Income Taxes

໿

Our provision (benefit) 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 (benefit) for income taxes (in thousands) and the effective tax rates:



	Three Months Ended
	June 30,			June 24,
	2018			2017
Income (loss) before income taxes	$	(4,500	)	$	47,875
Provision (benefit) for income taxes	$	(228	)	$	4,963
Effective tax rate	5.1		%	10.4		%

Our income tax benefit for the first quarter of fiscal year 2019 was $0.2 million compared to $5.0 million in income tax expense for the first quarter of fiscal year 2018, resulting in effective tax rates of 5.1% and 10.4% for the first quarter of fiscal year 2019 and 2018, respectively. Our effective tax rate for the first quarter of fiscal year 2019 was lower than the federal statutory rate primarily due to the effect of income earned in certain foreign jurisdictions that is taxed below the federal statutory rate and the U.S. federal research and development tax credit. 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.

The Tax Act was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate from 35.0% to 21.0%, restricts the deductibility of certain business expenses, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax-deferred and creates new taxes on certain foreign sourced earnings, among other provisions. We are applying the guidance in SEC Staff Accounting Bulletin No. 118 when accounting for the enactment-date effects of the Tax Act.

At June 30, 2018, we have not completed our accounting for the income tax effects of the Tax Act. We have made a reasonable estimate of the income tax effects on our existing deferred tax balances and the one-time transition tax. During the first quarter of fiscal year 2019, we did not recognize adjustments to provisional amounts recorded at March 31, 2018. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of deferred tax balances or give rise to new deferred tax amounts. In addition, we have not yet finalized the calculation of foreign earnings & profits ("E&P") and the amounts held in cash or other specified assets on the applicable measurement date. We will continue to make and refine calculations as additional analysis is completed.

Under a provision commonly known as global intangible low taxed income ("GILTI"), the Tax Act subjects a U.S. shareholder to current tax on certain earnings of foreign subsidiaries. Under US GAAP, an accounting policy election can be made to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Given the complexity of the GILTI provisions, we are still evaluating the effects of the GILTI provisions and have not yet made an accounting policy election. At June 30, 2018, because we are still evaluating the GILTI provisions, we have included GILTI related to current-year operations only in our estimated annual effective tax rate and have not provided additional GILTI on deferred items.

The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At June 30, 2018, the Company had unrecognized tax benefits of $55.8 million, all of which would impact the effective tax rate if recognized. The Company recorded gross increases to its current year unrecognized tax benefits of $0.7 million for the first quarter of fiscal year 2019. The Company’s total unrecognized tax benefits are classified as “Non-current income taxes" in the consolidated condensed balance sheets.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of June 30, 2018, the balance of accrued interest and penalties, net of tax, was $1.3 million.

Fiscal years 2015 through 2018 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 2015 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company's United Kingdom subsidiaries are currently under a limited scope tax audit for certain income tax matters related to fiscal year 2016. The Company believes it has accrued adequate reserves related to the matters under examination. The Company is not under an income tax audit in any other major taxing jurisdiction.