Income Taxes (Notes)
|9 Months Ended|
Jun. 26, 2016
|Income Tax Disclosure [Abstract]|
The Company estimates its annual effective income tax rate to be approximately 17% for fiscal 2016, which is less than its 19% effective income tax rate for fiscal 2015. Tax benefits from foreign income taxed at rates lower than rates in the United States are expected to be approximately 15% in fiscal 2016, compared to 14% in fiscal 2015. The annual effective tax rate for fiscal 2016 reflects a tax benefit of $101 million from a worthless stock deduction on a domestic subsidiary of the Company’s former QMT division, which was accounted for discretely during the third quarter. During the first quarter of fiscal 2016, the United States government permanently reinstated the federal research and development tax credit retroactively to January 1, 2015. As a result of the reinstatement, the Company recorded a tax benefit of $79 million in the first quarter of fiscal 2016 related to fiscal 2015. The annual effective tax rate for fiscal 2015 reflected the fine imposed by the NDRC of $975 million (Note 2), which was not deductible for tax purposes and was substantially attributable to a foreign jurisdiction, and a $61 million tax benefit as a result of a favorable tax audit settlement with the Internal Revenue Service, both of which were accounted for discretely in the second quarter of fiscal 2015. During the first quarter of fiscal 2015, the United States government reinstated the federal research and development tax credit retroactively to January 1, 2014 through December 31, 2014. As a result of the reinstatement, the annual effective tax rate for fiscal 2015 also reflected a tax benefit of $101 million recorded in the first quarter of fiscal 2015 related to fiscal 2014.
The effective tax rate of 15% for the third quarter of fiscal 2016 was less than the estimated annual effective tax rate of 17% primarily due to a $101 million tax benefit recorded discretely in the third quarter resulting from a worthless stock deduction on a domestic subsidiary of the Company’s former QMT division, partially offset by changes in the Company’s estimates related to foreign earnings taxed at rates that are less than the United States federal tax rate and the benefit of the retroactive reinstatement of the United States federal research and development credit recorded discretely during the first quarter of fiscal 2016 related to fiscal 2015.
Unrecognized tax benefits were $210 million and $40 million at June 26, 2016 and September 27, 2015, respectively. Certain of the Company’s existing tax positions are expected to continue to generate an increase in unrecognized tax benefits through fiscal 2016. The Company believes that it is reasonably possible that the total amounts of unrecognized tax benefits at June 26, 2016 may increase or decrease in the next 12 months.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef