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Income Taxes (Tables)
12 Months Ended
Dec. 30, 2017
Income Tax Disclosure [Abstract]  
Income before provision for income taxes
Cadence’s income before provision for income taxes included income from the United States and from foreign subsidiaries for fiscal 2017, 2016 and 2015, was as follows:
 
2017
 
2016
 
2015
 
(In thousands)
United States
$
81,619

 
$
84,694

 
$
47,867

Foreign subsidiaries
233,427

 
152,459

 
219,729

Total income before provision for income taxes
$
315,046

 
$
237,153

 
$
267,596

Components of income taxes provision
Cadence’s provision for income taxes was comprised of the following items for fiscal 2017, 2016 and 2015:
 
2017
 
2016
 
2015
 
(In thousands)
Current:
 
 
 
 
 
Federal
$
(2,193
)
 
$
4,839

 
$
(10,265
)
State and local
(2,097
)
 
50

 
(713
)
Foreign
35,301

 
34,047

 
24,622

Total current
31,011

 
38,936

 
13,644

 
 
 
 
 
 
Deferred:
 
 
 
 
 
Federal
76,494

 
(5,291
)
 
(13,165
)
State and local
5,571

 
6,006

 
1,751

Foreign
(2,131
)
 
(5,584
)
 
(1,734
)
Total deferred
79,934


(4,869
)
 
(13,148
)
 
 
 
 
 
 
Tax expense allocated to shareholders’ equity

 

 
14,683

 
 
 
 
 
 
Total provision for income taxes
$
110,945

 
$
34,067

 
$
15,179

Summary of income tax reconciliation
The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rate of 35% to income before provision for income taxes for fiscal 2017, 2016 and 2015 as follows:
 
2017
 
2016
 
2015
 
(In thousands)
Provision computed at federal statutory income tax rate
$
110,266

 
$
83,003

 
$
93,659

State and local income tax, net of federal tax effect
5,867

 
5,534

 
3,621

Foreign income tax rate differential
(65,296
)
 
(36,098
)
 
(56,873
)
Impact of 2017 Tax Act*
96,798

 

 

Stock-based compensation
(24,455
)
 
(13,132
)
 
2,687

Change in deferred tax asset valuation allowance
4,689

 
1,243

 
(11,066
)
Tax credits
(26,789
)
 
(39,765
)
 
(19,243
)
Repatriation of foreign earnings

 
25,145

 
50

Tax effects of intra-entity transfer of assets
(8,450
)
 
(7,661
)
 
(7,928
)
Domestic production activity deduction
(2,474
)
 
(2,826
)
 

Withholding taxes
11,225

 
9,870

 
5,119

Tax settlements, foreign
3,086

 
5,620

 

Increase in unrecognized tax benefits not included in tax settlements
4,054

 
614

 
3,530

Other
2,424

 
2,520

 
1,623

Provision for income taxes
$
110,945

 
$
34,067

 
$
15,179

Effective tax rate
35
%
 
14
%
 
6
%
Components of deferred tax assets and liabilities
The components of deferred tax assets and liabilities consisted of the following as of December 30, 2017 and December 31, 2016:
 
As of
 
December 30,
2017
 
December 31,
2016
 
(In thousands)
Deferred tax assets:
 
 
 
Tax credit carryforwards
$
164,687

 
$
180,999

Reserves and accruals
42,357

 
62,438

Intangible assets
13,112

 
23,335

Capitalized research and development expense for income tax purposes
10,621

 
19,093

Operating loss carryforwards
20,650

 
23,175

Deferred income
12,178

 
14,842

Capital loss carryforwards
20,266

 
20,580

Stock-based compensation costs
15,782

 
20,087

Depreciation and amortization
7,665

 
12,202

Investments
3,201

 
6,442

Prepaid expenses

 
26,526

Total deferred tax assets
310,519

 
409,719

Valuation allowance
(95,491
)
 
(92,920
)
Net deferred tax assets
215,028

 
316,799

 
 
 
 
Deferred tax liabilities:
 
 
 
Intangible assets
(36,683
)
 
(35,651
)
Undistributed foreign earnings
(23,563
)
 
(24,529
)
Other
(2,730
)
 
(119
)
Total deferred tax liabilities
(62,976
)
 
(60,299
)
Total net deferred tax assets
$
152,052

 
$
256,500

Summary of operating loss carryforward
As of December 30, 2017, Cadence’s operating loss carryforwards were as follows:
 
Amount
 
Expiration Periods
 
(In thousands)
 
 
Federal
$
13,638

 
from 2021 through 2036
California
198,173

 
from 2019 through 2036
Other states (tax effected, net of federal benefit)
3,081

 
from 2019 through 2037
Foreign (tax effected)
866

 
from 2025 through indefinite
Summary of tax credit carryforwards
As of December 30, 2017, Cadence had tax credit carryforwards of:
 
Amount
 
Expiration Periods
 
(In thousands)
 
 
Federal*
$
87,746

 
from 2023 through 2037
California
52,628

 
indefinite
Other states
9,153

 
from 2018 through 2037
Foreign
15,160

 
from 2018 through 2037
_____________
*Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.
Earliest tax years open to examination by jurisdiction
As of December 30, 2017 Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:
Jurisdiction
 
Earliest Tax Year Open to Examination
 
 
 
United States - Federal
 
2014
United States - California
 
2013
Hungary
 
2012
Unrecognized tax benefits roll forward
The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2017, 2016 and 2015 are as follows:
 
2017
 
2016
 
2015
 
(In thousands)
Unrecognized tax benefits at the beginning of the fiscal year
$
98,540

 
$
87,820

 
$
97,224

Gross amount of the increases (decreases) in unrecognized tax benefits of tax positions taken during a prior year*
688

 
(155
)
 
(7,331
)
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year
13,141

 
11,342

 
7,513

Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes

 

 
(9,571
)
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations
(3,028
)
 
(149
)
 
(119
)
Effect of foreign currency translation
838

 
(318
)
 
104

Unrecognized tax benefits at the end of the fiscal year
$
110,179

 
$
98,540

 
$
87,820

 
 
 
 
 
 
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate
$
63,108

 
$
56,248

 
$
48,335

_________
* Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions
Interest and penalties recognized in consolidated income statements and balance sheets
The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision (benefit) for income taxes for fiscal 2017, 2016 and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In thousands)
Interest
$
1,865

 
$
1,166

 
$
110

Penalties
218

 
3

 
(127
)
The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 30, 2017 and December 31, 2016 were as follows:
 
As of
 
December 30,
2017
 
December 31,
2016
 
(In thousands)
Interest
$
2,511

 
$
1,332

Penalties
151

 
265