Income Taxes	6 Months Ended
Jul. 04, 2020
Income Taxes
Income Taxes	12. Income Taxes Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Income tax expense (benefit) was $0.4 million and $29.3 million for the three months ended July 4, 2020 and June 29, 2019, resulting in effective tax rates of (26.4)% and 221.0%, respectively. Income tax expense (benefit) was $(0.2) million and $26.8 million for the six months ended July 4, 2020 and June 29, 2019, resulting in effective tax rates of (95.8)% and 165.8%, respectively. The significant change in the effective tax rate for the three and six months ended July 4, 2020 as compared to the prior periods was primarily due to the impact in the prior periods of a change in the Company’s position related to the treatment of stock-based compensation within its intercompany cost-sharing arrangement as well as a change in the proportion of permanent tax impacts relative to a decrease in current year pre-tax book income. On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner which concluded that related parties in an intercompany cost-sharing arrangement are not required to share costs related to stock-based compensation. On June 7, 2019, the U.S Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) reversed the 2015 decision of the U.S. Tax Court, thus requiring related parties in an intercompany cost-sharing agreement to share stock-based compensation costs. As a result of the Ninth Circuit decision, the Company no longer reflects a tax benefit related to the removal or exclusion of stock-based compensation from its intercompany cost-sharing arrangement within its financial statements. On June 22, 2020, the U.S. Supreme Court denied Altera’s petition for writ of certiorari, declining to review the Ninth Circuit’s decision. Based on the Supreme Court’s denial to hear the Altera case, until and unless there is further litigation on this matter in the future, the Company considers the matter resolved. Uncertain Tax Positions As of July 4, 2020, the Company had gross unrecognized tax benefits, inclusive of interest, of $2.4 million, of which $2.0 million would affect the effective tax rate if recognized. During the six months ended July 4, 2020, the Company did not release any of its unrecognized tax benefits. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented. Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013, 2014, 2015 and 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. The adjustment to the pricing of the intercompany transaction results in approximately 141.3 million Norwegian kroner, or $14.9 million additional Norwegian income tax. The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies. The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements. Tax years 2015 through 2020 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company is not currently under audit in any major taxing jurisdiction. The Company does not believe gross unrecognized tax benefits will decrease in the next 12 months.

Income Taxes

6 Months Ended

Jul. 04, 2020

12. Income Taxes

Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Income tax expense (benefit) was $0.4 million and $29.3 million for the three months ended July 4, 2020 and June 29, 2019, resulting in effective tax rates of (26.4)% and 221.0%, respectively. Income tax expense (benefit) was $(0.2) million and $26.8 million for the six months ended July 4, 2020 and June 29, 2019, resulting in effective tax rates of (95.8)% and 165.8%, respectively. The significant change in the effective tax rate for the three and six months ended July 4, 2020 as compared to the prior periods was primarily due to the impact in the prior periods of a change in the Company’s position related to the treatment of stock-based compensation within its intercompany cost-sharing arrangement as well as a change in the proportion of permanent tax impacts relative to a decrease in current year pre-tax book income.

On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner which concluded that related parties in an intercompany cost-sharing arrangement are not required to share costs related to stock-based compensation. On June 7, 2019, the U.S Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) reversed the 2015 decision of the U.S. Tax Court, thus requiring related parties in an intercompany cost-sharing agreement to share stock-based compensation costs. As a result of the Ninth Circuit decision, the Company no longer reflects a tax benefit related to the removal or exclusion of stock-based compensation from its intercompany cost-sharing arrangement within its financial statements. On June 22, 2020, the U.S. Supreme Court denied Altera’s petition for writ of certiorari, declining to review the Ninth Circuit’s decision. Based on the Supreme Court’s denial to hear the Altera case, until and unless there is further litigation on this matter in the future, the Company considers the matter resolved.

Uncertain Tax Positions

As of July 4, 2020, the Company had gross unrecognized tax benefits, inclusive of interest, of $2.4 million, of which $2.0 million would affect the effective tax rate if recognized. During the six months ended July 4, 2020, the Company did not release any of its unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented.

Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013, 2014, 2015 and 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. The adjustment to the pricing of the intercompany transaction results in approximately 141.3 million Norwegian kroner, or $14.9 million additional Norwegian income tax. The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies.

The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements.

Tax years 2015 through 2020 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company is not currently under audit in any major taxing jurisdiction.

The Company does not believe gross unrecognized tax benefits will decrease in the next 12 months.