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Income Taxes
3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company’s effective tax rate for the three fiscal months ended March 31, 2017 and April 1, 2016 was 33.7% and (114.3)%, respectively. The high effective tax rate for the three fiscal months ended April 1, 2016 was primarily due to the combined effect of incurring operational losses in jurisdictions where valuation allowances were recorded against net deferred tax assets as well as the general impact of having a low level of pre-tax loss, which results in a more volatile effective tax rate.
During the first quarter of 2017, the Company accrued approximately $0.3 million of income tax expense for uncertain tax positions likely to be taken in the current year and for interest and penalties on tax positions taken in prior periods, all of which would have a favorable impact on the effective tax rate, if recognized. In addition, $1.9 million of income tax benefits were recognized due to statute of limitation expirations associated with various uncertain tax positions.
The Company files income tax returns in numerous tax jurisdictions around the world. Due to uncertainties regarding the timing and outcome of various tax audits, appeals and settlements, it is difficult to reliably estimate the amount of unrecognized tax benefits that could change within the next twelve months. The Company believes it is reasonably possible that approximately $3 million of unrecognized tax benefits could change within the next twelve months due to the resolution of tax audits and statute of limitations expiration.
The Internal Revenue Service (“IRS”) proposed cumulative taxable income adjustments of approximately $50 million for the 2012-2013 tax years in February 2016. The proposed adjustments related to the Original Issue Discount (“OID”) yield claimed on the Company’s $429.5 million Subordinated Convertible Notes (“Notes”). The Company believed that the amount of the OID deductions claimed on its federal income tax returns since the 2009 issuance of the Notes was proper and appealed the IRS audit adjustment. In March 2017, the IRS Appeals Office ruled in favor of the Company and the audit was closed with no adjustment to reported income or tax. With limited exceptions, tax years prior to 2012 are no longer open in major foreign, state, or local tax jurisdictions.