Income Taxes	6 Months Ended
Jul. 03, 2016
Income Taxes	Q. Income Taxes The effective tax rate for the three months ended July 3, 2016 and July 5, 2015 was 3.2% and 22.1%, respectively. The effective tax rate for the six months ended July 3, 2016 and July 5, 2015 was 0.0% and 22.3%, respectively. The effective tax rates for the three and six months ended July 3, 2016 differed from the expected federal statutory rate of 35% as a result of a non-deductible goodwill impairment charge, which reduced the benefit of the U.S. loss before income taxes, and increases in uncertain tax positions for transfer pricing, offset by the effect of lower statutory rates applicable to income earned outside the U.S., the benefit of U.S. research and development tax credits, and discrete tax benefits. Discrete tax benefits recorded in the three and six months ended July 3, 2016 amounted to $4.4 million and $6.9 million respectively. The $4.4 million of discrete tax benefits recorded in the three months ended July 3, 2016 was composed of $2.6 million of tax reserve releases resulting from the settlement of a U.S. tax audit and $2.2 million from non-taxable foreign exchange gains net of $0.4 million of expense from other discrete tax items. The $6.9 million of discrete tax benefits recorded in the six months ended July 3, 2016 was composed of $3.4 million from non-taxable foreign exchange gains, $2.6 million of tax reserve releases resulting from the settlement of a U.S. tax audit, and $0.9 million related to marketable securities. The effective tax rates for three and six months ended July 5, 2015 differed from the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the U.S. The tax rate for the six months ended July 5, 2015 was increased by additions to the uncertain tax positions for transfer pricing included in the projected annual effective tax rate, partially offset by $1.7 million of discrete tax benefits composed of $0.7 million from disqualifying dispositions of incentive stock options and employee stock purchase plan shares and $1.0 million from other discrete tax benefits. 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 July 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 July 3, 2016 and December 31, 2015, Teradyne had $32.8 million and $33.7 million, respectively, of reserves for uncertain tax positions. The $0.9 million net decrease in reserves for uncertain tax positions is composed of tax reserve releases resulting from the settlement of a U.S. tax audit, partially offset by additions related to transfer pricing exposures. As of July 3, 2016, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $3.6 million in the next twelve months, as a result of a lapse of statutes of limitation. The estimated decrease is composed primarily of reserves relating to transfer pricing. Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of July 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 six months ended July 3, 2016, an expense of $0.3 million was recorded for interest and penalties related to income tax items. For the six months ended July 5, 2015, an expense of $0.1 million was recorded for interest and penalties related to income tax items. 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 six months ended July 3, 2016 was $30.7 million, or $0.15 per diluted share. The tax savings due to the tax holiday for the six months ended July 5, 2015 was $6.2 million, or $0.03 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.

Q. Income Taxes

The effective tax rate for the three months ended July 3, 2016 and July 5, 2015 was 3.2% and 22.1%, respectively. The effective tax rate for the six months ended July 3, 2016 and July 5, 2015 was 0.0% and 22.3%, respectively.

The effective tax rates for the three and six months ended July 3, 2016 differed from the expected federal statutory rate of 35% as a result of a non-deductible goodwill impairment charge, which reduced the benefit of the U.S. loss before income taxes, and increases in uncertain tax positions for transfer pricing, offset by the effect of lower statutory rates applicable to income earned outside the U.S., the benefit of U.S. research and development tax credits, and discrete tax benefits.

Discrete tax benefits recorded in the three and six months ended July 3, 2016 amounted to $4.4 million and $6.9 million respectively. The $4.4 million of discrete tax benefits recorded in the three months ended July 3, 2016 was composed of $2.6 million of tax reserve releases resulting from the settlement of a U.S. tax audit and $2.2 million from non-taxable foreign exchange gains net of $0.4 million of expense from other discrete tax items. The $6.9 million of discrete tax benefits recorded in the six months ended July 3, 2016 was composed of $3.4 million from non-taxable foreign exchange gains, $2.6 million of tax reserve releases resulting from the settlement of a U.S. tax audit, and $0.9 million related to marketable securities.

The effective tax rates for three and six months ended July 5, 2015 differed from the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the U.S. The tax rate for the six months ended July 5, 2015 was increased by additions to the uncertain tax positions for transfer pricing included in the projected annual effective tax rate, partially offset by $1.7 million of discrete tax benefits composed of $0.7 million from disqualifying dispositions of incentive stock options and employee stock purchase plan shares and $1.0 million from other discrete tax benefits.

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 July 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 July 3, 2016 and December 31, 2015, Teradyne had $32.8 million and $33.7 million, respectively, of reserves for uncertain tax positions. The $0.9 million net decrease in reserves for uncertain tax positions is composed of tax reserve releases resulting from the settlement of a U.S. tax audit, partially offset by additions related to transfer pricing exposures.

As of July 3, 2016, Teradyne estimates that it is reasonably possible that the balance of unrecognized tax benefits may decrease approximately $3.6 million in the next twelve months, as a result of a lapse of statutes of limitation. The estimated decrease is composed primarily of reserves relating to transfer pricing.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of July 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 six months ended July 3, 2016, an expense of $0.3 million was recorded for interest and penalties related to income tax items. For the six months ended July 5, 2015, an expense of $0.1 million was recorded for interest and penalties related to income tax items.

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 six months ended July 3, 2016 was $30.7 million, or $0.15 per diluted share. The tax savings due to the tax holiday for the six months ended July 5, 2015 was $6.2 million, or $0.03 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.