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Income Taxes
9 Months Ended
Jul. 29, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
In general, the Company’s provision for income taxes differs from the tax computed at the U.S. federal statutory tax rate due to state taxes, non-U.S. operations being taxed at rates lower than the U.S. federal statutory tax rate, non-deductible stock-based compensation expense, tax credits, and adjustments to unrecognized tax benefits. The non-U.S. operations primarily relate to its European, Asia Pacific, and Japanese subsidiaries.
The Company recorded an income tax benefit for the three and nine months ended July 29, 2017, primarily due to an operating loss before tax for the three months ended July 29, 2017, and an operating loss before tax and a net discrete benefit from reserve releases as a result of reaching settlement on certain transfer pricing issues with the Geneva Tax Administration (“GTA”) during the nine months ended July 29, 2017. The Company recorded an income tax benefit for the three months ended July 30, 2016, and an income tax expense for the nine months ended July 30, 2016.
The effective tax rate for the three months ended July 29, 2017, was higher than the U.S. federal statutory tax rate of 35% primarily due to the U.S. pre-tax loss being partially offset by pre-tax income from outside of the United States, which is generally taxed at lower than the 35%, increasing the relative tax benefits compared to the pre-tax consolidated loss.
The effective tax rate for the nine months ended July 29, 2017, was higher than the U.S. federal statutory tax rate of 35% primarily due to the U.S. pre-tax loss being partially offset by pre-tax income from outside of the United States, which is generally taxed at lower than the 35%, increasing the relative tax benefits compared to the pre-tax consolidated loss, and a net discrete benefit as a result of reaching settlement with the GTA.
The Company’s total gross unrecognized tax benefits, excluding interest and penalties, were $189.8 million as of July 29, 2017. If the total gross unrecognized tax benefits as of July 29, 2017, were recognized in the future, approximately $144.8 million would decrease the Company’s tax expense.
The IRS and other tax authorities regularly examine the Company’s income tax returns. In December 2016, the Company reached an agreement with the GTA for fiscal years through 2015, with the exception of fiscal year 2014. The timing of tax examinations, as well as the amounts and timing of related settlements, if any, are highly uncertain. Before the end of fiscal year 2017, it is reasonably possible that either certain audits will conclude or the statutes of limitations relating to certain tax examination periods will expire, or both. After the Company reaches settlement with the tax authorities, the Company expects to record a corresponding adjustment to its unrecognized tax benefits. Taking into consideration the inherent uncertainty as to settlement terms, the timing of payments, and the impact of such settlements on other uncertain tax positions, the Company estimates the range of potential decreases in underlying unrecognized tax benefits is between $0 and $2 million in the next 12 months.