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Income Taxes
9 Months Ended
Dec. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company recorded tax provisions of $183.2 million and $217.7 million for the third quarter and the first nine months of fiscal year 2018, respectively, representing an effective tax rate of 94% and 39%, respectively. The Company recorded tax provisions of $20.7 million and $50.8 million for the third quarter and the first nine months of fiscal year 2017, respectively, representing an effective tax rate of 13% and 10%, respectively.
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted into law. The TCJA provides for numerous significant tax law changes and modifications including the reduction of the U.S. federal corporate income tax rate from 35% to 21%, the requirement for companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and the creation of new taxes on certain foreign-sourced earnings. As a fiscal year-end taxpayer, certain provisions of the TCJA began to impact the Company in the third quarter of fiscal year 2018, while other provisions will impact the Company beginning in fiscal year 2019.
The corporate tax rate reduction is effective as of January 1, 2018. Since the Company has a fiscal year rather than a calendar year, it is subject to rules relating to transitional tax rates. As a result, the Company’s fiscal year 2018 federal statutory rate will be a blended rate of 31.5%. The change in the statutory tax rate from 35% to 31.5% for the Company's fiscal year 2018 does not have a significant impact on the effective tax rate.
Accounting Standards Codification (ASC) 740, Income Taxes, requires companies to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 which will allow companies to record provisional amounts during a measurement period that is similar to the measurement period used when accounting for business combinations. As of December 30, 2017, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. The Company recognized a provisional amount of $183.2 million, which was included as a component of income tax expense from continuing operations. The Company will continue to assess the impact of the recently enacted tax law (and expected further guidance from federal and state tax authorities as well as further guidance for the associated income tax accounting) on its business and consolidated financial statements.
The one-time transition tax is based on the Company’s total post-1986 earnings and profits (E&P) of its foreign subsidiaries. The Company had previously accrued deferred taxes on a portion of these same earnings. The larger balance was permanently reinvested outside the U.S. The Company recorded provisional U.S. federal and state amounts for its one-time transition tax liabilities, resulting in an increase in income tax expense of $582.8 million. In addition, the Company released the related deferred tax liabilities, resulting in a decrease in income tax expense of $424.3 million. The net increase to tax expense is $158.5 million.
The Company has not yet completed its calculation of the total post-1986 E&P for its foreign subsidiaries. In addition, the one-time transition tax is based in part on the amount of those earnings held in cash and other specified assets either as of the end of fiscal year 2018 or the average of the year-end balances for fiscal years 2016 and 2017. The Company's calculation of this amount will change with further analysis, fourth quarter activities, and further guidance from the U.S. federal and state tax authorities about the application of these new rules. The Company will continue to evaluate the impact of the tax law change as it relates to the accounting for the outside basis difference of its foreign entities.
As a result of the reduction of the corporate income tax rate to 21%, U.S. GAAP requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of enactment. The Company remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The provisional amount recorded for the remeasurement and resulting write-down of the Company's deferred tax balance was $26.2 million. The Company’s actual write-down may vary materially from the provisional amount because the final analysis will be based on balances as of March 31, 2018 and actual activities of the fourth quarter of fiscal year 2018.

The difference between the blended U.S. federal statutory tax rate of 31.5% and the Company's effective tax rate in all periods of fiscal year 2018 was primarily due to the one-time transition tax net of the reversal of the related deferred tax liabilities.
The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rate in all periods of fiscal year 2017 was primarily due to income earned in lower tax rate jurisdictions, for which no U.S. income tax had been provided, as the Company intended to permanently reinvest the earnings outside of the U.S.
The Company’s total gross unrecognized tax benefits as of December 30, 2017 increased by $91.1 million in the first nine months of fiscal year 2018 to $121.5 million. The increase is primarily attributable to an additional deduction claimed on federal and state amended tax returns for repurchase premium paid in connection with the early redemption of the Company’s 3.125% Junior Convertible debenture due March 15, 2037 (2037 Convertible Notes) in fiscal year 2014.  As of December 30, 2017, the total amount of unrecognized tax benefits that, if realized in a future period, would favorably affect the effective tax rate was $14.5 million. Another $85.5 million related to the 2037 Convertible Notes would increase additional paid-in capital.  It is reasonably possible that changes to our unrecognized tax benefits could be significant in the next twelve months due to tax audit settlements and lapses of statutes of limitation. As a result of uncertainties regarding tax audit settlements and their possible outcomes, an estimate of the range of increase or decrease that could occur in the next twelve months cannot be determined at this time.
The Company’s policy is to include interest and penalties related to income tax liabilities within the provision for income taxes on the condensed consolidated statements of income. The balance of accrued interest and penalties recorded in the condensed consolidated balance sheets and the amounts of interest and penalties included in the Company's provision for income taxes were not material for all periods presented.
The statutes of limitations have closed for U.S. federal income tax purposes for years through fiscal year 2014, for U.S. state income tax purposes for years through fiscal year 2010, and for Ireland income tax purposes for years through fiscal year 2012.