INCOME TAXES

As of April 2, 2016, the Company had $400 million accrued for uncertain tax positions, all of which would affect the Company’s effective tax rate if recognized. Additionally, the Company had $63 million accrued for gross interest and penalties as of April 2, 2016. At January 2, 2016, the liability for uncertain tax positions was $338 million and the accrual for gross interest and penalties was $58 million.

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. In April 2015, the U.S. Internal Revenue Service (IRS) completed an audit of the Company’s 2010 and 2011 tax returns and proposed adjustments in an audit report. In February 2014, the IRS completed an audit of the Company’s 2008 and 2009 tax returns and also proposed adjustments in an audit report.

The Company's effective income tax rate was 30.1% and 16.9% for the first quarter of 2016 and 2015, respectively. The Company’s effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes and foreign taxes that are different than the U.S. federal statutory rate. In addition, the effective tax rate can be impacted each period by discrete income tax factors and events. During the three months ended April 2, 2016, special charges, acquisition-related costs, other-than-temporary impairments and discrete income tax items unfavorably impacted the effective rate by 18.0 percentage points.

During the first quarter of 2016, the European Commission concluded that decisions by the tax authorities in Belgium regarding corporate income taxes paid under certain excess profit rulings, including the ruling previously granted to one of the Company’s subsidiaries, did not comply with European Union rules on state aid. Based on the applicability of this conclusion to the Company's 2009 through 2014 tax returns in Belgium, the Company recorded a liability of 45 million Euros ($52 million as of April 2, 2016) including interest during the first quarter of 2016 to reserve for this uncertain tax position.

As discussed in Note 1, the Company adopted ASU No. 2015-17 in light of the process simplification provided by the ASU. As a result, the January 2, 2016 balances of deferred tax assets and deferred tax liabilities previously reported were impacted as follows (in millions):



	January 2, 2016
	Previously
	Reported			Impact			As Adopted
Deferred income taxes (within Other current assets)	$	264		$	(264	)	$	—
Other current assets (excluding Deferred income taxes)	188			81			269
Deferred income taxes (within Other assets)	132			19			151
Other current liabilities	(517		)	7			(510		)
Deferred income taxes (within Other liabilities)	(738		)	157			(581		)

In conjunction with the adoption of this ASU, the Company reclassified $81 million of remaining other current tax assets to other current assets to conform to the 2016 presentation.