Note 14 – Income Taxes

Zebra has identified, evaluated, and measured the amount of income tax benefits to be recognized for all of our income tax positions. Included in deferred tax assets are amounts related to federal and state net operating losses acquired as part of our acquisition of WhereNet Corp in 2007. We intend to utilize these net operating loss carryforwards to offset future income taxes.

Zebra earns a significant amount of its operating income outside of the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. We do not intend to repatriate funds, however, should we require more capital in the U.S. than is generated by our operations locally, we could elect to repatriate funds held in foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. Repatriation would result in higher effective tax rates. Borrowing in the U.S. would result in increased interest expense.

An audit of U.S. federal tax returns for years 2008 through 2010 was completed in 2012. The tax years 2009 through 2011 remain open to examination by multiple state taxing jurisdictions. Tax authorities in the United Kingdom have completed income tax audits for tax years through 2011.

Zebra’s continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. For the six months ended June 29, 2013 and June 30, 2012, we did not accrue any interest or penalties into income tax expense.


	Three Months Ended						Six Months Ended
	June 29, 2013			June 30, 2012			June 29, 2013			June 30, 2012
Effective tax rate		19.0	%		23.6	%		18.6	%		25.8	%

The effective income tax rate for the first six months of 2013 was 18.6%, compared with 25.8% for the first six months of 2012. The 2013 effective rate reflects higher profits in lower-rate international jurisdictions and reinstatement of the US R&D tax credit during the first quarter of 2013 retroactive to January 2012 which resulted in a one-time credit of approximately $400,000, or a reduction to the effective tax rate of 0.6%.