
Note 7.	Income Taxes

The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate of 35% to income from continuing operations before provision for income taxes due to the following:



	Three Months Ended
	April 2,			March 28,
(In millions)	2016			2015

Provision for Income Taxes at Statutory Rate	$	148.1		$	133.7

Increases (Decreases) Resulting From:
Foreign rate differential	(47.3		)	(23.8		)
Income tax credits	(77.8		)	(103.1		)
Manufacturing deduction	(6.7		)	(7.6		)
Singapore tax holiday	(3.7		)	(3.2		)
Impact of change in tax laws and apportionment on deferred taxes	8.9			0.7
Nondeductible expenses	1.7			1.9
Tax return reassessments and settlements	(2.0		)	—
State income taxes, net of federal tax	(1.5		)	(1.6		)
Other, net	1.0			(0.1		)

Provision for (benefit from) income taxes	$	20.7		$	(3.1	)

In 2016, the company implemented tax planning initiatives related to non-U.S. subsidiaries. These non-U.S. subsidiaries incurred foreign tax obligations and made cash and deemed distributions to the company’s U.S. operations which resulted in no net tax cost. As a result of these distributions, the company benefitted from U.S. foreign tax credits of $46 million, offset in part by additional U.S. income taxes of $16 million on the related foreign income (which reduced the benefit from the foreign rate differential in 2016). The foreign tax credits are the result of foreign earnings remitted or deemed remitted to the U.S. during the reporting year and the U.S. treatment of taxes paid in the foreign jurisdictions in the years those profits were originally earned.

The company has significant activities in Singapore and has received considerable tax incentives. The local taxing authority granted the company pioneer company status which provides an incentive encouraging companies to undertake activities that have the effect of promoting economic or technological development in Singapore. This incentive equates to a tax exemption on earnings associated with most of the company’s manufacturing activities in Singapore and continues through December 31, 2021. In 2016 and 2015, the impact of this tax holiday decreased the annual effective tax rates by 0.9% and 0.8%, respectively, and increased diluted earnings per share by approximately $0.01 and $0.01, respectively.