Income Taxes (Notes)

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax [Text Block]

Income Taxes

The Company recorded a tax benefit of $14.1 million and a tax provision of $7.0 million, or effective tax rates of (18.3)% and 30.1% for the three months ended March 31, 2013 and March 31, 2012, respectively.

The effective tax rate for the three months ended March 31, 2013, reflects the Company's recognition of total tax benefits of approximately $43.0 million related to a tax settlement with the Internal Revenue Service (“IRS”) and the reinstatement of the U.S. federal research and development (“R&D”) tax credit on January 2, 2013.

In March 2013, the Company finalized a closing agreement with the IRS covering specific matters related to the audit of the Company's federal income tax returns for these tax years from 2004 through 2006. As a result of the settlement, the Company recognized a net tax benefit of $27.8 million, which included interest expense of $3.0 million. The Company is no longer subject to an audit of its U.S. federal income taxes through tax year 2006.

On January 2, 2013, the American Taxpayer Relief Act of 2012 retroactively reinstated the U.S. federal R&D tax credit from January 1, 2012 to December 31, 2013. As a result, for the three months ended March 31, 2013, the Company recognized a tax benefit of $15.2 million related to fiscal 2012 R&D credits.

The effective tax rate for the three months ended March 31, 2012, differs from the federal statutory rate of 35% primarily due to the benefit of earnings in foreign jurisdictions, which are subject to lower tax rates, partially offset by an increase in the Company's valuation allowance attributable to investment losses currently disallowed for income tax purposes. The effective rate for the period does not reflect the benefit of the federal R&D credit which had expired on December 31, 2011.

As a result of the IRS tax settlement, the amount of gross unrecognized tax benefits was reduced by approximately $29.1 million. The total amount of gross unrecognized tax benefits was $111.2 million as of March 31, 2013, of which $98.2 million, if recognized, would affect the effective tax rate.

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. There is a greater than remote likelihood that the balance of the gross unrecognized tax benefits will decrease by approximately $11.1 million within the next twelve months due to lapses of applicable statutes of limitation and the completion of tax review cycles in various tax jurisdictions.

The Company is currently under examination by the IRS for the 2007 through 2009 tax years. The Company is also subject to separate ongoing examinations by the India tax authorities for the 2004 tax year, 2004 through 2008 tax years and the 2009 through 2010 tax years. The Company is not aware of any other examinations by tax authorities in any other major jurisdictions in which it files income tax returns as of March 31, 2013.

In 2008, the Company received a proposed adjustment from the India tax authorities related to the 2004 tax year. In 2009, the India tax authorities commenced a separate investigation of our 2004 through 2008 tax returns and are disputing the Company's determination of taxable income due to the cost basis of certain fixed assets. The Company accrued $4.6 million in penalties and interest in 2009 related to this matter. The Company understands that in accordance with the administrative and judicial process in India, the Company may be required to make payments that are substantially higher than the amount accrued in order to ultimately settle this issue. The Company strongly believes that any assessment it may receive in excess of the amount accrued would be inconsistent with applicable India tax laws and intends to defend this position vigorously.

The Company is pursuing all available administrative procedures relative to these matters. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to these proposed adjustments and the ultimate resolution of these matters is unlikely to have a material effect on its consolidated financial condition or results of operations; however there is still a possibility that an adverse outcome of these matters could have a material effect on its consolidated financial condition and results of operations. For more information, see Note 16, Commitments and Contingencies, under the heading “IRS Notices of Proposed Adjustments.”