Income Taxes

9 Months Ended

Jun. 28, 2019

The provision for income taxes consists of the following components (in millions):



	Three Months Ended						Nine Months Ended
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
United States income taxes	$	1.8		$	16.0		$	52.7		$	328.7
Foreign income taxes	16.0			8.3			31.3			27.1
Provision for income taxes	$	17.8		$	24.3		$	84.0		$	355.8

Effective tax rate	11.0		%	7.8		%	11.6		%	36.0		%

The difference between the Company’s effective tax rate and the 21.0% United States federal statutory rate for the three and nine months ended June 28, 2019, resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate, a benefit from foreign derived intangible income deduction (“FDII”), and research and experimentation and foreign tax credits earned, partially offset by a tax on global intangible low-taxed income (“GILTI”), and an increase in tax expense related to a change in the reserve for uncertain tax positions.

The difference between the Company’s effective tax rate and the 24.6% United States federal statutory rate for the three and nine months ended June 29, 2018, resulted primarily from a decrease to tax expense related to an adjustment to the mandatory deemed repatriation tax on foreign earnings, foreign earnings taxed at rates lower than the federal statutory rate, the domestic production activities deduction, research and experimentation tax credits earned, and a benefit related to windfall stock deductions, partially offset by an increase in tax expense related to a change in the reserve for uncertain tax positions. During the nine months ended June 29, 2018, these amounts in the table above included a one-time charge of $238.0 million related to the mandatory deemed repatriation tax on foreign earnings and a one-time charge of $18.5 million related to the revaluation of the deferred tax assets and liabilities related to tax reform.

On December 22, 2017, the President of the United States signed into law new tax legislation (the “Tax Reform Act”). In addition to the introduction of a modified territorial tax system, the Tax Reform Act includes two new sets of provisions aimed at preventing or decreasing U.S. tax base erosion—the GILTI provisions and the base erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions impose taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company is making an accounting policy election to account for GILTI as a component of tax expense in the period in which the Company is subject to the rules and therefore will not provide any deferred tax impacts of GILTI in its consolidated financial statements for the three and nine months ended June 28, 2019. The BEAT provisions eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. These BEAT provisions are effective for the Company beginning in fiscal 2019. The Company has analyzed the BEAT provisions for the three and nine months ended June 28, 2019, and is not subject to the minimum tax imposed by the BEAT provisions. Other significant provisions of the Tax Reform Act that are effective in fiscal 2019 and that have an impact on the Company’s income taxes include the inclusion of performance-based compensation in determining the excessive compensation limitation and the benefit related to FDII.

The Company operates under a tax holiday in Singapore, which is effective through September 30, 2020. The Company has completed negotiations for an extension of this tax holiday through September 30, 2030. The current tax holiday and extension are both conditioned upon the Company's compliance with certain employment and investment thresholds in Singapore.

Accrued taxes of $26.2 million and $43.8 million have been included in other current liabilities within the consolidated balance sheets as of June 28, 2019, and September 28, 2018, respectively. The deemed repatriation tax is payable over the next seven years, $18.0 million per year for each of the next four years, followed by payments of $33.6 million, $44.9 million, and $56.1 million in years five through seven, respectively. The Company has accrued $188.6 million and $206.6 million of the deemed repatriation tax in long-term liabilities within the consolidated balance sheet as of June 28, 2019, and September 28, 2018, respectively.