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Income Taxes | 6 Months Ended
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Dec. 28, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We account for income taxes under the asset and liability method. The provision for income taxes recorded in interim periods is based on our estimate of the annual effective tax rate applied to year-to-date income before provision for income taxes, adjusted for discrete items required to be recognized in the period in which they are incurred. In each quarter, we update our estimate of the annual effective tax rate, and if the estimated annual tax rate changes, we make a cumulative adjustment in that quarter. Our quarterly tax provision and our quarterly estimate of the annual effective tax rate can be subject to volatility due to several factors, including our ability to accurately forecast annual income before provision for income taxes in each of the tax jurisdictions in which we operate. The benefit from income taxes of $27.8 million and $39.0 million for the three and six months ended December 2024, respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for the three months and six months ended December 2024 diverged from the combined U.S. federal and state statutory tax rate primarily due to two one-time events: 1) a $14.1 million deferred tax benefit driven by a “check-the-box election” for our Israel subsidiary to be treated as a U.S. disregarded entity for federal income tax purpose, and 2) an $8.9 million tax benefit associated with our fiscal 2018 federal one-time deemed repatriation liability under the U.S. Tax Cuts and Jobs Act, or TCJA, resulting from a recent U.S. Tax Court decision in Varian Medical Systems, Inc. v. Commissioner. The U.S. Tax Court held that a fiscal year taxpayer was entitled to claim a dividend received deduction, or DRD, on certain dividends deemed received during its gap period. The divergence also reflects foreign income taxed at lower rates. These benefits were partially offset by non-deductible officer compensation and non-deductible share-based compensation. The effective tax rate for the three and six months ended December 2023 diverged from the combined U.S. federal and state statutory tax rate primarily due to tax benefits from the impact of foreign tax credit temporary relief provided by U.S. Treasury Notice 2023-55 and Notice 2023-80 issued in July 2023 and December 2023, respectively, which delayed the effective date of the U.S. final foreign tax credit regulations published in January 2022. It was partially offset by the research and development capitalization rules increasing our global intangible low-taxed income, or GILTI, resulting from the U.S. Tax Cuts and Jobs Act of 2017, foreign income taxed at higher rates, and non-deductible officer compensation. The total liability for gross unrecognized tax benefits related to uncertain tax positions decreased $2.1 million during the six months ended December 2024, to $44.4 million, and was included in other long-term liabilities on our condensed consolidated balance sheets. If recognized, the total gross unrecognized tax benefits would reduce the effective tax rate on income from continuing operations. Accrued interest and penalties related to unrecognized tax benefits as of December 2024 were $3.7 million; this balance increased by $0.1 million compared to June 2024. We classify interest and penalties as components of income tax expense. 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 United States, Hong Kong SAR, Japan, Israel and the United Kingdom. From fiscal 2017 onward, we remain subject to examination by one or more of these jurisdictions.

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