XML 30 R21.htm IDEA: XBRL DOCUMENT v3.25.1
Income Taxes
 9 Months Ended
Mar. 29, 2025
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 $5.6 million and $44.6 million for the three and nine months ended March 2025, respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for the three months ended March 2025 is closely aligned with the combined U.S. federal and state statutory tax rate. The slight variance primarily results from non-deductible share-based compensation, partially offset by foreign income taxed at lower rates. The effective tax rate for the nine months ended March 2025 diverged from the combined U.S. federal and state statutory tax rate primarily due to one-time tax benefits recorded during the six months ended December 2024, including a $14.1 million deferred tax benefit from a U.S. “check-the-box” election for our Israel subsidiary, and an $8.9 million benefit related to the fiscal 2018 deemed repatriation liability under the U.S. Tax Cuts and Jobs Act, or TCJA, following a U.S. Tax Court decision in Varian Medical Systems, Inc. v. Commissioner. The divergence also reflects a deferred tax benefit from an inventory transfer and foreign income taxed at lower rates. These benefits were partially offset by non-deductible share-based compensation and non-deductible officer compensation.
The effective tax rate for the three and nine months ended March 2024 diverged from the combined U.S. federal and state statutory tax rate primarily due to U.S. research credits and 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 deferred the effective date of the U.S. final foreign tax credit regulations published in January 2022; partially offset by foreign earnings taxed at higher rates, 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, and non-deductible officer compensation.
The total liability for gross unrecognized tax benefits related to uncertain tax positions decreased $1.7 million during the nine months ended March 2025, to $44.7 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 March 2025 were $3.9 million; this balance increased by $0.4 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.