INCOME TAXES

The domestic (Singapore) and foreign components of income before income taxes were comprised of the following:



	Fiscal Year Ended March 31,
	2016		2015		2014
	(In thousands)
Domestic	$	199,283	$	67,482	$	314,639
Foreign	255,392		603,173		85,815
Total	$	454,675	$	670,655	$	400,454

The provision for income taxes consisted of the following:



	Fiscal Year Ended March 31,
	2016			2015			2014
	(In thousands)
Current:
Domestic	$	56		$	87		$	(681	)
Foreign	74,706			129,863			73,992
	74,762			129,950			73,311
Deferred:
Domestic	3,779			(4,734		)	9
Foreign	(67,947		)	(55,362		)	(38,460		)
	(64,168		)	(60,096		)	(38,451		)
Provision for income taxes	$	10,594		$	69,854		$	34,860

The domestic statutory income tax rate was approximately 17.0% in fiscal years 2016, 2015 and 2014. The reconciliation of the income tax expense expected based on domestic statutory income tax rates to the expense for income taxes included in the consolidated statements of operations is as follows:



	Fiscal Year Ended March 31,
	2016			2015			2014
	(In thousands)
Income taxes based on domestic statutory rates	$	77,295		$	114,011		$	68,077
Effect of tax rate differential	(73,286		)	(80,842		)	(68,654		)
Intangible amortization	11,214			5,143			4,750
Change in liability for uncertain tax positions	(13,724		)	29,729			(2,178		)
Change in valuation allowance	1,049			2,495			26,838
Other	8,046			(682		)	6,027
Provision for income taxes	$	10,594		$	69,854		$	34,860

A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to attract and retain business. In general, these holidays were secured based on the nature, size and location of the Company’s operations. The aggregate dollar effect on the Company’s income resulting from tax holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2016, 2015 and 2014 was $6.6 million, $9.8 million and $15.2 million, respectively. For fiscal year ended March 31, 2016, the effect on basic and diluted earnings per share was $0.01 and $0.01, respectively, and the effect on basic and diluted earnings per share during fiscal years 2015 and 2014, were $0.02 and $0.02 and $0.02 and $0.02, respectively. Unless extended or otherwise renegotiated, the Company's existing holidays will expire in the fiscal year ending March 31, 2017 through fiscal year 2022.

For fiscal years ended March 31, 2016, 2015 and 2014, the Company released valuation allowances totaling $63.3 million, $55.0 million and $37.4 million, respectively. These valuation allowance releases were primarily related to our operations that were deemed to be more likely than not to realize the respective deferred tax assets due to the increased profitability during the prior three fiscal years as well as continued forecasted profitability of that subsidiary. During fiscal year ended March 31, 2016, $43.0 million of the valuation allowance release was related to the recording of deferred tax liabilities in the US related to intangibles acquired during fiscal year 2016. However, these valuation allowance eliminations were offset by other current period valuation allowance movements primarily related to current period valuation allowance additions due to increased deferred tax assets related to current period losses in legal entities with existing full valuation allowance positions, and to a lesser extent, current period changes in valuation allowance positions due to increased negative evidence during the period in legal entities which did not previously have valuation allowance recorded. For fiscal years ended March 31, 2016, 2015 and 2014, the offsetting amounts totaled $64.3 million, $57.5 million and $64.2 million, respectively.

Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to Singapore. The Company has included the effects of Singapore's territorial tax system in the rate differential line above. The tax effect of foreign income not repatriated to Singapore for the fiscal years 2016, 2015 and 2014 were $36.6 million, $0.0 million and $51.5 million, respectively.

The components of deferred income taxes are as follows:



	As of March 31,
	2016			2015
	(In thousands)
Deferred tax liabilities:
Fixed assets	$	(74,316	)	$	(73,327	)
Intangible assets	(88,760		)	—
Others	(29,472		)	(44,603		)
Total deferred tax liabilities	(192,548		)	(117,930		)
Deferred tax assets:
Fixed assets	65,004			80,370
Intangible assets	3,795			28,954
Deferred compensation	15,892			13,618
Inventory valuation	10,124			11,864
Provision for doubtful accounts	1,300			3,149
Net operating loss and other carryforwards	2,332,894			2,394,456
Others	271,272			264,781
	2,700,281			2,797,192
Valuation allowances	(2,385,489		)	(2,521,763		)
Net deferred tax assets	314,792			275,429
Net deferred tax asset	$	122,244		$	157,499
The net deferred tax asset is classified as follows:
Current asset (classified as other current assets)	$	—		$	63,910
Long-term asset	222,772			211,519
Long-term liability	(100,528		)	(117,930		)
Total	$	122,244		$	157,499

Utilization of the Company's deferred tax assets is limited by the future earnings of the Company in the tax jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the Company. However, management has determined that it is more likely than not that the Company will realize certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that have no current impact on the tax provision. Approximately $34.0 million of the valuation allowance relates to income tax benefits arising from the exercise of stock options, which if realized will be credited directly to shareholders’ equity and will not be available to benefit the income tax provision in any future period.

The Company has recorded deferred tax assets of approximately $2.4 billion related to tax losses and other carryforwards against which the Company has recorded a valuation allowance for all but $79.3 million of the deferred tax assets. These tax losses and other carryforwards will expire at various dates as follows:



Expiration dates of deferred tax assets related to operating losses and other carryforwards
	(In thousands)
2017 - 2022	$	558,108
2023 - 2028	742,981
2029 and post	622,339
Indefinite	436,092
	$	2,359,520

The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ from management’s estimates.

The Company does not provide for income taxes on approximately $916.0 million of undistributed earnings of its subsidiaries which are considered to be indefinitely reinvested outside of Singapore as management has plans for the use of such earnings to fund certain activities outside of Singapore. Determination of the amount of the unrecognized deferred tax liability on these undistributed earnings is not practicable. During the fiscal year 2015, we changed our intent with regard to the indefinite reinvestment of foreign earnings from certain of our Chinese subsidiaries which are scheduled to be de-registrated or liquidated in the near future. As a result, as of March 31, 2016, we have provided for applicable foreign withholding taxes on $106.7 million of undistributed foreign earnings, and recorded a deferred tax liability of approximately $11.2 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Fiscal Year Ended March 31,
	2016			2015
	(In thousands)
Balance, beginning of fiscal year	$	222,373		$	243,864
Additions based on tax position related to the current year	21,273			27,048
Additions for tax positions of prior years	20,453			24,354
Reductions for tax positions of prior years	(9,578		)	(16,388		)
Reductions related to lapse of applicable statute of limitations	(22,312		)	(11,891		)
Settlements	(12,797		)	(24,049		)
Impact from foreign exchange rates fluctuation	(7,086		)	(20,565		)
Balance, end of fiscal year	$	212,326		$	222,373

The Company’s unrecognized tax benefits are subject to change over the next twelve months primarily as a result of the expiration of certain statutes of limitations and as audits are settled. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an estimated range of an additional $13.0 million to $41.0 million within the next twelve months primarily due to potential settlements of various audits and the expiration of certain statutes of limitations.

The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2006.

Of the $212.3 million of unrecognized tax benefits at March 31, 2016, $185.7 million will affect the annual effective tax rate ("ETR") if the benefits are eventually recognized. The amount that doesn’t impact the ETR relates to positions that would be settled with a tax loss carryforward previously subject to a valuation allowance.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company's tax expense. During the fiscal years ended March 31, 2016, 2015 and 2014, the Company recognized interest and penalties of approximately ($2.4) million and $2.5 million and $8.4 million, respectively. The Company had approximately $14.6 million, $17.0 million and $15.6 million accrued for the payment of interest and penalties as of the fiscal years ended March 31, 2016, 2015 and 2014, respectively.