Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal corporate income taxes on dividends from foreign subsidiaries; (4) capitalizing specific R&D expenses which are amortized over five to 15 years; and (5) other changes to how foreign and domestic earnings are taxed.

Our accounting for the impact of the Tax Act was completed in the first quarter of fiscal 2019 in accordance with the Staff Accounting Bulletin No. 118 measurement period. As of September 28, 2018, we had recorded a provisional amount for the Tax Act of $121.4 million. During the period ended December 28, 2018, we recorded a $36.0 million reduction to our provisional Tax Act amount resulting primarily from completion of our evaluation of the income tax effects of indirect taxes related to the Deemed Repatriation Transition Tax ("Transition Tax") on our deferred tax assets. During the quarter ended March 29, 2019, the U.S. Department of the Treasury issued final regulations on the Transition Tax related to deemed paid foreign taxes eliminating a benefit we previously expected to realize. As a result, we recorded an additional $19.0 million tax expense. During the quarter ended June 28, 2019, we recorded a $2.3 million reduction related to the impact of the Tax Act. The final amount recorded for the Tax Act was $102.1 million as of the period ended September 27, 2019, which reflects the $121.4 million recorded as of September 28, 2018, reduced by $36 million as of December 28, 2018, increased by $19 million as of March 29, 2019, and reduced by $2.3 million as of June 28, 2019. There may be additional tax effects of the Tax Act that may change the final recorded tax expense associated with the Tax Act upon finalization of the law, regulations, and additional guidance.

We have included the impact of new provisions effective in our fiscal 2019 in our effective tax rate. The Tax Act imposes a minimum tax on certain foreign earnings ("minimum foreign tax") in the year earned. Our accounting policy is to treat the minimum foreign tax as a current expense in the year incurred and we have not provided deferred taxes on temporary differences related to such minimum foreign tax.

The adoption of ASC 606 impacted the timing in which we record per-unit royalty-based revenue earned from our licensees’ shipments. This change in accounting principle also impacted the recognition of deferred tax assets related to licensing revenue. As a result, we reduced our deferred tax assets by $26.3 million at the beginning of our first quarter of fiscal 2019.



	Fiscal Year Ended
	September 27, 2019			September 28, 2018 (as adjusted)			September 29, 2017 (as adjusted)
Current:
Federal	$	14,144		$	40,624		$	30,718
State	394			333			610
Foreign	64,335			59,383			55,531
Total current	78,873			100,340			86,859

Deferred:
Federal	(55,793		)	43,377			(35,824		)
State	1,007			17,484			(4,604		)
Foreign	2,715			(7,132		)	1,608
Total deferred	(52,071		)	53,729			(38,820		)
Provision for income taxes	$	26,802		$	154,069		$	48,039

As a result of the Tax Act, foreign accumulated earnings that were subject to the mandatory Transition Tax as of December 31, 2017, can be repatriated to the U.S. without incurring further U.S. federal tax. The Tax Act moves towards a modified territorial tax system through the provision of a 100% dividend received deduction for the foreign-source portions of dividends received from controlled foreign subsidiaries. As a result, we continue to evaluate the

indefinite reinvestment assertions with regards to unremitted earnings for certain of our foreign subsidiaries. During the fiscal year, we repatriated $300 million of foreign subsidiary earnings which were exempt from foreign withholding tax. As of September 27, 2019, the total undistributed earnings of our non-U.S. subsidiaries were approximately $380 million. Historically, we have asserted our intention to indefinitely reinvest a portion of the undistributed earnings of certain foreign subsidiaries. However, we have reevaluated our historical assertion as a result of the Tax Act and determined that we no longer consider a vast majority of these earnings to be indefinitely reinvested. The unrecognized deferred tax liability on the portion of the undistributed earnings considered indefinitely reinvested is not material.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, using enacted tax rates in effect for the year in which the differences are expected to reverse. A summary of the tax effects of the temporary differences were as follows (in thousands):



	Fiscal Year Ended
	September 27, 2019			September 28, 2018 (as adjusted)
Deferred income tax assets:
Investments	$	2,099		$	2,215
Inventories	4,041			4,070
Net operating loss	2,050			2,174
Accrued expenses	13,917			12,573
Stock-based compensation	17,189			15,601
Revenue recognition	4,410			7,161
Depreciation and amortization	19,988			16,078
Research and development credits	28,777			21,302
Foreign tax credits	10,777			9,345
Deemed repatriated earnings tax benefit	33,357			—
Other	4,705			3,334
Total gross deferred income tax assets	141,310			93,853
Less: valuation allowance	(24,884		)	(16,256		)
Total deferred income tax assets	116,426			77,597

Deferred income tax liabilities:
Intangibles	(2,351		)	(2,831		)
Deferred income tax assets, net (non-current)	$	114,075		$	74,766

At September 27, 2019, the NOL carried forward for California tax purposes was $4.9 million and will expire in fiscal 2029 if unused. Additionally, we had total foreign NOL carryforwards of $8.3 million as of September 27, 2019, an amount which is not subject to expiration. At September 27, 2019, we had foreign tax credit and federal R&D tax credit carryforwards of $8.3 million and $8.4 million, respectively, which will expire between fiscal 2029 and fiscal 2039. We had California R&D tax credits of $30.3 million, which will be carried forward indefinitely, and foreign R&D tax credits of $3.1 million, which will expire between fiscal 2020 and fiscal 2029.

Each period, the combination of multiple different factors can impact our effective tax rate. These factors include both recurring items such as tax rates and the relative amount of income earned in foreign jurisdictions, as well as discrete items that may occur in, but are not necessarily consistent between periods. The benefit associated with the foreign rate differential shown below is net of the impact of uncertain tax positions affecting the amount of income subject to foreign taxation. A reconciliation of the federal statutory tax rate to our effective tax rate on income from continuing operations was as follows:



	Fiscal Year Ended
	September 27, 2019		September 28, 2018 (as adjusted)		September 29, 2017 (as adjusted)
Federal statutory rate	21.0	%	24.6	%	35.0	%
State income taxes, net of federal effect	0.2		0.7		0.7
Stock-based compensation expense rate	(2.8	)	(5.2	)	1.4
Research and development tax credits	(3.0	)	(4.5	)	(3.7	)
Tax exempt interest	—		(0.1	)	(0.1	)
U.S. manufacturing tax incentives	—		(0.2	)	(0.8	)
Foreign rate differential	(2.6	)	(5.2	)	(22.9	)
Audit settlements	—		—		(0.6	)
Tax Act	(7.7	)	53.3		—
Change in Valuation Allowance	1.5		8.3		—
Other	2.9		6.8		9.8
Effective tax rate	9.5	%	78.5	%	18.8	%

Our effective tax rate was 9.5% in fiscal 2019, compared with our federal statutory rate of 21.0%, and with our effective tax rate in fiscal 2018 of 78.5%. The decrease in our effective tax rate reflects the impact from the Tax Act, most notably the remeasurement of net deferred tax assets and the Transition Tax on the accumulated earnings of our foreign subsidiaries, and the establishment of a valuation allowance against California tax credits in fiscal 2018. In addition, our federal statutory tax rate decreased from a blended rate of 24.6% in fiscal 2018 to 21% in fiscal 2019.

Our effective tax rate was 18.8% in fiscal 2017 and was 78.5% in fiscal 2018. The effective tax rate in fiscal 2018 compared to fiscal 2017 reflects a detriment from the impact from the Tax Act, most notably the remeasurement of net deferred tax assets and the Transition Tax on the accumulated earnings of our foreign subsidiaries, and the establishment of a valuation allowance against California tax credits in fiscal 2018, offset by a reduction in federal statutory tax rate and increase in excess benefit related to stock-based awards.

As of September 27, 2019, the total amount of gross unrecognized tax benefits was $108.5 million, of which $72.8 million, if recognized, would reduce our effective tax rate. Our liability for unrecognized tax benefits is classified within other non-current liabilities in our consolidated balance sheets. Over the next twelve months, we estimate that this amount could be reduced by $57.8 million as a result of the expiration of certain statute of limitations. Aggregate changes in the balance of gross unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):



	Fiscal Year Ended
	September 27, 2019			September 28, 2018			September 29, 2017
Beginning Balance	$	102,009		$	98,665		$	75,168
Gross increases - tax positions taken during prior years	115			—			308
Gross decreases - tax positions taken during prior years	—			(2,209		)	—
Gross increases - tax positions taken during current year	6,822			9,580			26,724
Gross decreases - settlements with tax authorities during current year	—			(130		)	(1,101		)
Lapse of statute of limitations	(407		)	(3,897		)	(2,434		)
Ending Balance	$	108,539		$	102,009		$	98,665

We include interest and penalties related to gross unrecognized tax benefits within our provision for income taxes. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued are reduced in the period that such determination is made and are reflected as a reduction of the overall income tax provision. In fiscal year 2019, our current tax provision was increased by interest expense of $3.5 million, while in fiscal year 2018, our current tax provision was increased by interest expense of $3.0 million. Accrued interest and penalties are included within the related tax liability line item in our consolidated balance sheets. Our accrued interest and penalties on unrecognized tax benefits as of September 27, 2019 and September 28, 2018 were as follows (in thousands):

We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected tolling of the statute of limitations in various taxing jurisdictions. We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. The material income tax jurisdictions are the United States federal, California, New York, and the Netherlands.

We are currently under audit by the State of New York for fiscal years 2014 and 2015 and Spain for fiscal years 2012 through 2015. In the U.S federal jurisdiction, other major states, and major foreign jurisdictions, the fiscal years subsequent to 2014, 2014, and 2012, respectively, remain open and could be subject to examination by the taxing authorities.

Management does not believe that the outcome of any ongoing examination will have a material impact on our consolidated financial statements. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If resolution of any tax issues addressed in our current audits are inconsistent with management’s expectations, we may be required to adjust our tax provision for income taxes in the period such resolution occurs.