Income Taxes

12 Months Ended

Mar. 27, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income taxes consisted of (in thousands): 

	Fiscal Years Ended
	March 27, 2021		March 28, 2020		March 30, 2019
U.S.	$	19,189	$	44,154	$	41,980
Non-U.S.	226,057		137,112		51,764
	$	245,246	$	181,266	$	93,744

The provision (benefit) for income taxes consists of (in thousands): 

	Fiscal Years Ended
	March 27, 2021		March 28, 2020		March 30, 2019
Current:
U.S.	$	981	$	5,241	$	(7,109)
Non-U.S.	32,428		21,634		12,428
Total current tax provision	$	33,409	$	26,875	$	5,319
Deferred:
U.S.	(192)		(561)		5,441
Non-U.S.	(5,315)		(4,546)		(7,007)
Total deferred tax provision	(5,507)		(5,107)		(1,566)
Total tax provision	$	27,902	$	21,768	$	3,753

The effective income tax rates differ from the rates computed by applying the statutory federal rate to pretax income as follows (in percentages): 

	Fiscal Years Ended
	March 27, 2021	March 28, 2020	March 30, 2019
U.S. federal statutory rate	21.0	21.0	21.0
Foreign income taxed at different rates	(8.4)	(5.5)	(2.9)
Transition tax on deferred foreign income	—	—	(11.8)
Remeasurement of U.S. deferred tax balance	—	—	(0.1)
Research and development tax credits	—	—	(6.7)
Stock-based compensation	(0.8)	(2.7)	(1.0)
Foreign-derived intangible income deduction	(0.3)	(0.8)	(2.8)
Current U.S. tax on foreign earnings	0.4	1.1	2.2
Change in valuation allowance	—	(0.1)	4.4
Release of prior year unrecognized tax benefits	(1.4)	(2.3)	—
Interest related to unrecognized tax benefits	0.3	0.5	1.6
Other	0.6	0.8	0.1
Effective tax rate	11.4	12.0	4.0

The Tax Act was enacted on December 22, 2017 and required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax-deferred. We elected to pay the transition tax over the eight-year period provided in the Tax Act. As of March 27, 2021, the remaining balance of our transition tax obligation is $27.0 million, which will be paid over the next five years.

On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. et al. v. Commissioner which concluded that the regulations relating to the treatment of stock-based compensation expense in intercompany cost-sharing arrangements were invalid. In 2016 the U.S. Internal Revenue Service appealed the decision to the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”). On July 24, 2018, the Ninth Circuit issued a decision that was subsequently withdrawn and a reconstituted panel conferred on the appeal. On June 7, 2019, the Ninth Circuit reversed the decision of the U.S. Tax Court and upheld the cost-sharing regulations. On February 10, 2020, Altera Corp. filed a Petition for a Writ of Certiorari with the Supreme Court of the United States, which was denied by the Supreme Court on June 22, 2020. Although the issue is now resolved within the Ninth Circuit, the Ninth Circuit's opinion is not binding in other circuits. The potential impact of this issue on the Company, which is not located within the jurisdiction of the Ninth Circuit, is unclear at this time. We will continue to monitor developments related to this issue and the potential impact of those developments on the Company's current and prior fiscal years.

Significant components of our deferred tax assets and liabilities as of March 27, 2021 and March 28, 2020 are (in thousands): 

	March 27, 2021		March 28, 2020
Deferred tax assets:
Accrued expenses and allowances	$	4,354	$	2,750
Net operating loss carryforwards	1,781		2,093
Research and development tax credit carryforwards	12,753		13,066
Stock-based compensation	10,995		8,380
Lease liabilities	17,672		18,095
Other	—		1,260
Total deferred tax assets	$	47,555	$	45,644
Valuation allowance for deferred tax assets	(12,782)		(12,596)
Net deferred tax assets	$	34,773	$	33,048
Deferred tax liabilities:
Depreciation and amortization	$	4,059	$	5,425
Right of use asset	16,987		17,391
Acquisition intangibles	3,100		4,645
Other	650		—
Total deferred tax liabilities	$	24,796	$	27,461
Total net deferred tax assets	$	9,977	$	5,587

Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. Our valuation allowance increased by $0.2 million in fiscal year 2021 due to current year operations.  The Company maintains a valuation allowance for certain deferred tax assets primarily relating to certain state net operating loss and state tax credit carryforwards due to the likelihood that they will expire or go unutilized. Management believes that the Company’s results from future operations will generate sufficient taxable income in the appropriate jurisdictions and of the appropriate character such that it is more likely than not that the remaining deferred tax assets will be realized.

At March 27, 2021, the Company had gross federal net operating loss carryforwards of $4.4 million, all of which related to acquired companies and are, therefore, subject to certain limitations under Section 382 of the Internal Revenue Code. The federal net operating loss carryforwards expire in fiscal years 2022 through 2031. In addition, at March 27, 2021 the Company had gross foreign net operating loss carryforwards of $0.3 million that do not expire and gross state net operating loss carryforwards of $12.2 million that expire in fiscal years 2022 through 2029. In addition, the Company had $12.9 million of state business tax, minimum tax, and research and development tax credit carryforwards. Certain of these state tax credits will expire in fiscal years 2022 through 2034, and others do not expire.

At March 27, 2021, unremitted earnings of our foreign subsidiaries that can be distributed without tax consequence, other than withholding taxes that may apply based on the jurisdiction of the subsidiary, are not expected to be indefinitely reinvested. No taxes have been accrued for foreign withholding taxes on these earnings as these amounts are not material. We have not provided additional income taxes for other outside basis differences inherent in our foreign entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to all other outside basis differences in these entities is not practicable at this time.

The following table summarizes the changes in the unrecognized tax benefits (in thousands): 

	March 27, 2021		March 28, 2020
Beginning balance	$	36,208	$	39,746
Additions based on tax positions related to the current year	—		615
Reductions based on tax positions related to the prior years	(3,329)		(4,153)
Ending balance	$	32,879	$	36,208

At March 27, 2021, the Company had gross unrecognized tax benefits of $32.9 million, all of which would impact the effective tax rate if recognized. During fiscal year 2021, the Company recorded a decrease of $3.3 million related to prior year unrecognized tax positions. The Company’s unrecognized tax benefits are classified as “Non-current income taxes” in the Consolidated Balance Sheet.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. During fiscal years 2021 and 2020 we recognized interest expense, net of tax, of approximately $0.7 million and $0.9 million, respectively. The total amount of interest accrued as of March 27, 2021 was $4.1 million.

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 2017 through 2021 remain open to examination by the major taxing jurisdictions to which the Company is subject, although carry forward attributes that were generated in tax years prior to fiscal year 2017 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period.  The Company's fiscal year 2017, 2018, and 2019 federal income tax returns are under examination by the U.S. Internal Revenue Service.  The Company believes it has accrued adequate reserves related to the matters under examination. The Company is not under an income tax audit in any other major taxing jurisdiction.