Income Taxes

3 Months Ended

Mar. 29, 2020

Income Taxes

R. INCOME TAXES

A reconciliation of the United States federal statutory corporate tax rate to Teradyne’s effective tax rate was as follows:

	For the Three Months Ended
	March 29,			March 31,
	2020			2019
US statutory federal tax rate		21.0	%		21.0	%
Foreign taxes		(5.7	)		(3.1	)
Tax credits		(1.9	)		(3.0	)
Discrete benefit related to equity compensation		(4.1	)		(4.1	)
Discrete benefit related to release of reserves for uncertain tax positions		—			(27.6	)
Other, net		1.3			0.7
Effective tax rate		10.6	%		(16.1	)%

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 March 29, 2020, 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 March 29, 2020 and December 31, 2019, Teradyne had $21.3 million and $21.2 million, respectively, of reserves for uncertain tax positions. The $0.1 million net increase in reserves for uncertain tax positions is associated with U.S. research and development tax credits generated in the current year.

As of March 29, 2020, Teradyne does not anticipate a material change in the balance of unrecognized tax benefits during the next twelve months.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of March 29, 2020 and December 31, 2019, $1.6 million and $1.4 million, respectively, of interest and penalties were accrued for uncertain tax positions. For the three months ended March 29, 2020 and March 31, 2019, expense of $0.1 million and $0.3 million, respectively, 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 three months ended March 29, 2020 was $7.1 million, or $0.04 per diluted share. The tax savings due to the tax holiday for the three months ended March 31, 2019 was $2.1 million, or $0.01 per diluted share. The tax holiday is scheduled to expire on December 31, 2020.