Income Taxes |
9 Months Ended |
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Sep. 24, 2016 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes
In the third quarter of 2016, the Company recorded an income tax provision of $4 million, consisting of $1 million of foreign taxes in profitable locations and $3 million for withholding taxes applicable to license fee revenue from foreign locations.
For the nine months ended September 24, 2016, the Company recorded an income tax provision of $34 million, including $6 million of foreign taxes in profitable locations, $5 million for withholding taxes applicable to license fee revenue from foreign locations and $4 million of tax benefits arising from other comprehensive income and Canadian tax credits. In addition, the Company recorded the tax effect of completion of the sale of a majority equity interest in two subsidiaries comprising $21 million of income tax expense in China and $6 million of withholding tax expense associated with a future repatriation of the gain generated in China by the Chinese portion of that transaction (see Note 5. Equity Interest Purchase Agreement - ATMP Joint Venture).
The Company now applies the equity method of accounting to its 15% investment in the two former subsidiaries. The Company's share of applicable tax expense will be netted with the equity share of future profits or losses. In 2015, the Company recorded an income tax provision of $2 million related to the activities of the two former subsidiaries.
The Company has not recognized the tax benefit of future foreign tax credits associated with the withholding tax expense as the size and age profile of existing tax attributes does not allow it to satisfy the "more likely than not" criterion for the recognition of deferred tax assets.
In the third quarter of 2015 the Company did not record any income tax provision. For the nine months ended September 26, 2015, the Company recorded an income tax provision of $4 million due to foreign taxes in profitable locations.
As of September 24, 2016, substantially all of the Company’s U.S. and Canadian deferred tax assets, net of deferred tax liabilities, continue to be subject to a valuation allowance. The realization of these assets is dependent on substantial future taxable income which, as of September 24, 2016, in management’s estimate, is not more likely than not to be achieved.
The Company's total gross unrecognized tax benefits as of September 24, 2016 were $41 million. The Company does not believe it is reasonably possible that unrecognized tax benefits will materially change in the next 12 months. However, the settlement, resolution or closure of tax audits are highly uncertain.
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