Income Taxes

12 Months Ended

Mar. 25, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (loss) before income taxes consisted of (in thousands):

	Fiscal Years Ended
	March 25, 2023		March 26, 2022		March 27, 2021
U.S.	$	(141,670)	$	(17,674)	$	19,189
Non-U.S.	396,409		386,337		226,057
	$	254,739	$	368,663	$	245,246

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

	Fiscal Years Ended
	March 25, 2023		March 26, 2022		March 27, 2021
Current:
U.S.	$	60,603	$	4,483	$	981
Non-U.S.	52,023		52,920		32,428
Total current tax provision	$	112,626	$	57,403	$	33,409
Deferred:
U.S.	(28,529)		(6,256)		(192)
Non-U.S.	(6,061)		(8,839)		(5,315)
Total deferred tax provision	(34,590)		(15,095)		(5,507)
Total tax provision	$	78,036	$	42,308	$	27,902

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 25, 2023	March 26, 2022	March 27, 2021
U.S. federal statutory rate	21.0	21.0	21.0
Foreign income taxed at different rates	(14.4)	(9.6)	(8.4)
Stock-based compensation	(0.3)	(0.9)	(0.8)
Foreign-derived intangible income deduction	—	(0.1)	(0.3)
GILTI and Subpart F income	30.6	10.0	7.8
Foreign tax credits	(7.7)	(9.4)	(7.4)
Change in valuation allowance	0.2	(0.2)	—
Release of prior year unrecognized tax benefits	—	—	(1.4)
Interest related to unrecognized tax benefits	0.7	0.2	0.3
Other	0.5	0.5	0.6
Effective tax rate	30.6	11.5	11.4

The legislation commonly referred to as the Tax Cuts and Jobs Act ("Tax Act") was enacted on December 22, 2017. Under the Tax Act, research and development expenses incurred for tax years beginning after December 31, 2021 must be capitalized and amortized over five or fifteen years for tax purposes, depending on where the research activities are conducted. The Company has elected to treat global intangible low-taxed income ("GILTI") as a period cost, so the capitalization of research and development costs in GILTI increased the Company's provision for income taxes beginning in fiscal year 2023.

The Tax Act also 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 25, 2023, the remaining balance of our transition tax obligation was $25.7 million, which will be paid over the next three years.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act, which, among other things, implemented a 15 percent minimum tax on book income of certain large corporations and several tax incentives to promote clean energy. Based on our current analysis of these provisions, this legislation will not have a material impact on our financial statements.

Significant components of our deferred tax assets and liabilities as of March 25, 2023 and March 26, 2022 are (in thousands): 

	March 25, 2023		March 26, 2022
Deferred tax assets:
Accrued expenses and allowances	$	7,913	$	6,517
Net operating loss carryforwards	1,132		1,713
Research and development tax credit carryforwards	13,283		15,230
Stock-based compensation	24,842		18,952
Lease liabilities	21,602		26,653
Capitalized research and development	9,183		6,372
Other	1,119		651
Total deferred tax assets	$	79,074	$	76,088
Valuation allowance for deferred tax assets	(13,076)		(13,088)
Net deferred tax assets	$	65,998	$	63,000
Deferred tax liabilities:
Depreciation and amortization	$	3,395	$	3,574
Right of use asset	19,226		25,744
Acquisition intangibles	7,782		32,315
Other	37		—
Total deferred tax liabilities	$	30,440	$	61,633
Total net deferred tax assets	$	35,558	$	1,367

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. 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. Our valuation allowance increased by $0.1 million in fiscal year 2023.  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 25, 2023, the Company had gross federal net operating loss carryforwards of $3.0 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 2024 through 2031. At March 25, 2023 the Company had gross foreign net operating loss carryforwards of $0.1 million that do not expire and gross state net operating loss carryforwards of $7.5 million that expire in fiscal years 2024 through 2030. In addition, the Company had $13.4 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 2024 through 2034, and others do not expire.

At March 25, 2023, 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.

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.

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

	March 25, 2023		March 26, 2022
Beginning balance	$	32,879	$	32,879
Additions based on tax positions related to the current year	—		—
Reductions based on tax positions related to the prior years	—		—
Ending balance	$	32,879	$	32,879

At March 25, 2023, the Company had gross unrecognized tax benefits of $32.9 million, all of which would impact the effective tax rate if recognized. 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 2023 and 2022 we recognized interest expense, net of tax, of approximately $1.7 million and $0.9 million, respectively. The total amount of interest accrued as of March 25, 2023 was $6.8 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 2023 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 ("IRS").  The IRS has proposed adjustments that would increase U.S. taxable income related to transfer pricing matters with respect to our U.S. and U.K. affiliated companies and on May 17, 2022, the IRS issued a Revenue Agent’s Report asserting additional tax of approximately $170.5 million plus interest and imposing penalties of approximately $63.7 million. We do not agree with the IRS's positions and we intend to vigorously dispute the proposed adjustments. We intend to pursue resolution through the administrative process with the IRS Independent Office of Appeals and, if necessary, through judicial remedies. We expect it could take a number of years to reach resolution on these matters. Although the final resolution

of these matters is uncertain, the Company believes adequate amounts have been reserved for any adjustments to the provision for income taxes that may ultimately result. However, if the IRS prevails in these matters, the assessed tax, interest, and penalties, if any, could have an adverse impact on our financial position, results of operations, and cash flows in future periods. The Company is not under an income tax audit in any other major taxing jurisdiction.