Income Taxes

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Our provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items and any applicable credits.

The following table presents the provision for income taxes (in thousands) and the effective tax rates:



	Three Months Ended
	June 24,			June 25,
	2017			2016
Income before income taxes	$	47,875		$	21,669
Provision for income taxes	$	4,963		$	3,598
Effective tax rate	10.4		%	16.6		%

Our income tax expense was $5.0 million and $3.6 million for the first quarter of fiscal year 2018 and 2017, respectively, resulting in effective tax rates of 10.4% and 16.6% for the first quarter of fiscal year 2018 and 2017, respectively. Our effective tax rate for the first quarter of fiscal year 2018 was lower than the federal statutory rate primarily due to income earned in certain foreign jurisdictions taxed below the federal statutory rate, excess tax benefits from stock-based compensation, and the release of prior year unrecognized tax benefits that were determined to be effectively settled in the first quarter of fiscal year 2018. Our effective tax rate for the first quarter of fiscal year 2017 was below the federal statutory rate primarily due to excess tax benefits from stock based compensation and income earned in certain foreign jurisdictions taxed below the federal statutory rate.

The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At June 24, 2017, the Company had unrecognized tax benefits of $30.8 million, all of which would impact the effective tax rate if recognized. The Company had a net decrease in unrecognized tax benefits of $0.1 million during the first three months of fiscal year 2018, which was comprised of a gross decrease of $2.3 million due to the lapse of the statute of limitations applicable to a tax deduction claimed on a prior year tax return, and a gross increase of $2.2 million to its current year unrecognized tax benefits. The Company’s total unrecognized tax benefits are classified as “Other long-term liabilities” in the consolidated condensed balance sheets.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company recognized $0.1 million of interest in the provision for income taxes during the first three months of fiscal year 2018. As of June 24, 2017, the balance of accrued interest and penalties, net of tax, was $0.3 million. An immaterial amount of interest or penalties was recognized during the first three months of fiscal year 2017.

The Company believes it is reasonably possible that the gross unrecognized tax benefits could decrease by approximately $1.1 million in the next 12 months due to the lapse of the statute of limitations applicable to a tax position taken on a prior year tax return.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. Fiscal years 2014 through 2017 remain open to examination by the major taxing jurisdictions to which the Company is subject, although carry forward attributes that were generated in tax years prior to fiscal year 2014 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company is not currently under an income tax audit in any major taxing jurisdiction.