Note 9 Income Tax

9 Months Ended

Jun. 29, 2019

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Tax

The Company estimates its annual effective income tax rate at the end of each quarterly period. The estimate takes into account the geographic mix of expected pre-tax income (loss), expected total annual pre-tax income (loss), enacted changes in tax laws, implementation of tax planning strategies and possible outcomes of audits and other uncertain tax positions. To the extent there are fluctuations in any of these variables during a period, the provision for income taxes may vary.

The U.S. Tax Cuts and Jobs Act (“the Tax Act”) provision for Global Intangible Low-Taxed Income (“GILTI”), imposes taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations and is effective for the Company in fiscal year 2019. The Company will not pay cash taxes due to GILTI because of either the utilization of federal net operating losses or foreign tax credits. The Company has determined that the GILTI provision will be accounted for under U.S. generally accepted accounting principles as a component of income tax expense in the period in which the Company is subject to the rules (the “period cost method”).

The Tax Act also imposes an additional minimum tax “base erosion and anti-abuse tax” (“BEAT”) on certain deductible payments made to a foreign subsidiary applicable to tax years beginning in 2018. BEAT applies to the extent that a tentative BEAT on modified taxable income exceeds the regular tax liability. The Company does not expect BEAT to have a material impact to the Company’s income taxes.

The Company's provision for income taxes for the three months ended June 29, 2019 and June 30, 2018 was $16 million (27% of income before taxes) and $7 million (18% of income before taxes), respectively, and $69 million (36% of income before taxes) and $190 million (202% of income before taxes) for the nine months ended June 29, 2019 and June 30, 2018, respectively. Income tax expense for the nine months ended June 29, 2019 included the imposition of GILTI (as discussed above). Income tax expense for the nine months ended June 30, 2018 attributable to the estimated impact of the Tax Act was $162 million.