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Income Taxes
3 Months Ended
Sep. 29, 2018
Income Tax Disclosure [Abstract]  
Income Taxes [Text Block]
INCOME TAXES

In the three months ended September 29, 2018 and September 23, 2017, the Company recorded an income tax provision of $36.2 million and $26.4 million, respectively. The Company’s effective tax rate for the three months ended September 29, 2018 and September 23, 2017 was 15.5% and 14.6%, respectively.
On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act included a one-time tax on accumulated unremitted earnings of our foreign subsidiaries (“Transition Tax”). SEC Staff Accounting Bulletin No. 118 allows the use of provisional amounts (reasonable estimates) if accounting for the income tax effects of the Act has not been completed. Provisional amounts must be adjusted within one year from the enactment date of the Act. In the second quarter of fiscal year 2018, the Company recorded a $236.9 million discrete provisional Transition Tax charge. No adjustment to the provisional Transition Tax charge was made in the first quarter of fiscal year 2019 as the Company continues to gather information and analyze available guidance to more precisely compute the amount of the Transition Tax.
The Act reduced the federal statutory tax rate from 35% to 21%, effective January 1, 2018, which resulted in a fiscal year 2018 federal statutory tax rate of 28.1% for the Company (average of a 35% rate for the first half of fiscal year 2018 and a 21% rate for the second half of fiscal year 2018). The Company’s federal statutory tax rate for fiscal year 2019 is 21%.
The Act contains Global Intangible Low-Taxed Income (“GILTI”) provisions, which first impact the Company in fiscal year 2019. The GILTI provisions effectively subject income earned by the Company’s foreign subsidiaries to current U.S. tax at a rate of 10.5%, less foreign tax credits. Under U.S. GAAP the Company can make an accounting policy election to either recognize deferred taxes for temporary differences expected to impact GILTI in future years or provide for tax expense related to GILTI in the year the tax is incurred as a period expense. The Company has elected to treat tax generated by the GILTI provisions as a period expense.
The Company’s federal statutory tax rate for the first quarter of fiscal year 2019 is 21%. The Company’s effective tax rate for the three months ended September 29, 2018 of 15.5% was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated primarily by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by tax expense related to GILTI.
The Company’s federal statutory tax rate for the first quarter of fiscal year 2018 was 35%. The Act did not impact the federal statutory tax rate and income tax provision for the first quarter of fiscal year 2018 because it was enacted after the end of that quarter. The Company’s effective tax rate for the three months ended September 23, 2017 of 14.6% was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated primarily by the Company's international operations managed in Ireland, that were taxed at lower rates, and a $2.0 million discrete benefit for excess tax benefits generated by the settlement of share-based awards, partially offset by share-based compensation for which no tax benefit is expected and $3.9 million of discrete interest accruals for unrecognized tax benefits.
The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits, including accrued interest and penalties, could decrease up to $439.0 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $439.0 million primarily relates to matters involving federal taxation of cross-border transactions.
The Company’s federal corporate income tax returns are audited on a recurring basis by the Internal Revenue Service (“IRS”). The IRS concluded its field examination of the Company’s federal corporate income tax returns for fiscal years 2009 through 2011 and issued an IRS Revenue Agent's Report in July 2016 that included proposed adjustments for transfer pricing issues related to cost sharing and buy-in license payments for the use of intangible property by one of the Company’s international subsidiaries. The Company disagreed with the proposed transfer pricing adjustments and related penalties, and in September 2016, the Company filed a protest to challenge the proposed adjustments and request a conference with the Appeals Office of the IRS. In May 2018, a preliminary understanding was reached with the IRS regarding the contested issues for the audit and post-audit years, which the Company expects may be finalized in fiscal year 2019 with the execution of a closing agreement. In June 2018, the Company made advance payments for audit and post-audit year tax of $140.7 million and interest of $37.4 million. These payments will reduce the accrual of interest on audit and post-audit year tax deficiencies that would be owed if the preliminary understanding is finalized. The Company’s reserves for unrecognized tax benefits are sufficient to cover the audit and post-audit year tax deficiencies that would be owed as a result of the preliminary understanding. In fiscal year 2017, the IRS commenced an audit of the Company’s federal corporate income tax returns for fiscal years 2012 through 2014, which is ongoing. In the first quarter of fiscal year 2019, the Company was notified that the IRS will commence an audit of the Company's federal corporate income tax returns for fiscal years 2015 through 2016.