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Income Taxes
 12 Months Ended
Jun. 29, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

14. Income Taxes

(Loss)/Income before provision for income taxes for fiscal 2024, 2023, and 2022 consisted of the following (in millions):

 

 

2024

 

 

2023

 

 

2022

 

United States

 

$

(80.5

)

 

$

(69.5

)

 

$

(44.8

)

Foreign

 

 

(44.1

)

 

 

195.5

 

 

 

365.3

 

(Loss)/Income before provision for income taxes

 

$

(124.6

)

 

$

126.0

 

 

$

320.5

 

 

For fiscal 2023, $48.7 million of foreign income before provision for income taxes has been reclassified in the preceding table from the United States to foreign to correct for an immaterial error in the prior year presentation. This reclassification had no impact to our consolidated financial statements or our previously reported net income per share for any prior quarterly or annual period, or the current annual period.

The (benefit)/provision for income taxes for fiscal 2024, 2023, and 2022 consisted of the following (in millions):

 

 

 

2024

 

 

2023

 

 

2022

 

Current tax (benefit)/expense

 

 

 

 

 

 

 

 

 

Federal

 

$

(17.4

)

 

$

15.8

 

 

$

(0.6

)

State

 

 

—

 

 

 

0.1

 

 

 

—

 

Foreign

 

 

56.0

 

 

 

62.4

 

 

 

94.9

 

 

 

 

38.6

 

 

 

78.3

 

 

 

94.3

 

Deferred tax (benefit)/expense

 

 

 

 

 

 

 

 

 

Federal

 

 

(280.8

)

 

 

(12.7

)

 

 

(21.8

)

State

 

 

—

 

 

 

—

 

 

 

—

 

Foreign

 

 

(8.0

)

 

 

(13.2

)

 

 

(7.9

)

 

 

 

(288.8

)

 

 

(25.9

)

 

 

(29.7

)

(Benefit)/provision for income taxes

 

$

(250.2

)

 

$

52.4

 

 

$

64.6

 

The provision for income taxes differs from the federal statutory rate for fiscal 2024, 2023, and 2022 as follows (in millions):

 

 

2024

 

 

2023

 

 

2022

 

(Benefit)/provision at U.S. federal statutory tax rate

 

$

(26.2

)

 

$

26.4

 

 

$

67.3

 

Non-deductible share-based compensation

 

 

7.6

 

 

 

6.6

 

 

 

7.9

 

Shortfall/(windfall) related to share-based compensation

 

 

3.5

 

 

 

(1.3

)

 

 

(18.1

)

Non-deductible officer compensation

 

 

4.8

 

 

 

6.4

 

 

 

6.5

 

Business credits

 

 

(5.2

)

 

 

(5.2

)

 

 

(10.0

)

Foreign tax differential

 

 

45.2

 

 

 

(0.5

)

 

 

6.4

 

U.S. inclusion of foreign income

 

 

(0.3

)

 

 

21.0

 

 

 

3.6

 

Deferred taxes on unremitted foreign earnings

 

 

—

 

 

 

0.3

 

 

 

0.7

 

U.S. provision to return adjustment (1)

 

 

(18.1

)

 

 

0.4

 

 

 

(3.2

)

Deferred tax benefit from domestication (2)

 

 

(262.8

)

 

 

—

 

 

 

—

 

Other differences

 

 

1.3

 

 

 

(1.7

)

 

 

3.5

 

(Benefit)/provision for income taxes

 

$

(250.2

)

 

$

52.4

 

 

$

64.6

 

(1)
U.S. provision to return adjustment in fiscal 2024 was primarily driven by approximately $11.3 million tax benefit from foreign tax credit relief under U.S. Treasury Notice 2023-55 issued in July 2023, together with a tax benefit of
approximately $6.3 million recognized as part of a multiyear research and development tax credit study completed in fiscal 2024.

 

(2)
On June 29, 2024, we completed an intra-group transfer that involved the domestication of certain foreign subsidiaries and the migration of certain foreign intellectual property to the United States. See further discussion below.

Significant components of our deferred tax assets (liabilities) as of the end of fiscal 2024 and 2023 consisted of the following (in millions):

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Capital loss carryforward

 

$

34.1

 

 

$

34.1

 

Inventory write downs

 

 

1.6

 

 

 

1.9

 

Intangibles and capitalized research and development costs

 

 

273.1

 

 

 

41.5

 

Share-based compensation

 

 

9.4

 

 

 

10.3

 

Nondeductible interest

 

 

23.7

 

 

 

4.9

 

Lease liabilities

 

 

10.2

 

 

 

10.1

 

Business credit carryforward

 

 

95.6

 

 

 

45.1

 

Net operating loss carryforward

 

 

11.4

 

 

 

10.8

 

Other accruals

 

 

5.8

 

 

 

5.1

 

 

 

 

464.9

 

 

 

163.8

 

Valuation allowance

 

 

(92.4

)

 

 

(78.4

)

 

 

 

372.5

 

 

 

85.4

 

Deferred tax liabilities:

 

 

 

 

 

 

Property and equipment

 

 

—

 

 

 

(1.3

)

Right-of-use assets

 

 

(9.5

)

 

 

(9.5

)

Unremitted foreign earnings

 

 

(14.3

)

 

 

(14.3

)

Acquisition intangibles

 

 

(31.0

)

 

 

(31.4

)

 

 

 

(54.8

)

 

 

(56.5

)

Net deferred tax assets

 

$

317.7

 

 

$

28.9

 

Realization of deferred tax assets depends on our generating sufficient U.S. and certain foreign taxable income in future years to obtain a benefit from the utilization of those deferred tax assets on our tax returns. Accordingly, the amount of deferred tax assets considered realizable may increase or decrease when we reevaluate the underlying basis for our estimates of future U.S. and foreign taxable income. As of June 29, 2024, we simplified our corporate entity structure via an intra-group transfer that included the domestication of certain foreign subsidiaries and the onshoring of certain intellectual property. As a result of the domestication, a deferred tax benefit of $263.0 million was recognized primarily driven by recording certain deferred tax assets, net of deferred tax liabilities based on the U.S. tax rate in the fourth quarter of fiscal 2024. The associated deferred tax assets resulting from the domestication are expected to be realizable based on the assessment of currently available evidence. As of the end of fiscal 2024, a valuation allowance of $92.4 million was maintained to reduce certain state and foreign related deferred tax assets to levels we believe are more likely than not to be realized through future taxable income. The net change in the valuation allowance during fiscal 2024 was an increase of $14.0 million, primarily due to an increase of unrealized deferred tax assets associated with state tax credits.

We consider most of the earnings of our foreign subsidiaries as not indefinitely reinvested overseas and have made appropriate provisions for income or withholding taxes, that may result from a future repatriation of those earnings. As a result, $14.3 million of our deferred tax liability is associated with unremitted foreign earnings, which if remitted would not result in a further provision for income taxes. We continue to indefinitely reinvest $200 million on certain accumulated earnings and outside basis differences primarily related to our DSPG acquisition. If the undistributed earnings and other outside basis differences were recognized in a taxable transaction, the associated foreign tax credits would be expected to reduce the U.S. income tax liability associated with the foreign distribution or the otherwise taxable transaction. As of our fiscal 2024, assuming full utilization of the associated foreign tax credits, the potential net deferred tax liability associated with these undistributed earnings and outside basis differences would be approximately $46 million.

As of the end of fiscal 2024, we had federal, California, and foreign net operating loss carryforwards of approximately $20.1 million, $26.5 million, and $49.4 million, respectively. The federal and California net operating loss will begin to expire in fiscal 2037 and 2027, respectively if not utilized. Most of our foreign net operating loss carryforwards have no expiration date. Under current tax law, net operating loss and tax credit carryforwards available to offset future income or income taxes

if not utilized. Under current tax law, net operating loss and tax credit carryforwards available to offset future income or income taxes may be limited by statute or upon the occurrence of certain events, including significant changes in ownership.

We had $30.2 million and $69.0 million of federal and state research tax credit carryforwards, respectively, as of the end of fiscal 2024. The federal research tax credit carryforward will begin to expire in fiscal 2029 and the state research tax credit can be carried forward indefinitely.

The total liability for gross unrecognized tax benefits related to uncertain tax positions, included in other liabilities in our consolidated balance sheets, increased by $2.8 million from $43.7 million in fiscal 2023 to $46.5 million in fiscal 2024. Of this amount, $36.6 million will reduce the effective tax rate on income from operations, if recognized. A reconciliation of the beginning and ending balance of gross unrecognized tax benefits for fiscal 2024, 2023, and 2022 consisted of the following (in millions):

 

 

2024

 

 

2023

 

 

2022

 

Beginning balance

 

$

43.7

 

 

$

29.8

 

 

$

22.6

 

Increase in unrecognized tax benefits related to current year tax positions

 

 

10.4

 

 

 

13.7

 

 

 

7.1

 

(Decrease)/increase in unrecognized tax benefits related to prior year tax positions

 

 

(5.3

)

 

 

2.5

 

 

 

5.5

 

Decrease due to effective settlement with tax authorities

 

 

—

 

 

 

(1.1

)

 

 

—

 

Remeasurement of unrecognized tax benefits

 

 

(1.0

)

 

 

(0.3

)

 

 

(0.5

)

Decrease due to statute expiration

 

 

(1.3

)

 

 

(0.9

)

 

 

(4.9

)

Ending Balance

 

$

46.5

 

 

$

43.7

 

 

$

29.8

 

Accrued interest and penalties increased by $0.6 million in fiscal 2024 as compared to fiscal 2023 and increased by $0.5 million in fiscal 2023 as compared to fiscal 2022. Accrued interest and penalties were $3.6 million and $3.0 million as of the end of fiscal 2024 and 2023, respectively. Our policy is to classify interest and penalties as components of income tax expense.

It is reasonably possible that the amount of liability for unrecognized tax benefits may change within the next 12 months; an estimate of the range of possible changes could result in a decrease of $2.9 million to an increase of $5.1 million. Any prospective adjustments to our unrecognized tax benefits will be recorded as an increase or decrease to income tax expense and cause a corresponding change to our effective tax rate. Accordingly, our effective tax rate could fluctuate materially from period to period.

Our major tax jurisdictions are the U.S., Hong Kong SAR, Japan, Israel and the U.K. From fiscal 2017 onward, we remain subject to examination by one or more of these jurisdictions.