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Income Taxes | 12 Months Ended
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Jun. 29, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 13. Income Taxes The Company’s income (loss) before income taxes consisted of the following (in millions):
| Years Ended
| June 29, 2019 |  | June 30, 2018 |  | July 1, 2017
Domestic | $ | (66.9 | ) |  | $ | (112.5 | ) |  | $ | 90.5 |
Foreign | 106.2 |  |  | 76.8 |  |  | 89.5 |
(Loss) income before income taxes | $ | 39.3 |  |  | $ | (35.7 | ) |  | $ | 180.0 |
The Company’s income tax expense (benefit) consisted of the following (in millions):
| Years Ended
| June 29, 2019 |  | June 30, 2018 |  | July 1, 2017
Federal: |  |  |  |  |
Current | $ | — |  |  | $ | (4.5 | ) |  | $ | — |
Deferred | — |  |  | (1.7 | ) |  | 1.0 |
Total federal income tax (benefit) expense | — |  |  | (6.2 | ) |  | 1.0 |
State: |  |  |  |  |
Current | 0.1 |  |  | — |  |  | 0.2 |
Deferred | — |  |  | (0.1 | ) |  | — |
Total state income tax (benefit) expense | 0.1 |  |  | (0.1 | ) |  | 0.2 |
Foreign: |  |  |  |  |
Current | 33.3 |  |  | 22.0 |  |  | 18.1 |
Deferred | (1.9 | ) |  | (2.8 | ) |  | 2.1 |
Total foreign income tax expense | 31.4 |  |  | 19.2 |  |  | 20.2 |
Total income tax expense | $ | 31.5 |  |  | $ | 12.9 |  |  | $ | 21.4 |
The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions. The foreign deferred tax benefit primarily relates to the amortization of foreign purchased intangible assets. A reconciliation of the Company’s income tax expense (benefit) at the federal statutory rate to the income tax expense at the effective tax rate is as follows (in millions):
| Years Ended
| June 29, 2019 |  | June 30, 2018 |  | July 1, 2017
Income tax (benefit) expense computed at federal statutory rate | $ | 8.3 |  |  | $ | (10.0 | ) |  | $ | 63.0 |
US Inclusion of foreign earnings | 16.0 |  |  | 1.0 |  |  | 1.9 |
Tax Reform E&P Inclusion | — |  |  | 14.3 |  |  | — |
Valuation allowance | 1.0 |  |  | 13.0 |  |  | (26.0 | )
Foreign rate differential | 8.3 |  |  | (1.1 | ) |  | (5.4 | )
AMT Tax Repeal | — |  |  | (4.5 | ) |  | — |
Permanent items | (2.7 | ) |  | 0.7 |  |  | (11.1 | )
Reversal of previously accrued taxes | (1.2 | ) |  | (1.2 | ) |  | (0.2 | )
Withholding Taxes | 1.5 |  |  | 0.7 |  |  | 0.4 |
Research and experimentation benefits and other tax credits | — |  |  | (0.7 | ) |  | (1.4 | )
Other | 0.3 |  |  | 0.7 |  |  | 0.2 |
Income tax expense | $ | 31.5 |  |  | $ | 12.9 |  |  | $ | 21.4 |
The components of the Company’s net deferred taxes consisted of the following (in millions):
| Balance as of
| June 29, 2019 |  | June 30, 2018 |  | July 1, 2017
Gross deferred tax assets: |  |  |  |  |
Tax credit carryforwards | $ | 164.3 |  |  | $ | 158.8 |  |  | $ | 150.6 |
Net operating loss carryforwards | 1,206.9 |  |  | 1,219.0 |  |  | 1,875.4 |
Capital loss carryforwards | 63.9 |  |  | 63.9 |  |  | 102.4 |
Inventories | 9.3 |  |  | 4.0 |  |  | 5.4 |
Accruals and reserves | 56.0 |  |  | 20.7 |  |  | 28.4 |
Investments | 0.5 |  |  | 0.5 |  |  | 0.7 |
Other | 42.5 |  |  | 43.3 |  |  | 51.9 |
Acquisition-related items | 42.1 |  |  | 31.5 |  |  | 55.5 |
Gross deferred tax assets | 1,585.5 |  |  | 1,541.7 |  |  | 2,270.3 |
Valuation allowance | (1,405.3 | ) |  | (1,382.1 | ) |  | (2,095.0 | )
Deferred tax assets | 180.2 |  |  | 159.6 |  |  | 175.3 |
Gross deferred tax liabilities: |  |  |  |  |
Acquisition-related items | (33.5 | ) |  | (26.8 | ) |  | (6.5 | )
Undistributed foreign earnings | — |  |  | — |  |  | (3.0 | )
Foreign branch taxes | (22.0 | ) |  | — |  |  | — |
Other | (30.9 | ) |  | (39.0 | ) |  | (59.4 | )
Deferred tax liabilities | (86.4 | ) |  | (65.8 | ) |  | (68.9 | )
Total net deferred tax assets | $ | 93.8 |  |  | $ | 93.8 |  |  | $ | 106.4 |
As of June 29, 2019, the Company had federal, state and foreign tax net operating loss carryforwards of $5,126.6 million, $722.1 million and $603.5 million, respectively, and federal, state and foreign research and other tax credit carryforwards of $111.4 million, $51.5 million and $1.2 million, respectively. The tax net operating loss, tax credit and capital loss carryforwards will start to expire in calendar 2020 and at various other dates through 2038 if not utilized. In addition, a portion of the tax net operating loss, tax credit and capital loss carryforwards have an indefinite carryforward period. Utilization of the tax net operating losses may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state and foreign provisions. Loss carryforward limitations may result in the expiration or reduced utilization of a portion of the Company’s net operating losses. Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have not been provided on $276.7 million of undistributed earnings for certain foreign subsidiaries. The Company intends to reinvest these earnings indefinitely outside of the United States. The Company estimates that an additional $28.0 million of foreign withholding taxes would have to be provided if these earnings were repatriated back to the U.S. During fiscal year 2018, the U.S. Tax Cuts and Jobs Act was enacted. Income tax effects resulting from changes in tax laws were accounted for by the Company in accordance with the authoritative guidance, which required that these tax effects be recognized in the period in which the law was enacted, and the effects were recorded as a component of the provision for income taxes from continuing operations. The law had significantly changed the way the U.S. taxes corporations. The Act repealed the alternative minimum tax (“AMT”) for corporations and provided that the existing AMT credit carryforwards would be fully refunded in 2022 if not utilized. As a result, the Company recognized a benefit of $4.5 million for the year ended June 30, 2018 for the release of the valuation allowance previously maintained against the AMT credit deferred tax asset. In addition, under the Act, the Company’s fiscal 2018 net operating losses and any future net operating losses can now be carried forward indefinitely. As a result, the Company’s deferred tax liability associated with indefinite-lived intangible assets offset these indefinite-lived deferred tax assets, resulting in a benefit of $2.0 million for the year ended June 30, 2018 due to release of valuation allowance. The Act imposed a deemed repatriation of the Company’s foreign subsidiaries’ post-1986 earnings and profits (“E&P”) which had previously been deferred from US income tax. This deemed repatriation was reported in the Company’s fiscal 2018 U.S. tax return. The Company completed the calculation of the total post-1986 foreign E&P for all foreign subsidiaries during the quarter ended December 29, 2018. The change in estimate did not materially impact the Company’s financial statements. The Act reduced the U.S. federal corporate tax rate from 35% to 21% as of January 1, 2018. The Company remeasured its US deferred tax assets and liabilities which resulted in a net reduction of $734.9 million of our net deferred tax assets and an equal and offsetting reduction to the valuation allowance against these deferred tax assets. Upon adoption of the new guidance on share-based payment awards in fiscal 2018, the Company had $117.7 million of net operating loss carryforwards resulting from excess tax benefit deductions. The deferred tax asset recorded for these net operating loss carryforwards was fully offset by a corresponding increase in valuation allowance, resulting in no impact to opening accumulated deficit. In addition, due to the full valuation allowance on the U.S. deferred tax assets, there was no impact to the income tax provision from excess tax benefits for the year ended June 30, 2018. The valuation allowance increased by $23.2 million in fiscal 2019, decreased by $712.9 million in fiscal 2018, and decreased by $77.5 million in fiscal 2017. The increase during fiscal 2019 was primarily due to the net increase of deferred tax assets resulting from the inclusion of the Company’s foreign subsidiaries in the US tax return as a consequence of the the U.S. Tax Cuts and Jobs Act. The decrease during fiscal 2018 was primarily due to the revaluation of the U.S. deferred tax assets as a result of the Act. The decrease during fiscal 2017 was primarily due to the utilization of deferred tax assets and the increase in deferred tax liabilities as result of the issuance of convertible debt. The following table provides information about the activity of our deferred tax valuation allowance (in millions):
Deferred Tax Valuation Allowance |  | Balance at Beginning of Period |  | Additions Charged to Expenses or Other Accounts(1) |  | Deductions Credited to Expenses or Other Accounts(2) |  | Balance at End of Period
Year Ended June 29, 2019 |  | $ | 1,382.1 |  |  | $ | 72.8 |  |  | $ | (49.6 | ) |  | $ | 1,405.3 |
Year Ended June 30, 2018 |  | $ | 2,095.0 |  |  | $ | 31.7 |  |  | $ | (744.6 | ) |  | $ | 1,382.1 |
Year Ended July 1, 2017 |  | $ | 2,172.5 |  |  | $ | 44.4 |  |  | $ | (121.9 | ) |  | $ | 2,095.0 |
(1) | Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, other adjustments.
(2) | Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and increases in deferred tax liabilities.
A reconciliation of unrecognized tax benefits between July 2, 2016 and June 29, 2019 is as follows (in millions):
Balance at July 2, 2016 | $ | 41.7 |
Additions based on tax positions related to current year | 1.6 |
Additions based on tax positions related to prior year | 0.9 |
Reduction based on tax positions related to prior year | (3.5 | )
Reductions for lapse of statute of limitations | (1.8 | )
Balance at July 1, 2017 | 38.9 |
Additions based on tax positions related to current year | 4.4 |
Additions based on tax positions related to prior year | 5.6 |
Reductions for lapse of statute of limitations | (0.3 | )
Balance at June 30, 2018 | 48.6 |
Additions based on tax positions related to current year | 1.7 |
Additions based on tax positions related to prior year | 7.3 |
Reduction based on tax positions related to prior year | (2.8 | )
Reductions for lapse of statute of limitations | (0.6 | )
Balance at June 29, 2019 | $ | 54.2 |
The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S. tax credits. Included in the balance of unrecognized tax benefits at June 29, 2019 are $9.9 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits at June 29, 2019 are $41.0 million of tax benefits that, if recognized, would result in adjustments to the valuation allowance. The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within th e income tax provision. The amount of interest and penalties accrued as of June 29, 2019 , June 30, 2018 and July 1, 2017 was approximately $3.7 million, $1.9 million, and $1.8 million respectively. During fiscal 2019, the Company’s accrued interest and penalties increased by $1.8 million. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year. Although we do not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, we are unable to estimate the full range of possible adjustments to this balance. The Company is routinely subject to various federal, state and foreign audits by taxing authorities. The Company believes that adequate amounts have been provided for any adjustments that may result from these examinations. The following table summarizes the Company’s major tax jurisdictions and the tax years that remain subject to examination by such jurisdictions as of June 29, 2019:
Tax Jurisdictions | Tax Years
United States* | 2000 and onward
Canada | 2018 and onward
China | 2014 and onward
France | 2016 and onward
Germany | 2014 and onward
Korea | 2014 and onward
United Kingdom | 2018 and onward
*Although the Company is generally subject to a three year statute of limitations in the U.S., tax authorities maintain the ability to adjust tax attribute carryforwards generated in earlier years.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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