
	Income Taxes

Tax Rate Reconciliation

The differences between income taxes expected at the U.S. federal statutory income tax rate of 35% and income taxes recorded are set forth below:



	Three Months Ended						Nine Months Ended
	December 28, 2013			December 29, 2012			December 28, 2013			December 29, 2012
	(millions)
Provision for income taxes at the U.S. federal statutory rate	$	113		$	103		$	307		$	322
Increase (decrease) due to:
State and local income taxes, net of federal benefit	9			7			23			22
Foreign income taxed at different rates, net of U.S. foreign tax	(27		)	(17		)	(71		)	(52		)
Unrecognized tax benefits and settlements of tax examinations	(8		)	(11		)	(5		)	7
Other	—			(3		)	—			(1		)
Total provision for income taxes	$	87		$	79		$	254		$	298
Effective tax rate^(a)	26.9		%	26.8		%	29.0		%	32.4		%


^(a)	Effective tax rate is calculated by dividing the provision for income taxes by income before provision for income taxes.

The Company's effective tax rate was lower than the statutory rate principally due to the proportion of earnings generated in lower taxed foreign jurisdictions versus the U.S. During the three-month and nine-month periods ended December 28, 2013, the effective tax rate was also favorably impacted by tax reserve reductions associated with the conclusion of a tax examination and an income tax benefit resulting from restructuring of certain of the Company's foreign operations during Fiscal 2014. The Company's effective tax rate for the nine months ended December 29, 2012 reflected tax reserve reductions associated with the conclusion of a tax examination, offset by the inclusion of a reserve for an interest assessment on a prior year withholding tax.

Uncertain Income Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, for the three-month and nine-month periods ended December 28, 2013 and December 29, 2012 is presented below:



	Three Months Ended								Nine Months Ended
	December 28, 2013				December 29, 2012				December 28, 2013				December 29, 2012
	(millions)
Unrecognized tax benefits beginning balance	$	102			$	130			$	100			$	129
Additions related to current period tax positions	2				—				4				2
Additions related to prior period tax positions	—				8				1				9
Reductions related to prior period tax positions	(9		)	^(a)	(24		)	^(b)	(11		)	^(a)	(25		)	^(b)
Reductions related to settlements with taxing authorities	—				(10		)	^(b)	(1		)		(10		)	^(b)
Changes related to foreign currency translation	1				1				3				—
Unrecognized tax benefits ending balance	$	96			$	105			$	96			$	105


^(a)	Includes a $9 million decline in unrecognized tax benefits as a result of the Company's tax settlement agreement reached during the three months ended December 28, 2013 for the taxable years ended April 3, 2004 and April 2, 2005.


^(b)	Includes a $34 million decline in unrecognized tax benefits as a result of the Company's tax settlement agreement reached during the three months ended December 29, 2012 in connection with a tax examination for the taxable years ended March 29, 2008 through April 3, 2010.

The Company classifies interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. A reconciliation of the beginning and ending amounts of accrued interest and penalties related to unrecognized tax benefits for the three-month and nine-month periods ended December 28, 2013 and December 29, 2012 is presented below:



	Three Months Ended						Nine Months Ended
	December 28, 2013			December 29, 2012			December 28, 2013			December 29, 2012
	(millions)
Accrued interest and penalties beginning balance	$	53		$	57		$	50		$	39
Net additions charged to expense	1			1			4			21			^(a)
Reductions related to prior period tax positions	(2		)	(7		)	(3		)	(9		)
Reductions related to settlements with taxing authorities	—			(1		)	—			(1		)
Changes related to foreign currency translation	1			1			2			1
Accrued interest and penalties ending balance	$	53		$	51		$	53		$	51


^(a)	Includes a reserve of $17 million for an interest assessment on a prior year withholding tax. No underlying tax exposure exists. The interest assessed was not material to the Company's consolidated financial statements in any period.

The total amount of unrecognized tax benefits, including interest and penalties, was $149 million as of December 28, 2013, of which $27 million was recorded within accrued expenses and other current liabilities and $122 million within non-current liability for unrecognized tax benefits in the consolidated balance sheet. As of March 30, 2013, the Company recorded total unrecognized tax benefits, including interest and penalties, of $150 million within non-current liability for unrecognized tax benefits in the consolidated balance sheet. The total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $113 million and $115 million as of December 28, 2013 and March 30, 2013, respectively.

Future Changes in Unrecognized Tax Benefits

The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Changes in the occurrence, expected outcomes, and timing of such events could cause the Company’s current estimate to change materially in the future.

During the third quarter of Fiscal 2014, the Company reached a settlement agreement with respect to a tax examination for the taxable years ended April 3, 2004 and April 2, 2005. In connection with this agreement, the Company recognized a tax benefit of $9 million during the third quarter of Fiscal 2014. The Company currently expects that its liability for unrecognized tax benefits will further decline in the next twelve months by approximately $22 million, excluding interest and penalties, with respect to this settlement agreement as a result of the expected payment, resulting in no additional tax benefit.

The Company files tax returns in the U.S. federal and various state, local, and foreign jurisdictions. With a few exceptions, the Company is no longer subject to examinations by the relevant tax authorities for years prior to Fiscal 2006.