INCOME TAX EXPENSE

6 Months Ended

Dec. 27, 2015

Income Tax Disclosure [Abstract]

INCOME TAX EXPENSE

INCOME TAX EXPENSE

The Company recorded an income tax (benefit) expense of $(14.1) million and $5.5 million for the three and six months ended December 27, 2015, which yielded an effective tax rate of approximately (6.7)% and 1.1%, 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 December 27, 2015 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 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 unrecognized tax benefits due to uncertain tax positions. The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rate for the six months ended December 27, 2015 is primarily due to estimated higher income in lower tax jurisdictions, the recognition of a discrete tax benefit of the Altera court case, 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 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 non-deductible stock-based compensation 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 However, the U.S Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations.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.