Income Taxes

6 Months Ended

Mar. 29, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

Unrecognized Tax Benefits

As of March 29, 2024, the total amount of gross unrecognized tax benefits was $81.4 million, of which $49.9 million, if recognized, would reduce our effective tax rate. As of September 29, 2023, the total amount of gross unrecognized tax benefits was $76.3 million, of which $47.2 million, if recognized, would reduce our effective tax rate. The fiscal year-to-date period ended March 29, 2024 increase was primarily due to current year reserves for transfer pricing and interest accruals. Our liability for unrecognized tax benefits is classified within other non-current liabilities in our unaudited interim condensed consolidated balance sheets.

Effective Tax Rate

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.

Our effective tax rate in the second quarter of fiscal 2024 was 19.3% or a tax expense of $23.5 million and our effective tax rate in the second quarter of fiscal 2023 was 18.2% or a tax expense of $21.4 million. The increase in our effective tax rate was primarily due to tax benefits related to settlement of stock-based awards.

Our effective tax rate in the fiscal year-to-date period ended March 29, 2024 was 18.2% or a tax expense of $36.8 million and our effective tax rate in the fiscal year-to-date period ended March 31, 2023 was 19.3% or a tax expense of $41.9 million. The decrease in our effective tax rate was primarily due to higher tax benefits related to settlement of stock-based awards.

On December 11, 2023, the IRS announced in a notice that taxpayers can temporarily apply the regulations in effect prior to 2022 related to U.S. federal foreign tax credits. This relief applies to foreign taxes paid or accrued in our fiscal 2024.

Compared to the Federal statutory rate of 21%, our effective tax rate for the second quarter of fiscal 2024 and fiscal year-to-date period ended March 29, 2024 were lower primarily due to the mix of earnings favoring jurisdictions with lower tax rates and benefits related to settlement of stock-based awards.