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Income Taxes (Notes)
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3 Months Ended |
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Mar. 30, 2013
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| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes
In the first quarter of 2013, the Company recorded an income tax provision expense of $2 million due to $2 million of foreign taxes in profitable locations and $1 million related to the reversal of previously recognized tax benefits associated with other comprehensive income offset by $1 million of tax benefits for Canadian co-op credits and the monetization of U.S. tax credits.
In the first quarter of 2012, the Company recorded an income tax provision benefit of $32 million due to a tax benefit of $36 million relating to the SeaMicro acquisition and a $1 million tax benefit for the tax effects of items credited directly to other comprehensive income, offset by $5 million of foreign taxes in profitable locations.
Purchase accounting for the SeaMicro acquisition required the establishment of a deferred tax liability related to the book tax basis differences of identifiable intangible assets that increased goodwill. The deferred tax liability created an additional source of U.S. future taxable income which resulted in a release of a portion of the Company's U.S. valuation allowance. This resulted in a discrete income tax provision benefit of approximately $36 million in the first quarter of 2012.
As of March 30, 2013, 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 at March 30, 2013, in management's estimate, is not more likely than not to be achieved.
The Company's gross unrecognized tax benefits decreased by $2 million during the first quarter of 2013 for unrecognized tax benefits in foreign jurisdictions. The total gross unrecognized tax benefits as of March 30, 2013 were approximately $55 million. The Company has recognized $2 million of liabilities for unrecognized tax benefits as of March 30, 2013. There were no material changes to penalties or interest in the first quarter of 2013.
During the twelve months beginning March 31, 2013, the Company believes that it is reasonably possible that there will be no material changes in its unrecognized tax benefits. However, the resolution and/or closure of open audits are highly uncertain.
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