Income Taxes |
6 Months Ended |
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Jul. 01, 2017 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes
In the second quarter of 2017, the Company recorded an income tax provision of $3 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, partially offset by $1 million of tax benefits comprising the tax effects of items credited directly to other comprehensive income, Canadian tax credits, and the monetization of certain U.S. tax credits.
For the six months ended July 1, 2017, the Company recorded an income tax provision of $8 million, consisting of $4 million of foreign taxes in profitable locations and $7 million for withholding taxes applicable to license fee revenue from foreign locations, partially offset by $3 million of tax benefits comprising the tax effects of items credited directly to other comprehensive income, Canadian tax credits, and the monetization of certain U.S. tax credits.
In the second quarter of 2016, the Company recorded an income tax provision of $29 million, consisting of $2 million of foreign taxes in profitable locations and $2 million for withholding taxes applicable to license fee revenue from foreign locations, partially offset by $2 million of tax benefits comprising the tax effects of items credited directly to 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.
For the six months ended June 25, 2016, the Company recorded an income tax provision of $30 million due to foreign taxes in profitable locations and items identified above.
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 us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets.
As of July 1, 2017, 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 July 1, 2017, in management’s estimate, is not more likely than not to be achieved.
The Company's total gross unrecognized tax benefits is increased from $42 million in prior quarter to $58 million as of July 1, 2017. This increase is due to additional R&D unrecognized tax benefits in foreign locations. 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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