Income taxes

The consolidated effective tax rate for the quarter ended October 1, 2016 was 18% as compared to the prior year’s rate of 24%. For the quarter ended October 1, 2016, the effective tax rate benefited from excess tax benefits from share-based compensation totaling $16 million. See Note 1 for further discussion regarding the ASU adoption. Additionally, the effective tax rate for the quarter benefited from the completion of certain tax examinations partially offset by the establishment of a valuation allowance for certain deferred tax assets.

The consolidated effective tax rates for the year-to-date periods ended October 1, 2016 and October 3, 2015 were 22% and 26%, respectively. The current year-to-date period effective tax rate benefited from excess tax benefits from share-based compensation totaling $34 million as well as the completion of certain tax examinations.

The effective tax rate for 2015 benefited from a reduction in tax related to current year remitted and unremitted earnings and the completion of certain tax examinations.

As of October 1, 2016, the Company classified $16 million of unrecognized tax benefits as a net current liability. Management’s estimate of reasonably possible changes in unrecognized tax benefits during the next twelve months consists of the current liability balance expected to be settled within one year, offset by approximately $8 million of projected additions related primarily to ongoing intercompany transfer pricing activity. Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation in this estimate.

Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the year-to-date period ended October 1, 2016; $49 million of this total represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.



(millions)
January 2, 2016	$	73
Tax positions related to current year:
Additions	6
Reductions	—
Tax positions related to prior years:
Additions	1
Reductions	(4		)
Settlements	1
Lapse in statute of limitations	(2		)
October 1, 2016	$	75

The accrual balance for tax-related interest was $19 million at October 1, 2016.