INCOME TAXES

Income tax provision consisted of the following components (in thousands):



	Three Months Ended
	December 28, 2012		December 30, 2011
United States income taxes	$	17,832	$	15,492
Foreign income taxes	2,517		2,044
Provision for income taxes	$	20,349	$	17,536

For the three months ended December 28, 2012, the difference between the Company's effective tax rate of 23.4% and the 35% United States federal statutory rate resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate and the domestic production activities deduction, partially offset by an increase in the Company's tax expense related to a change in the Company's reserve for uncertain tax positions. For the three months ended December 30, 2011, the difference between the Company's effective tax rate of 23.5% and the 35% United States federal statutory rate resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate, the recognition of research and development tax credits earned and the domestic production activities deduction, partially offset by an increase in the Company's tax expense related to a change in the Company's reserve for uncertain tax positions.

On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore. The Company operates under a tax holiday in Singapore, which is effective through September 30, 2020. The tax holiday is conditional upon the Company's compliance with certain employment and investment thresholds in Singapore. The Company continues to be in compliance with such conditions as of the date that this quarterly report on Form 10-Q was filed.

In accordance with ASC 740 Income Taxes ("ASC 740"), management has determined that it is more likely than not that a portion of the Company's prior and current year income tax benefits will not be realized. Accordingly, as of December 28, 2012, the Company has maintained a valuation allowance of $46.8 million. This valuation allowance is comprised of $33.6 million related to United States state research tax credits and $13.2 million related to the Company's foreign deferred tax assets.

Realization of benefits from the Company's deferred tax assets, net of valuation allowance, is dependent upon generating United States source taxable income in the future. The Company will continue to evaluate its valuation allowance in future periods and depending upon the outcome of that assessment, additional amounts could be reversed or recorded and recognized as an adjustment to income tax benefit or expense. Such adjustments could cause the Company's effective income tax rate to vary in future periods. The Company will need to generate $208.7 million of United States federal taxable income in future years to utilize all of the Company's net operating loss carryforwards, research and experimentation tax credit carryforwards, and deferred income tax temporary differences, net of valuation allowance, as of December 28, 2012.

During the three months ended December 28, 2012, the Company increased its gross unrecognized tax benefits by $3.6 million to $55.9 million. Of the total unrecognized tax benefits at December 28, 2012, $42.6 million would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company's valuation allowance and certain positions which were required to be deferred. There are no significant positions that the Company anticipates could change within the next twelve months. The Company accrued $0.3 million of interest related to unrecognized tax benefits during the three months ended December 28, 2012. The Company's policy is to recognize accrued interest and penalties, if incurred, on any unrecognized tax benefits as a component of income tax expense.

The federal tax credit available under the Internal Revenue Code for research and development expenses lapsed on December 31, 2011. As of December 28, 2012, the United States Congress had not taken action to extend the research and development tax credit. Accordingly, the income tax provision for the three months ended December 28, 2012 does not include the impact of such research and development tax credits earned after December 31, 2011.