taxes were as follows:



	Year Ended
	October 3, 2015		September 27, 2014		September 28, 2013
	(In thousands)
Domestic	$	91,613	$	92,961	$	3,517
Foreign	84,580		68,778		99,889
Total	$	176,193	$	161,739	$	103,406

The provision for (benefit from) income taxes consists of the following:



	Year Ended
	October 3, 2015			September 27, 2014			September 28, 2013
	(In thousands)
Federal:
Current	$	1,413		$	5,889		$	—
Deferred	(226,225		)	(43,789		)	(6,611		)
State:
Current	543			(100		)	1,388
Deferred	(513		)	(1,251		)	(189		)
Foreign:
Current	42,295			27,937			31,249
Deferred	(18,581		)	(24,112		)	(1,782		)
Total provision for (benefit from) income taxes	$	(201,068	)	$	(35,426	)	$	24,055

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:



	As of
	October 3, 2015			September 27, 2014
	(In thousands)
Deferred tax assets:
U.S. net operating loss carryforwards	$	416,866		$	452,754
Foreign net operating loss carryforwards	214,949			298,693
Acquisition related intangibles	46,019			58,442
Accruals not currently deductible	60,225			62,148
Property, plant and equipment	21,099			23,754
Tax credit carryforwards	8,898			9,155
Reserves not currently deductible	22,482			18,612
Stock compensation expense	16,388			14,173
Unrealized losses	4,417			4,417
Other	1,633			745
Valuation allowance	(282,734		)	(663,193		)
Total deferred tax assets	530,242			279,700
Deferred tax liabilities on foreign earnings	(19,872		)	(19,872		)
Other deferred tax liabilities	(17,792		)	(9,521		)
Net deferred tax assets	$	492,578		$	250,307
Recorded as:
Current deferred tax assets	$	74,935		$	37,738
Non-current deferred tax assets	422,670			217,645
Non-current deferred tax liabilities	(5,027		)	(5,076		)
Net deferred tax assets	$	492,578		$	250,307

The Company offsets current deferred tax assets and liabilities and non-current deferred tax assets and liabilities by tax-paying jurisdiction. The resulting net amounts by tax jurisdiction are then aggregated without further offset.

A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company regularly assesses its valuation allowance against deferred tax assets on a jurisdiction by jurisdiction basis. The Company considers all available positive and negative evidence, including future reversals of temporary differences, projected future taxable income, tax planning strategies and recent financial results. Significant judgment is required in assessing the Company's ability to generate revenue, gross profit, operating income and jurisdictional taxable income in future periods.

Prior to 2012, based on negative evidence (primarily a cumulative history of operating losses), the Company had a full valuation allowance against its net deferred tax assets in the U.S. and certain foreign jurisdictions. Since 2012, the Company has released a portion of its U.S. valuation allowances annually in recognition of its improved historical earnings and increasing future projected earnings.

The Company released $288.7 million, $87.6 million and $21.5 million of the valuation allowance attributable to U.S. and foreign deferred tax assets in 2015, 2014 and 2013, respectively. The Company reduced the valuation allowance based on continued improved operating results over the past few years and expectations about generating U.S. taxable income in the future. The remaining valuation allowance relates primarily to foreign net operating losses, with the exception of $102.7 million related to U.S. net operating losses.

To the extent the Company continues to consistently earn, as well as reliably project, income in the appropriate jurisdictions, it is reasonably possible that the valuation allowance will be further reduced at such time when such positive evidence can be substantiated. The Company’s expected continued strong and predictable earnings may be sufficient to warrant an additional release of the valuation allowance in future years, although such positive evidence would need to be weighed against any negative evidence existing at that time. To the extent the Company's future projections are adjusted downward, the Company could be required to record an additional valuation allowance, which would negatively impact income tax expense at such time.

As of October 3, 2015, U.S. income taxes have not been provided for approximately $582.9 million of cumulative undistributed earnings of several non-U.S. subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside of the U.S. Determination of the amount of unrecognized deferred tax liabilities on these undistributed earnings is not practicable.

As of October 3, 2015, the Company has cumulative net operating loss carryforwards for federal, state and foreign tax purposes of $1,151.0 million, $758.5 million and $756.2 million, respectively. The federal and state net operating loss carryforwards begin expiring in 2023 and 2016, respectively, and expire at various dates through 2033. Certain foreign net operating losses start expiring in 2016. However, the majority of foreign net operating losses carryforward indefinitely. The Tax Reform Act of 1986 and similar state provisions impose restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an “ownership change” as defined in the Internal Revenue Code. The utilization of certain net operating losses may be restricted due to changes in ownership and business operations.

Following is a reconciliation of the statutory federal tax rate to the Company's effective tax rate:



	Year Ended
	October 3, 2015		September 27, 2014		September 28, 2013
Federal tax at statutory tax rate	35.00	%	35.00	%	35.00	%
Effect of foreign operations	3.82		(4.34	)	(8.17	)
Foreign income inclusion	0.21		1.17		4.08
Change in valuation allowance	4.41		(4.23	)	11.54
Permanent items	2.05		2.69		0.26
Change to other comprehensive income	—		2.05		—
Release of valuation allowance	(163.92	)	(54.18	)	(20.79	)
State income taxes, net of federal benefit	4.31		(0.06	)	1.34
Effective tax rate	(114.12	)%	(21.90	)%	23.26	%

A reconciliation of the beginning and ending amount of total unrecognized tax benefits, excluding accrued penalties and interest, is as follows:



	Year Ended
	October 3, 2015			September 27, 2014
	(In thousands)
Balance, beginning of year	$	54,237		$	65,148
Increase related to prior year tax positions	—			—
Decrease related to prior year tax positions	(5,044		)	(11,274		)
Increase related to current year tax positions	5,564			4,993
Settlements	(3,599		)	(4,630		)
Balance, end of year	$	51,158		$	54,237

As of October 3, 2015, the Company had reserves of $32.2 million for the payment of interest and penalties relating to unrecognized tax benefits. The Company accrued interest and penalties related to unrecognized tax benefits of $3.9 million in 2015, $5.6 million in 2014, and $1.9 million in 2013. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The Company conducts business globally and, as a result, files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is currently being audited by the Internal Revenue Service for tax years 2008 through 2010. To the extent the final tax liabilities are different from the amounts accrued, this would result in an increase or decrease in net operating loss carryforwards which would impact tax expense to the extent the associated deferred tax asset is not offset by a valuation allowance. Additionally, the Company is being audited by various state tax agencies and certain foreign countries. To the extent the final tax liabilities are different from the amounts accrued, the increases or decreases would be recorded as income tax expense or benefit in the consolidated statements of income. Although the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, the outcome is subject to uncertainty.

In general, the Company is no longer subject to United States federal or state income tax examinations for years before 2003, and to foreign examinations for years prior to 2003 in its major foreign jurisdictions. Although the timing of the resolution of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years subject to audit and the number of matters being examined, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.