Income (loss) before income taxes is as follows (in thousands):



	Fiscal Year Ended
	June 29, 2014		June 30, 2013			June 24, 2012
Domestic	$	32,255	$	(105,575	)	$	(88,430	)
Foreign	38,731		28,745			16,623
Total income (loss) before income taxes	$	70,986	$	(76,830	)	$	(71,807	)

The provision for (benefit from) income taxes is as follows (in thousands):



	Fiscal Year Ended
	June 29, 2014			June 30, 2013			June 24, 2012
Current income taxes:
Domestic	$	5,118		$	1,735		$	5,971
Foreign	(203		)	(1,129		)	2,455
	$	4,915		$	606		$	8,426
Deferred income taxes:
Domestic	$	1,150		$	352		$	5,728
Foreign	6,188			11,032			(30,911		)
	7,338			11,384			(25,183		)
Total provision (benefit)	$	12,253		$	11,990		$	(16,757	)

The tax benefit from stock-based compensation reduced current or future income taxes payable for the fiscal years ended June 29, 2014, June 30, 2013, and June 24, 2012 by $0.2 million, $0.0 million, and $1.7 million, respectively.

The Company’s effective tax rate on pretax income (loss) differs from the U.S. federal statutory tax rate as follows:



	Fiscal Year Ended
	June 29, 2014		June 30, 2013		June 24, 2012
Statutory tax rate	35.0	%	(35.0	)%	(35.0	)%
State taxes, net of federal benefit	0.4		(0.1	)	14.6
Change in valuation allowance	(25.5	)	58.2		(38.9	)
Multijurisdictional taxation *	4.6		(8.4	)	(1.5	)
Actual and deemed foreign dividends	7.2		2.7		3.7
Foreign tax credit	(5.2	)	(4.8	)	(7.0	)
Research and development credit	1.4		(8.0	)	(2.6	)
Uncertain tax positions	(12.6	)	(6.6	)	3.7
Tax rate changes	6.1		9.7		0.7
Withholding tax	3.7		4.3		6.7
Stock based compensation	0.9		2.4		2.5
Goodwill impairment	—		—		30.1
Other, net	1.3		1.2		(0.3	)
Effective tax rate (benefit)	17.3	%	15.6	%	(23.3	)%

* Provision for income taxes related to multijurisdictional taxation for the fiscal year ended June 29, 2014 included an expense of $2.9 million for the correction of an immaterial prior period error related to a deferred tax charge.

Net Deferred Tax Assets (Liabilities)

The major components of the net deferred tax assets (liabilities) as of June 29, 2014 and June 30, 2013 were as follows (in thousands):



	June 29, 2014			June 30, 2013
Deferred tax assets:
Accrued expenses	$	13,857		$	13,514
Accrued compensation	17,187			18,011
Property, plant and equipment	5,104			8,499
Losses carryforward	76,045			108,921
Research and experimental credits	50,385			51,015
Other tax credits	40,719			36,745
Other	740			636
Total deferred tax assets	204,037			237,341
Valuation allowance	(167,428		)	(204,233		)
Deferred tax liabilities:
Unrealized gain on securities	(7,122		)	(2,992		)
Prepaid expenses	(899		)	(1,347		)
Undistributed foreign earnings	(3,425		)	—
Total deferred tax liabilities	(11,446		)	(4,339		)
Net deferred tax assets	$	25,163		$	28,769

Realization of deferred tax assets is dependent upon generating sufficient future taxable income, carryback of losses, offsetting deferred tax liabilities, and the availability of tax planning strategies. Based on the consideration of all available evidence using a “more-likely-than-not” standard, the Company has determined that the valuation allowance established against its United States ("U.S.") federal and California deferred tax assets should remain in place as of the end of fiscal year 2014. The valuation allowance for U.S. federal tax assets relates to beginning of the year balances of reserves that were established during fiscal year 2009. In addition, the Company determined during fiscal year 2012 that its California deferred tax assets should be fully reserved with a valuation allowance.

With respect to the U.S. valuation allowance, cumulative pre-tax losses for the current and prior two years in the Company's U.S. federal consolidated group constitute significant negative evidence, and therefore, positive evidence of equal or greater significance is needed at a minimum to overcome that negative evidence before a tax benefit is recognized for deductible temporary differences and loss carryforwards. The Company examined the four sources of income that allow the realization of deferred tax assets. These sources are carrybacks, reversals of existing temporary differences, tax planning strategies, and future taxable income exclusive of reversals of existing temporary differences. As of fiscal year 2014, the Company determined that none of the sources of income were meaningful enough to warrant the release of the U.S. federal and state valuation allowance.

The Company's fiscal years' 2009, 2012, and 2013 California pretax losses constitute negative evidence, which resulted in recording a $10.3 million valuation allowance in 2012 against all of the Company's California deferred tax assets. The pattern of losses for California makes the reliance on forecasted earnings a source of income which should not be used, and the carryback of losses is not permitted in California. Based upon this analysis, the Company concluded that a full valuation allowance was required in fiscal year 2014.

During fiscal year 2011, the Company recorded a deferred charge of $14.6 million in connection with the reduction of its deferred tax assets in the U.K. which is offset by the associated valuation allowance, and both balances were reduced by $0.8 million. As of June 29, 2014, as a result of the amortization of the deferred charge reported during the fiscal year, the charge and the related valuation allowance were reduced to $5.0 million and $2.2 million, respectively.

During the third quarter of fiscal year 2012, the Company recorded a deferred charge of $16.5 million and valuation allowance of $13.4 million related to certain intercompany transactions which reduced its deferred tax assets and associated valuation allowance in the U.S. by $3.1 million. As of June 29, 2014, as a result of the amortization of the deferred charge reported during the fiscal year, the charge and the related valuation allowance were reduced to $10.2 million and $8.3 million, respectively.

Statutory Rate Reduction in U.K.

During the three months ended September 23, 2012, the statutory tax rate in the U.K. was reduced from 24 percent to 23 percent, effective April 1, 2013. The Company reported a $3.2 million one-time expense due to the rate reduction on the deferred tax assets in the U.K. as a discrete item in the provision for income taxes. On July 17, 2013, the U.K. enacted the Finance Act of 2013 that further reduced tax rates from 23 percent to 21 percent in April 2014, and eventually to 20 percent in April 2015. The Company reported a $4.2 million one-time expense due to the rate reduction on the deferred tax assets in the U.K. as a discrete item in the provision for income taxes during Q1 of 2014.

Singapore Tax Holiday

During fiscal year 2011, the Company was granted certain incentives by the Singapore Economic Development Board. As a result, the Company started to operate under a tax holiday in Singapore, effective from December 27, 2010 through December 26, 2020. The tax holiday was amended in the fourth fiscal quarter of 2013, resulting in an extension of the incentive through December 26, 2022. The tax holiday is conditional upon the Company meeting certain employment and investment thresholds. The impact of the Singapore tax holiday provided no benefit in the 2012, 2013 and 2014 fiscal years.

The Company operated in multiple foreign jurisdictions with lower statutory tax rates than the U.S., and its operation in Singapore has the most significant impact on the Company's effective tax rate.

Reconciliation of Unrecognized Tax Benefits

A reconciliation of unrecognized tax benefits from June 24, 2012 to June 29, 2014 is as follows (in thousands):



Beginning balances at June 24, 2012	$	48,876
Increases for positions taken in current year	2,262
Increases for positions taken in a prior year	2,395
Decreases for positions taken in a current year	—
Decreases for positions taken in a prior year	(3,953		)
Decreases for settlements with taxing authorities	—
Decreases for lapses in the applicable statute of limitation	(4,895		)
Unrecognized tax benefits at June 30, 2013	44,685

Increases for positions taken in current year	1,760
Increases for positions taken in a prior year	4,069
Decreases for positions taken in a current year	(212		)
Decreases for positions taken in a prior year	(1,532		)
Decreases for settlements with taxing authorities	(552		)
Decreases for lapses in the applicable statute of limitation	(6,479		)
Unrecognized tax benefits at June 29, 2014	$	41,739

The Company recognizes certain tax liabilities for anticipated tax audit findings in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which additional taxes would be due. If the audit findings result in actual taxes owed more or less than what was anticipated, income tax expense would be increased or decreased, accordingly, in the period of the determination.

As of June 29, 2014, the liability for income tax associated with uncertain tax positions was $3.2 million. If recognized, the liability associated with uncertain tax positions would result in a benefit to income taxes on the consolidated statement of operations which would reduce the Company's future effective tax rate. For fiscal year 2014, $9.1 million of the decrease to uncertain tax positions impacted the effective tax rate. The remaining change in the uncertain tax positions was recorded against long-term deferred tax assets that receive a full valuation allowance and foreign currency translation adjustments.

The Company's policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. The Company had accrued interest and penalties related to uncertain tax positions as of June 29, 2014 and June 30, 2013 of $1.2 million and $3.9 million, respectively. The change in interest and penalties during fiscal year 2014 of $2.7 million was primarily the result of lapses in the statutes of limitation offset by the accrual of additional interest. The decrease in interest and penalties of $0.5 million during fiscal year 2013 was primarily the result of lapses in the statutes of limitation and accrual of interest related to outstanding uncertain tax positions.

The Company’s uncertain tax positions are expected to decrease by an estimated $0.8 million during the next twelve months primarily due to a significant decrease from lapses of statutes of limitation in certain foreign tax jurisdictions partially offset by increases in uncertain tax positions in certain domestic and foreign tax jurisdictions.

The Company anticipates that there will be other changes to the unrecognized tax benefit associated with uncertain tax positions due to the expiration of statutes of limitation, audit settlements and other changes in reserves. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of other changes that may occur within the next twelve months cannot be made.

Tax Jurisdiction

The Company's major tax jurisdictions are U.S. Federal, California, Japan, United Kingdom, Singapore, Germany, Hong Kong and Mexico. In the ordinary course of business, the Company is subject to examination by taxing authorities. As of June 30, 2013, the Company is no longer subject to: (i) U.S. federal income tax examinations for years before the fiscal year ended June 28, 2009; (ii) California income tax examinations before the fiscal year ended June 29, 2008, subject to fiscal years 2000 through 2005 being currently under appeal and being subject to reopening for examination by the Franchise Tax Board; (iii) Japan income tax examinations before the fiscal year ended July 1, 2009; (iv) United Kingdom before the fiscal year ended June 24, 2013; (v) Germany tax examinations before the fiscal year ended June 27, 2010; (vi) Singapore tax examination before fiscal year 2011; (vii) Mexico tax examination for the assessment year ended December 31, 2009; and (viii) Hong Kong profits tax examinations before the assessment year ended March 31, 2010.

As a matter of course, the Company is regularly audited by various taxing authorities. Unfavorable settlement of any particular issue may require the use of cash. Favorable resolution may be recognized as a reduction to the effective tax rate in the year of resolution. The Company's interest and penalties associated with income taxes are included in both accrued income taxes and long-term income taxes payable, as appropriate.

Operating Loss Carryforwards and Tax Credits

The Company has federal, state and foreign net operating loss carryforwards. The federal net operating loss of $127.7 million will expire in 2029 through 2033, and the California net operating loss of $118.2 million will expire in 2015 through 2033. The foreign net operating losses of $33.3 million have no expiration. The Company has foreign tax credits of $62.7 million that will expire from 2019 through 2024. The Company also has federal research credits of $23.3 million that will expire in 2026 through 2033, California research credits of $41.5 million that have no expiration, Massachusetts research credits of $1.2 million that will expire in 2023 through 2029, and Massachusetts investment tax credits of $0.4 million that will expire in 2023 through 2029.

Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code, the utilization of operating loss carryforward and other tax attributes may be subject to limitations if certain ownership changes occur during a three-year testing period. The Company does not believe an ownership change has occurred as of June 29, 2014 that would limit the Company's utilization of any operating loss carryforward or other tax attributes.

Undistributed Earnings

As of June 29, 2014, U.S. income taxes have been provided on approximately $9.3 million of undistributed earnings of foreign subsidiaries. The amount represents excess cash held by foreign subsidiaries not required for working capital, capital expenditures and other needs of the foreign subsidiaries. The remaining unrepatriated foreign earnings of $118.1 million are considered to be invested indefinitely.