Provision for Income Taxes

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):



	Three months ended						Nine months ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Provision for income taxes	$	110,258		$	126,697		$	379,980		$	316,030
Effective tax rate	29.6		%	31.4		%	32.1		%	31.0		%

The provision for income taxes for the three and nine months ended September 28, 2014 differs from the U.S. statutory tax rate of 35% primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share‑based compensation, tax audit settlements and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to the Company’s Chinese, Irish, Israeli and Japanese entities. Earnings in these countries where tax rates are lower than the U.S. notional rate contributed to the majority of the difference between the rate of the Company’s tax provision and the U.S. statutory tax rate. The lower effective tax rate for the three months ended September 28, 2014, compared to the same period in fiscal year 2013, is primarily attributable to a benefit recorded as a result of tax audit settlements. The higher effective tax rate for the nine months ended September 28, 2014, compared to the same period in fiscal year 2013, is attributable to the federal R&D tax credit not being extended as of September 28, 2014, while the September 29, 2013 effective tax rate includes both the 2013 federal R&D credit and retroactive inclusion of the 2012 federal R&D tax credit, and changes in the composition of operating income by tax jurisdiction, partially offset by a benefit recorded as a result of tax audit settlements. As of September 28, 2014, the Company believes that most of its deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $117.0 million and $185.3 million as of September 28, 2014 and December 29, 2013, respectively. Unrecognized tax benefits that would impact the effective tax rate in the future were approximately $92.3 million at September 28, 2014. Interest and penalties included in income tax expense in each of the three and nine months ended September 28, 2014 and September 29, 2013 were immaterial. It is reasonably possible that within the next 12 months, unrecognized tax benefits could decrease by up to $4.6 million as a result of potential settlements of tax authority examinations and could decrease by up to $9.6 million as a result of the expiration of statutes of limitation.

The Company is subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In August 2014, the Company received and signed the closing agreement from the Internal Revenue Service (“IRS”) relating to its federal income tax returns for the fiscal years 2005 through 2008. During the three months ended September 28, 2014, the Company recorded a discrete benefit of $25.2 million as a result of several audit settlements.

The IRS recently initiated an examination of the Company’s federal income tax returns for fiscal years 2009 through 2011. The Company does not expect a resolution of this audit to be reached during the next twelve months. In addition, the Company is currently under audit by various state and international tax authorities. The Company cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm the Company’s financial position, results of operations or liquidity.