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Income Taxes
6 Months Ended
Jun. 28, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
As of June 28, 2014, the Company had $321 million accrued for unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. Additionally, the Company had $40 million accrued for interest and penalties as of June 28, 2014. At December 28, 2013, the liability for unrecognized tax benefits was $315 million and the accrual for interest and penalties was $37 million. The Company recognizes interest and penalties related to income tax matters in income tax expense.
The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has substantially concluded all material U.S. federal, state, foreign and local income tax matters for all tax years through 2004. The U.S. Internal Revenue Service (IRS) completed an audit of the Company’s 2008 and 2009 tax returns, and proposed adjustments in its audit report, commonly referred to as a “30-day letter,” issued in February 2014. The Company intends to vigorously defend its positions and initiated defense of these adjustments at the IRS appellate level in April 2014. An unfavorable outcome could have a material negative impact on the Company's effective income tax rate in future periods. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company's effective income tax rate was 8.2% income tax expense and (8.1)% income tax benefit for the second quarter of 2014 and 2013, respectively. For the first six months of 2014 and 2013, the Company's effective income tax rate was 13.4% and 8.4%, respectively. Special charges and discrete items recognized during the second quarter and first six months of 2014 were $82 million and $118 million, respectively, favorably impacting the effective tax rate by 10.1 percentage points and 5.9 percentage points, respectively. Additionally, the Company's effective tax rate for the second quarter and first six months of 2014 does not include the impact of the federal research and development tax credit (R&D tax credit), as the R&D tax credit has not yet been extended for 2014. As a result, the Company's effective tax rate for the second quarter and first six months of 2014 was negatively impacted by 1.1 and 1.2 percentage points, respectively, compared to the same periods in 2013. Debt redemption charges and special charges recognized during the second quarter and first six months of 2013 favorably impacted the Company's effective tax rate by 30.7 percentage points and 9.9 percentage points, respectively. Refer to Note 7 for additional detail associated with these special charges. Additionally, the Company's effective tax rate for the first six months of 2013 includes the full 2012 benefit of the R&D tax credit, which was extended for 2012 in January 2013. As a result, the Company's effective tax rate for the first six months of 2013 was favorably impacted by 3.1 percentage points.