Income Taxes	3 Months Ended
Apr. 03, 2016
Income Taxes	Q. Income Taxes The effective tax rate for the three months ended April 3, 2016 and April 5, 2015 was 12.6% and 22.7%, respectively. The effective tax rates for these periods were lower than the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the United States. The tax rate for the three months ended April 3, 2016 was also reduced by the benefit from U.S. research and development tax credits, partially offset by additions to the uncertain tax positions for transfer pricing, both of which are included in the projected annual effective tax rate. Discrete tax benefits recorded in the quarter amounted to $2.5 million of which $1.2 million resulted from non-taxable foreign exchange gains, $0.9 million related to marketable securities and $0.4 million from other discrete tax benefits. The tax rate for the three months ended April 5, 2015 was reduced by a $1.2 million discrete tax benefit related to non-taxable foreign exchange gains and a $0.5 million discrete tax benefit related to disqualifying dispositions of incentive stock options and employee stock purchase plan shares. On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of April 3, 2016, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more likely than not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets. As of April 3, 2016 and December 31, 2015, Teradyne had $35.2 million and $33.7 million, respectively, of reserves for uncertain tax positions. The $1.5 million net increase in reserves for uncertain tax positions relates primarily to transfer pricing exposure. As of April 3, 2016, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $9.1 million in the next twelve months, as a result of a lapse of statutes of limitation and the settlement of a tax audit. The estimated decrease is composed primarily of reserves relating to federal tax credits and transfer pricing. Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of April 3, 2016 and December 31, 2015, $0.8 million and $0.5 million, respectively, of interest and penalties were included in the reserve for uncertain tax positions. For the three months ended April 3, 2016, expense of $0.3 million was recorded for interest and penalties related to income tax items. For the three months ended April 5, 2015, interest and penalties related to income tax items were not material. Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended April 3, 2016 was $2.6 million, or $0.01 per diluted share. The tax savings due to the tax holiday for the three months ended April 5, 2015 was $1.1 million and the impact of the tax holiday on earnings per share was not material. The tax holiday is scheduled to expire on December 31, 2020.

Q. Income Taxes

The effective tax rate for the three months ended April 3, 2016 and April 5, 2015 was 12.6% and 22.7%, respectively. The effective tax rates for these periods were lower than the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the United States. The tax rate for the three months ended April 3, 2016 was also reduced by the benefit from U.S. research and development tax credits, partially offset by additions to the uncertain tax positions for transfer pricing, both of which are included in the projected annual effective tax rate. Discrete tax benefits recorded in the quarter amounted to $2.5 million of which $1.2 million resulted from non-taxable foreign exchange gains, $0.9 million related to marketable securities and $0.4 million from other discrete tax benefits.

The tax rate for the three months ended April 5, 2015 was reduced by a $1.2 million discrete tax benefit related to non-taxable foreign exchange gains and a $0.5 million discrete tax benefit related to disqualifying dispositions of incentive stock options and employee stock purchase plan shares.

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. As of April 3, 2016, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more likely than not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

As of April 3, 2016 and December 31, 2015, Teradyne had $35.2 million and $33.7 million, respectively, of reserves for uncertain tax positions. The $1.5 million net increase in reserves for uncertain tax positions relates primarily to transfer pricing exposure.

As of April 3, 2016, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $9.1 million in the next twelve months, as a result of a lapse of statutes of limitation and the settlement of a tax audit. The estimated decrease is composed primarily of reserves relating to federal tax credits and transfer pricing.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of April 3, 2016 and December 31, 2015, $0.8 million and $0.5 million, respectively, of interest and penalties were included in the reserve for uncertain tax positions. For the three months ended April 3, 2016, expense of $0.3 million was recorded for interest and penalties related to income tax items. For the three months ended April 5, 2015, interest and penalties related to income tax items were not material.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the three months ended April 3, 2016 was $2.6 million, or $0.01 per diluted share. The tax savings due to the tax holiday for the three months ended April 5, 2015 was $1.1 million and the impact of the tax holiday on earnings per share was not material. The tax holiday is scheduled to expire on December 31, 2020.