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Income Taxes
6 Months Ended
Mar. 28, 2015
Income Taxes  
Income Taxes

 

 

11.Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the expected future tax benefits or consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

 

As of March 28, 2015, the Company had a $17.7 million state capital loss carryforward and a state net operating loss carryforward of $11.5 million available to be utilized against future taxable income for years through fiscal 2015 and 2029, respectively, subject to annual limitation pertaining to change in ownership rules under the Internal Revenue Code of 1986, as amended.  In addition, the Company has a foreign net operating loss carryforward of €30.3 million available to be utilized against future taxable income with no expiration date.  Based upon earnings history, the Company concluded it is more likely than not that the state net operating loss carryforward will be utilized prior to its expiration, but the state capital loss carryforward and foreign net operating loss will not.  As such, a valuation allowance has been recognized against the balance of the state capital loss and foreign net operating loss carryforwards.

 

The total amount of unrecognized tax benefits as of March 28, 2015 and September 27, 2014 was $14.3 million and $14.8 million, respectively.  The amount of unrecognized tax benefits at March 28, 2015 that would impact the effective tax rate if resolved in favor of the Company is $14.3 million.  As a result of acquisitions, the Company is indemnified for $6.6 million of the total reserve balance, with a total indemnification pool of $43.1 million.  If these unrecognized tax benefits are resolved in favor of the Company, the associated indemnification receivable, recorded in other long-term assets, would be reduced accordingly.  The indemnification provisions of the acquisition agreements have various expiration dates through June 2016.

 

As of March 28, 2015 and September 27, 2014, accrued interest and penalties of $2.3 million and $2.4 million, respectively, were included in the Consolidated Balance Sheets related to unrecognized tax benefits.  The Company recognizes interest and penalties in income tax expense.  The Company did not release any unrecognized tax benefits in the current quarter of fiscal 2015 and expects to release $5.4 million over the next twelve months due to the expiration of the statute of limitations.

 

In the normal course of business, the Company is subject to tax examinations by taxing authorities both inside and outside of the United States.  The Company is generally not subject to examination with respect to returns filed for fiscal years prior to 2010.  The Company is currently under audit by the Internal Revenue Service for the 2012 and 2013 fiscal years.