INCOME TAX EXPENSE

9 Months Ended

Mar. 27, 2016

Income Tax Disclosure [Abstract]

INCOME TAX EXPENSE

INCOME TAX EXPENSE

The Company recorded an income tax expense of $17.5 million and $23.0 million for the three and nine months ended March 27, 2016, which yielded an effective tax rate of approximately 10.9% and 3.4%, respectively.

The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rate for the three months ended March 27, 2016 is primarily due to estimated higher income in lower tax jurisdictions, U.S. federal research and development tax credit, recognition of previously unrecognized tax benefits due to lapse of statutes of limitation and the tax effect of KLA-Tencor acquisition related expenses, offset by the tax effect of nondeductible stock-based compensation and other permanent items, unrecognized tax benefits due to uncertain tax positions and the true-up of the prior year federal tax return.

The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rate for the nine months ended March 27, 2016 is primarily due to estimated higher income in lower tax jurisdictions, extension of the U.S. federal research and development tax credit for part of fiscal year 2015 and all of fiscal year 2016, recognition of a discrete tax benefit of the Altera court case and the tax effect of KLA-Tencor acquisition related expenses, offset by the tax effect of non-deductible stock-based compensation and other permanent items and unrecognized tax benefits due to uncertain tax positions.

In July 2015, the United States Tax Court (the “Court”) issued an opinion favorable to Altera Corporation (“Altera”) with respect to Altera’s litigation with the Internal Revenue Service (“IRS”). The litigation relates to the treatment of stock-based compensation expense in an inter-company cost-sharing arrangement with Altera’s foreign subsidiary. In its opinion, the Court accepted Altera’s position of excluding stock based compensation from its inter-company cost-sharing arrangement. The Company is including the impact of the Altera court ruling in its income tax expense calculations. However, the U.S Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. The Company will continue to monitor this matter and related potential impacts to its financial statements.