Income Taxes
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Dec. 02, 2011
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES Income before income taxes for fiscal 2011, 2010 and 2009 consisted of the following (in thousands):
Domestic income before taxes is significantly lower than foreign income before taxes due to certain accounting charges that our foreign subsidiaries are not required to bear under foreign accounting standards. These charges do not lower our domestic income subject to U.S. tax. The provision for income taxes for fiscal 2011, 2010 and 2009 consisted of the following (in thousands):
Total income tax expense differs from the expected tax expense (computed by multiplying the U.S. federal statutory rate of 35% by income before income taxes) as a result of the following (in thousands):
Deferred Tax Assets and Liabilities The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and liabilities as of December 2, 2011 and December 3, 2010 are presented below (in thousands):
The deferred tax assets and liabilities for fiscal 2011 and fiscal 2010 include amounts related to various acquisitions. The total change in deferred tax assets and liabilities in fiscal 2011 includes changes that are recorded to OCI, additional paid-in capital, goodwill and retained earnings. During fiscal 2010, we repatriated $700 million of undistributed foreign earnings for which a deferred tax liability had been previously recognized. As such, a long-term deferred tax liability of approximately $200 million was reclassified from deferred income taxes to income taxes payable in the first quarter of fiscal 2010 and was paid during fiscal 2010. We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered permanently reinvested outside the U.S. To the extent that the foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. As of December 2, 2011, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $2.4 billion. The unrecognized deferred tax liability for these earnings is approximately $0.7 billion. As of December 2, 2011, we have U.S. net operating loss carryforwards of approximately $32.4 million for federal and $37.5 million for state. We also have federal and state tax credit carryforwards of approximately $9.4 million and $23.7 million, respectively. The net operating loss carryforward assets, federal tax credits and foreign tax credits will expire in various years from fiscal 2017 through 2031. The state tax credit carryforwards can be carried forward indefinitely. The net operating loss carryforward assets and certain credits are subject to an annual limitation under Internal Revenue Code Section 382, but are expected to be fully realized. In addition, we have been tracking certain deferred tax attributes of $44.6 million which have not been recorded in the financial statements pursuant to accounting standards related to stock-based compensation. These amounts are no longer included in our gross or net deferred tax assets. Pursuant to these standards, the benefit of these deferred tax assets will be recorded to equity when they reduce taxes payable. A valuation allowance has been established for certain deferred tax assets related to the impairment of investments. Accounting for Uncertainty in Income Taxes During fiscal 2011 and 2010, our aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
As of December 2, 2011, the combined amount of accrued interest and penalties related to tax positions taken on our tax returns and included in non-current income taxes payable was approximately $12.3 million. We file income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. We are subject to the continual examination of our income tax returns by the IRS and other domestic and foreign tax authorities. Our major tax jurisdictions are the U.S., Ireland and California. For California, Ireland and the U.S., the earliest fiscal years open for examination are 2005, 2006 and 2008, respectively. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from the current examination. We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position. In August 2011, a Canadian income tax examination covering our fiscal years 2005 through 2008 was completed. Our accrued tax and interest related to these years was approximately $35 million and was previously reported in long-term income taxes payable. We reclassified approximately $17 million to short-term income taxes payable and decreased deferred tax assets by approximately $18 million in conjunction with the aforementioned resolution. The $17 million balance in short-term income taxes payable is partially secured by a letter of credit and is expected to be paid by the first quarter of fiscal 2012. In October 2010, a U.S. income tax examination covering our fiscal years 2005 through 2007 was completed. Our accrued tax and interest related to these years was $59 million and was previously reported in long-term income taxes payable. We paid $20 million in conjunction with the aforementioned resolution. A net income statement tax benefit in the fourth quarter of fiscal 2010 of $39 million resulted. The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of current and non-current assets and liabilities. The Company believes that before the end of fiscal 2012, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Given the uncertainties described above, we can only determine a range of estimated potential decreases in underlying unrecognized tax benefits ranging from $0 to approximately $40 million. These amounts would decrease income tax expense under current GAAP related to income taxes. |