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Income Taxes
6 Months Ended
Jul. 01, 2016
Operating Loss Carryforwards [Line Items]  
Income Taxes
Income Taxes
For the quarter ended July 1, 2016, the Company's effective tax rate ("ETR") was 31.7% compared to 28.8% for the three months ended July 3, 2015. The increase in ETR was primarily due to a tax benefit from the release of a valuation allowance in the second quarter of the prior year that did not recur, partially offset by the tax benefit recognized in the current quarter upon settlement of stock-based awards due to the adoption of the new accounting standard for stock-based compensation discussed below.
For the six months ended July 1, 2016, the Company's ETR was 31.9% compared to 20.0% for the six months ended July 3, 2015. The increase in ETR was primarily due to tax benefits from the utilization of capital losses to offset historical capital gains in the first six months of the prior year that did not recur, partially offset by the tax benefit recognized in the current quarter upon settlement of stock-based awards due to the adoption of the new accounting standard for stock-based compensation discussed below.
As a result of the adoption of ASU 2016-09 during the quarter ended July 1, 2016, the Company recognized excess tax benefits and deficiencies related to employee share-based payment transactions as income tax expense or benefit in the Company's condensed consolidated statements of income, which resulted in a $3 million and $7 million tax benefit as a discrete item for the second quarter and six months ended July 1, 2016, respectively (see "Note 1–Summary of Significant Accounting Policies"). The adoption of the new accounting standard could result in fluctuations in the ETR period over period depending on the amount of excess tax benefits or deficiencies recognized.
The Company files income tax returns in the United States and various state and foreign jurisdictions. The Company participates in the Internal Revenue Service ("IRS") Compliance Assurance Process, a real-time audit of the Company's consolidated federal corporate income tax return. The IRS has examined the Company's consolidated federal income tax returns through fiscal 2015. With a few exceptions, as of July 1, 2016, the Company is no longer subject to state, local or foreign examinations by the tax authorities for years before fiscal 2013.
As of July 1, 2016, the balance of unrecognized tax benefits included liabilities for uncertain tax positions of $11 million, of which $5 million were classified as other long-term liabilities in the condensed consolidated balance sheets. During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to $7 million of the Company’s unrecognized tax benefits either because the Company’s tax positions are sustained or because the Company agrees to their disallowance and pays the related income tax. This is dependent on the timing of ongoing examinations as well as any potential litigation and expiration of statute of limitations. While the Company believes it has adequate accruals for uncertain tax positions, the tax authorities may determine that the Company owes taxes in excess of recorded accruals or the recorded accruals may be in excess of the final settlement amounts agreed to by the tax authorities.
Leidos, Inc.  
Operating Loss Carryforwards [Line Items]  
Income Taxes
Income Taxes
For the quarter ended July 1, 2016, the Company's effective tax rate ("ETR") was 31.7% compared to 28.8% for the three months ended July 3, 2015. The increase in ETR was primarily due to a tax benefit from the release of a valuation allowance in the second quarter of the prior year that did not recur, partially offset by the tax benefit recognized in the current quarter upon settlement of stock-based awards due to the adoption of the new accounting standard for stock-based compensation discussed below.
For the six months ended July 1, 2016, the Company's ETR was 31.9% compared to 20.0% for the six months ended July 3, 2015. The increase in ETR was primarily due to tax benefits from the utilization of capital losses to offset historical capital gains in the first six months of the prior year that did not recur, partially offset by the tax benefit recognized in the current quarter upon settlement of stock-based awards due to the adoption of the new accounting standard for stock-based compensation discussed below.
As a result of the adoption of ASU 2016-09 during the quarter ended July 1, 2016, the Company recognized excess tax benefits and deficiencies related to employee share-based payment transactions as income tax expense or benefit in the Company's condensed consolidated statements of income, which resulted in a $3 million and $7 million tax benefit as a discrete item for the second quarter and six months ended July 1, 2016, respectively (see "Note 1–Summary of Significant Accounting Policies"). The adoption of the new accounting standard could result in fluctuations in the ETR period over period depending on the amount of excess tax benefits or deficiencies recognized.
The Company files income tax returns in the United States and various state and foreign jurisdictions. The Company participates in the Internal Revenue Service ("IRS") Compliance Assurance Process, a real-time audit of the Company's consolidated federal corporate income tax return. The IRS has examined the Company's consolidated federal income tax returns through fiscal 2015. With a few exceptions, as of July 1, 2016, the Company is no longer subject to state, local or foreign examinations by the tax authorities for years before fiscal 2013.
As of July 1, 2016, the balance of unrecognized tax benefits included liabilities for uncertain tax positions of $11 million, of which $5 million were classified as other long-term liabilities in the condensed consolidated balance sheets. During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to $7 million of the Company’s unrecognized tax benefits either because the Company’s tax positions are sustained or because the Company agrees to their disallowance and pays the related income tax. This is dependent on the timing of ongoing examinations as well as any potential litigation and expiration of statute of limitations. While the Company believes it has adequate accruals for uncertain tax positions, the tax authorities may determine that the Company owes taxes in excess of recorded accruals or the recorded accruals may be in excess of the final settlement amounts agreed to by the tax authorities.