Income taxes

The consolidated effective tax rate for the quarter ended July 4, 2015 was 28% as compared to the prior year’s rate of 29%. The consolidated effective tax rates for the year-to-date periods ended July 4, 2015 and June 28, 2014 were 26% and 29%, respectively. The effective tax rate for the first half of 2015 benefited from a reduction in tax related to current year remitted and unremitted earnings and the completion of certain tax examinations.

As of July 4, 2015, the Company classified $10 million of unrecognized tax benefits as a net current liability. Management’s estimate of reasonably possible changes in unrecognized tax benefits during the next twelve months consists of the current liability balance expected to be settled within one year, offset by approximately $7 million of projected additions related primarily to ongoing intercompany transfer pricing activity. Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation in this estimate.

Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the year-to-date period ended July 4, 2015; $50 million of this total represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.



(millions)
January 3, 2015	$	78
Tax positions related to current year:
Additions	3
Reductions	—
Tax positions related to prior years:
Additions	2
Reductions	(8		)
Settlements	(1		)
July 4, 2015	$	74

For the quarter ended July 4, 2015, the Company recognized an increase of $1 million for tax-related interest and penalties. For the year-to-date period ended July 4, 2015, the Company recognized tax-related interest and penalties netting to zero. The Company recognized no cash settlements during the current quarter or year-to-date periods. The accrual balance was $20 million at July 4, 2015.