Note 15 – 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 that resulted from our acquisition of WhereNet Corp in 2007. We intend to utilize these net operating loss carryforwards to offset future income taxes prior to expiration. Under the United States Tax Reform Act of 1986, the amount of benefits from net operating loss carryforwards may be impaired or limited in certain circumstances, including significant changes in ownership interests. The company has reviewed the impact of ownership changes and believes that this will not have an impact on the realizability on the related deferred tax asset recorded as of September 27, 2014.

Zebra earns a significant amount of our operating income outside of the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. We do not intend to repatriate funds nor do we need to fund U.S. operations. Repatriation would result in higher effective tax rates.

In 2014, we completed an audit of the 2011 and 2012 US Federal income tax returns with no material impact on the financial statements. Various tax years 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 with no material impact on the financial statements.

At September 27, 2014 Zebra’s unrealized tax benefit was $4,000. Zebra’s continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. For the nine months ended September 27, 2014 and September 28, 2013, we did not accrue any interest or penalties into income tax expense.


	Three Months Ended						Nine months Ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Effective tax rate		39.8	%		18.1	%		23.1	%		18.4	%

The effective income tax rate for the first nine months of 2014 was 23.1% compared with 18.4% for 2013. The change in the tax rate was driven by a change in the UK tax laws related to intercompany debt which resulted in a one-time charge of $5,900,000 and additional tax expense for the current quarter of $2,600,000 during Q3. We expect this charge to be reversed in the fourth quarter as a result of the issuance of the Motorola Enterprise acquisition debt. See Notes 18 for details. In addition, the third quarter rate was decreased by the significant acquisition expenses incurred primarily in the United States.