7. Income Taxes

Our provision for income taxes is based on estimated effective tax rates derived from an estimate of annual consolidated earnings before taxes, adjusted for nondeductible expenses, other permanent items and any applicable credits. Our income tax expense is primarily a non-cash charge due to the utilization of U.S. net operating losses.

The following table presents the provision for income taxes and the effective tax rates (in thousands):



	Three Months Ended				Six Months Ended
	September 28,		September 29,		September 28,		September 29,
	2013		2012		2013		2012
Income before income taxes	$	50,828	$	50,516	$	82,474	$	61,091
Provision for income taxes	$	17,461	$	15,067	$	28,465	$	18,715
Effective tax rate		34.4%		29.8%		34.5%		30.6%

Our income tax expense for the second quarter and first six months of fiscal year 2014 was slightly below the federal statutory rate primarily due to the effect of the federal research development credit which was extended through December 31, 2013 by the American Taxpayer Relief Act of 2012 which was enacted on January 2, 2013. Our income tax expense for the second quarter and first six months of fiscal year 2013 was below the federal statutory rate primarily due to the release of valuation allowance on the Company’s deferred tax assets in the second quarter of fiscal year 2013. The release was due to the sale of assets of Apex Microtechnology (“Apex”), which generated sufficient capital gain to utilize a capital loss carry forward that was previously expected to expire unutilized.

We had no unrecognized tax benefits as of September 28, 2013. The Company does not believe that its unrecognized tax benefits will significantly increase or decrease during the next 12 months.

We accrue interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. As of September 28, 2013, the balance of accrued interest and penalties was zero. No interest or penalties were incurred during the first six months of fiscal year 2014 or 2013.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. Fiscal years 2010 through 2013 remain open to examination by the major taxing jurisdictions to which we are subject.