Income taxes

The consolidated effective tax rate for the quarter ended April 1, 2017 was 14% as compared to the prior year’s rate of 21%. For the quarter ended April 1, 2017, the effective tax rate benefited from a deferred tax benefit of $38 million resulting from an intercompany transfer of intellectual property under the application of the newly adopted standard. See discussion regarding the adoption of ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, in Note 1.

The effective tax rate for 2016 benefited from excess tax benefits from share-based compensation, the completion of certain tax examinations partially offset by the establishment of a valuation allowance for certain deferred tax assets.

As of April 1, 2017, the Company classified $11 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 $6 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 quarter ended April 1, 2017; $40 million of this total represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.



(millions)
December 31, 2016	$	63
Tax positions related to current year:
Additions	1
Reductions	—
Tax positions related to prior years:
Additions	1
Reductions	(5		)
Settlements	—
Lapse in statute of limitations	—
April 1, 2017	$	60

The accrual balance for tax-related interest was $20 million at April 1, 2017.