Income Taxes (Notes)
|9 Months Ended|
Jun. 25, 2017
|Income Tax Disclosure [Abstract]|
The Company estimates its annual effective income tax rate to be approximately 11% for fiscal 2017, which is less than its 17% effective income tax rate for fiscal 2016. Tax benefits from foreign income taxed at rates lower than rates in the United States are expected to be approximately 27% in fiscal 2017, compared to 16% in fiscal 2016, primarily resulting from lower estimated United States revenues related to decreased royalty revenues from Apple’s contract manufacturers and the BlackBerry arbitration (Note 6). In the nine months ended June 25, 2017, the Company recorded a charge of $927 million related to the KFTC fine (Note 6), which is not deductible for tax purposes and is attributable to both the United States and a foreign jurisdiction. The estimated annual effective tax rate of 11% for fiscal 2017 also reflects the increase in the Company’s Singapore tax rate as a result of the expiration of certain of its tax incentives in March 2017, which is partially offset by tax benefits resulting from the increase in the Singapore tax rate that will be in effect when certain deferred tax assets are scheduled to reverse. The annual effective tax rate of 17% for fiscal 2016 reflected a $101 million tax benefit recorded discretely in the third quarter of fiscal 2016 resulting from a worthless stock deduction on a domestic subsidiary of one of the Company’s former display businesses and a $79 million benefit recorded discretely in the first quarter of fiscal 2016 related to fiscal 2015 resulting from the retroactive and permanent reinstatement of the United States federal research and development tax credit.
The effective tax rate of 1% benefit for the third quarter of fiscal 2017 was less than the estimated annual effective tax rate of 11% provision primarily resulting from a reduction in the third quarter of fiscal 2017 to the Company’s expected United States revenues principally related to decreased royalty revenues from Apple’s contract manufacturers (Note 6).
Unrecognized tax benefits were $278 million and $271 million at June 25, 2017 and September 25, 2016, respectively. The Company believes that it is reasonably possible that the total amounts of unrecognized tax benefits at June 25, 2017 may increase or decrease in the next 12 months.
The Company is subject to income taxes in the United States and numerous foreign jurisdictions and is currently under examination by the United States and various other tax authorities worldwide, most notably in countries where the Company earns a routine return and tax authorities believe substantial value-add activities are performed. These examinations are at various stages with respect to assessments, claims, deficiencies and refunds. As of June 25, 2017, the Company believes that adequate amounts have been reserved based on facts known. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts give rise to a revision become known, which may have a negative impact on the Company’s results of operations.
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