

	For the Year Ended
	June 27, 2020		June 29, 2019		June 30, 2018
	(in thousands)
Domestic pre-tax income	$	72,854	$	103,016	$	149,056
Foreign pre-tax income	605,242		651,405		675,829
Total	$	678,096	$	754,421	$	824,885



	For the Year Ended
	June 27, 2020			June 29, 2019			June 30, 2018
	(in thousands)
Federal
Current	$	1,893		$	(114,494	)	$	318,288
Deferred	9,828			12,874			25,769
State
Current	(3,880		)	9,842			117
Deferred	552			2,196			1,325
Foreign
Current	15,683			17,562			11,450
Deferred	(674		)	(1,045		)	618
Total provision (benefit) for income taxes	$	23,402		$	(73,065	)	$	357,567



	For the Year Ended
	June 27, 2020		June 29, 2019		June 30, 2018
Federal statutory rate	21.0	%	21.0	%	28.1	%
State tax, net of federal benefit	(0.5	)	1.4		0.2
General business credits	(1.8	)	(0.9	)	(0.8	)
Effect of foreign operations	(17.1	)	(15.8	)	(16.7	)
Stock-based compensation	1.0		0.7		0.4
Interest accrual for uncertain tax positions	0.9		1.1		2.1
Transition Tax	1.0		9.0		28.7
Global intangible low taxed income	7.9		7.4		—
Deferred tax remeasurement	—		—		1.6
Settlement of uncertain tax positions	(7.5	)	(33.4	)	—
Other	(1.4	)	(0.2	)	(0.3	)
Effective tax rate	3.5	%	(9.7	)%	43.3	%

On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act reduced the federal statutory tax rate from 35.0% to 21.0%, effective January 1, 2018, which results in federal statutory tax rates for the Company of 21.0%, 21.0% and 28.1% (average of a 35.0% rate for the first half of fiscal year 2018 and a 21.0% rate for the second half of fiscal year 2018) for fiscal years 2020, 2019 and 2018, respectively. In fiscal year 2018 the Company recorded a $13.7 million charge to remeasure deferred taxes as of the enactment date of the Act to reflect the federal statutory rate reduction.

The Act included a one-time tax on accumulated unremitted earnings of our foreign subsidiaries (“Transition Tax”). SEC Staff Accounting Bulletin No. 118 allowed the use of provisional amounts (reasonable estimates) if accounting for the income tax effects of the Act was not completed. Provisional amounts must be adjusted within a one-year measurement period from the enactment date of the Act. In the second quarter of fiscal year 2018, the Company recorded a $236.9 million provisional Transition Tax charge. During the measurement period the Company gathered information and analyzed available guidance and in the second quarter of fiscal year 2019 recorded a $22.1 million Transition Tax charge, which increased the Company’s fiscal year 2019 tax rate by 2.9%. As of the end of the second quarter of fiscal year 2019 accounting for income tax effects of the Act was completed.

The Act included Global Intangible Low-Taxed Income (“GILTI”) provisions, which first impact the Company in fiscal year 2019. The GILTI provisions effectively subject income earned by the Company’s foreign subsidiaries to current U.S. tax at a rate of 10.5%, less foreign tax credits. The Company has elected to treat tax generated by the GILTI provisions as a period expense.

In fiscal year 2019, the Company reversed $221.5 million of uncertain tax position reserves and $30.1 million of related interest reserves, net of federal and state benefits, primarily due to the fiscal fourth quarter settlement of an audit of the Company’s fiscal year 2009 through fiscal year 2011 federal corporate income tax returns, which also settled intercompany buy-in license payment issues for fiscal years 2012 through 2019. $140.7 million of fiscal year 2009 through fiscal year 2018 advance tax payments made in June 2018 were applied to additional federal tax liabilities generated by the settlement. The reversal of uncertain tax position reserves for intercompany transfer pricing issues increased accumulated unremitted foreign earnings, which resulted in an additional Transition Tax charge of $47.7 million in the fiscal fourth quarter.

In fiscal year 2020, the Company reversed $40.5 million of uncertain tax position reserves and $10.7 million of related interest reserves, net of federal and state benefits, primarily due to the fiscal fourth quarter settlement of an audit of the Company’s fiscal year 2012 through fiscal year 2014 federal corporate income tax returns. The reversal of uncertain tax position reserves for intercompany transfer pricing issues increased accumulated unremitted foreign earnings, which resulted in an additional Transition Tax charge of $6.5 million in the fiscal fourth quarter.

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service released temporary regulations under Internal Revenue Code (“IRC”) Section 245A (“Section 245A”), as enacted by the Act, and IRC Section 954(c)(6) (the “Temporary Regulations”), which apply retroactively to intercompany dividends occurring after December 31, 2017. The Temporary Regulations limit the applicability of the foreign personal holding company income (“FPHCI”) look-through exception for certain intercompany dividends received by a controlled foreign corporation. Before application of the retroactive intercompany Temporary Regulations, the Company benefited in fiscal years 2018 and 2019 from the FPHCI look-through exception. The Company has analyzed the

relevant Temporary Regulations and concluded that they were not validly issued. Therefore, the Company has not accounted for the effects of the retroactive Temporary Regulations in its results of operations for fiscal year 2019 or fiscal year 2020. The Company believes it has strong arguments in favor of its position and that it has met the more likely than not recognition threshold that its position will be sustained. The Company intends to vigorously defend its position, however, due to the uncertainty involved in challenging the validity of regulations as well as a potential litigation process, there can be no assurance that the relevant Temporary Regulations will be invalidated, modified or that a court of law will rule in favor of the Company. An unfavorable resolution of this issue could have a material adverse impact on the Company's results of operations and financial condition.

As of June 27, 2020, the Company's foreign subsidiaries have accumulated undistributed earnings of approximately $306.2 million that are intended to be indefinitely reinvested outside the U.S. No deferred tax liability has been recognized for the repatriation of these earnings. At June 27, 2020, the unrecognized deferred tax liability on these earnings was $27.2 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company's deferred tax assets and liabilities were as follows:



	June 27, 2020			June 29, 2019
	(in thousands)
Deferred tax assets:
Accrued compensation	$	8,750		$	7,990
Stock-based compensation	10,476			9,788
Net operating loss carryovers	40,933			40,067
Tax credit carryovers	97,870			93,269
Other reserves and accruals not currently deductible for tax purposes	17,580			21,584
Other	11,626			11,500
Total deferred tax assets	187,235			184,198

Deferred tax liabilities:
Fixed assets and intangible assets cost recovery, net	(58,293		)	(52,567		)
Unremitted earnings of foreign subsidiaries	(9,968		)	(7,428		)
Other	(3,080		)	(3,712		)
Total deferred tax liabilities	(71,341		)	(63,707		)

Net deferred tax assets before valuation allowance	115,894			120,491
Valuation allowance	(135,751		)	(131,798		)
Net deferred tax assets (liabilities)	$	(19,857	)	$	(11,307	)

The valuation allowance as of June 27, 2020 and June 29, 2019 primarily relates to certain state and foreign net operating loss carryforwards and certain state tax credit carryforwards. The valuation allowance increased by $4.0 million in fiscal year 2020.

As of June 27, 2020, the Company has $15.0 million of federal net operating loss carryforwards expiring at various dates between fiscal years 2022 and 2033, $39.4 million of state net operating loss carryforwards expiring at various dates through fiscal year 2033, $140.2 million of foreign net operating loss carryforwards with no expiration date, $115.4 million of state tax credit carryforwards with no expiration date, and $6.6 million of state tax credit carryforwards expiring at various dates through fiscal year 2035.

The Company classifies unrecognized tax benefits as (i) a current liability to the extent that payment is anticipated within one year; (ii) a non-current liability to the extent that payment is not anticipated within one year; or (iii) a reduction to deferred tax assets to the extent that the unrecognized tax benefit relates to deferred tax assets such as operating loss or tax credit carryforwards or to the extent that operating loss or tax credit carryforwards would be able to offset the additional tax liability generated by unrecognized tax benefits.



	For the Year Ended
	June 27, 2020			June 29, 2019			June 30, 2018
	(in thousands)
Balance as of beginning of year	$	220,397		$	591,458		$	539,569
Tax positions related to current year:
Addition	3,459			6,974			48,646
Tax positions related to prior year:
Addition	5,626			20,851			3,806
Reduction	(48,944		)	(236,705		)	—
Settlements	(6,263		)	(161,847		)	—
Lapses in statutes of limitations	—			(334		)	(563		)
Balance as of end of year	$	174,275		$	220,397		$	591,458

Prior year tax position activity in fiscal year 2019 includes the reversal of $221.5 million of tax reserves, primarily due to the settlement of an audit of the Company’s fiscal year 2009 through fiscal year 2011 federal corporate income tax returns, which also settled intercompany buy-in license payment issues for fiscal year 2012 through fiscal year 2019. Fiscal year 2019 settlements include $140.7 million of fiscal year 2009 through fiscal year 2018 advance tax payments made in June 2018 that were applied to additional federal tax liabilities generated by the federal tax audit settlement. Prior year tax position activity in fiscal year 2020 includes the reversal of $40.5 million of tax reserves, primarily due to the settlement of an audit of the Company’s fiscal year 2012 through fiscal year 2014 federal corporate income tax returns.

The total amount of gross unrecognized tax benefits as of June 27, 2020 that, if recognized, would affect the effective tax rate is $122.7 million. $51.6 million of unrecognized tax benefits would be offset by an increase in the valuation allowance for deferred tax assets and thus would not affect the effective tax rate.

The Company reports interest and penalties related to unrecognized tax benefits as a component of income tax expense. The gross amount, before the federal and state benefit, of interest and penalties recognized in income tax expense during the fiscal years ended June 27, 2020, June 29, 2019, and June 30, 2018 was $(5.9) million, $(30.2) million and $27.8 million, respectively, and the total amount of interest and penalties accrued as of June 27, 2020, June 29, 2019, and June 30, 2018 was $24.6 million, $31.7 million, and $61.9 million, respectively.

The Company’s federal corporate income tax returns are audited on a recurring basis by the Internal Revenue Service (“IRS”). In fiscal year 2020, the IRS commenced an audit of the Company’s federal corporate income tax returns for fiscal years 2015 through 2017, which is ongoing.