|12 Months Ended|
Dec. 28, 2019
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
Income (loss) before income taxes consists of the following:
The provision for (benefit from) income taxes consists of:
The table below displays the reconciliation between statutory federal income taxes and the total provision for (benefit from) income taxes.
The income tax provision in 2019 was primarily due to $22 million of tax provision of withholding tax related to cross-border transactions, $22 million tax provision in foreign locations offset by a $13 million benefit for a reduction of U.S. income taxes accrued in the prior year.
The income tax provision in 2018 was primarily due to a $36 million refund of withholding tax from a foreign jurisdiction related to a legal settlement from 2010, offset by $13 million of U.S. income taxes resulting from the Tax Reform Act, $7 million tax provision in foreign locations and $7 million of withholding taxes on cross-border transactions.
The income tax provision in 2017 was primarily due to $38 million of foreign taxes in profitable locations including $27 million of withholding taxes on cross-border transactions, offset by $1 million of tax benefits for Canadian tax credits and $19 million primarily attributable to the reversal of the valuation allowance on Alternate Minimum Tax (AMT) credit carryovers due to the Tax Reform Act.
Deferred income taxes reflect the net tax effects of tax carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the balances for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 28, 2019 and December 29, 2018 are as follows:
The breakdown between deferred tax assets and deferred tax liabilities as of December 28, 2019 and December 29, 2018 is as follows:
Deferred tax assets are included in Other assets on the consolidated balance sheets. Deferred tax liabilities are included in Other long-term liabilities on the consolidated balance sheets.
As of December 28, 2019, substantially all of the Company’s U.S. and foreign deferred tax assets, net of deferred tax liabilities, continued to be subject to a valuation allowance. The Company evaluates the need for and the amount of a valuation allowance for deferred tax assets based on available evidence whether it is more-likely-than-not (a probability level of more than 50%) that these assets will be realized. In completing this assessment management must consider both objective and subjective factors in its assessment. These factors include, but are not limited to a history of losses in prior years, unique competitiveness of the semiconductor industry, future reversal of existing temporary differences, tax planning strategies, and future taxable income exclusive of reversing temporary differences and loss carryforwards. After evaluating all available evidence, the Company determined that the valuation allowances for the United States and Canada should both be maintained.
The Company’s United States federal and state net operating losses carryforwards as of December 28, 2019, were $6.7 billion and $0.5 billion, respectively. The United States federal net operating losses will expire between 2026 through 2037, and the state net operating losses will expire at various dates through 2037. The federal credit of $399 million will expire at various dates between 2020 and 2039. The state credits of $239 million will expire at various dates between 2020 through 2039 except for California R&D credit, which does not expire. The Company also has $365 million of credit carryforward in Canada that will expire between 2023 and 2028.
The Tax Reform Act modified the income tax liability in the United States for companies with subsidiaries outside of the United States. As a result of the Tax Reform Act the impact of future distributions of undistributed earnings that are indefinitely
reinvested are anticipated to be withholding taxes from local jurisdictions. The amount of cumulative undistributed earnings that are permanently reinvested that could be subject to withholding taxes are $142 million as of December 28, 2019.
A reconciliation of the Company's gross unrecognized tax benefits is as follows:
The amount of unrecognized tax benefits that would impact the effective tax rate was $17 million, $9 million and $9 million as of December 28, 2019, December 29, 2018 and December 30, 2017, respectively. The Company had no material amounts of accrued interest and accrued penalties related to unrecognized tax benefits as of December 28, 2019, December 29, 2018 and December 30, 2017.
It is possible the Company may have tax audits close in the next 12 months that could materially change the balance of the uncertain tax benefits; however, the timing of tax audit closures and settlements are highly uncertain. The Company and its subsidiaries have several foreign and U.S. state audits in process at any one point in time. The Company has provided for uncertain tax positions that require a liability under the adopted method to account for uncertainty in income taxes.
The Company is subject to taxation in the United States and foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax. The material jurisdiction in which the Company is subject to potential examination by the taxing authority is the United States, which is open for years from 2006 onwards due to the net operating losses.
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://fasb.org/us-gaap/role/ref/legacyRef