Income Taxes

12 Months Ended

Mar. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Fiscal Years Ended
	March 30, 2024		March 25, 2023		March 26, 2022
U.S.	$	(10,343)	$	(141,670)	$	(17,674)
Non-U.S.	374,279		396,409		386,337
	$	363,936	$	254,739	$	368,663

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

	Fiscal Years Ended
	March 30, 2024		March 25, 2023		March 26, 2022
Current:
U.S.	$	42,184	$	60,603	$	4,483
Non-U.S.	60,615		52,023		52,920
Total current tax provision	$	102,799	$	112,626	$	57,403
Deferred:
U.S.	(5,178)		(28,529)		(6,256)
Non-U.S.	(8,257)		(6,061)		(8,839)
Total deferred tax provision	(13,435)		(34,590)		(15,095)
Total tax provision	$	89,364	$	78,036	$	42,308

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 30, 2024	March 25, 2023	March 26, 2022
U.S. federal statutory rate	21.0	21.0	21.0
Foreign income taxed at different rates	(7.1)	(14.4)	(9.6)
Stock-based compensation	(0.1)	(0.3)	(0.9)
Foreign-derived intangible income deduction	(0.2)	—	(0.1)
GILTI and Subpart F income	14.6	30.6	10.0
Foreign tax credits	(4.1)	(7.7)	(9.4)
Change in valuation allowance	—	0.2	(0.2)
Release of prior year unrecognized tax benefits	(0.2)	—	—
Interest related to unrecognized tax benefits	0.7	0.7	0.2
U.S. research and development credit	(0.7)	—	—
Other	0.7	0.5	0.5
Effective tax rate	24.6	30.6	11.5

Under the legislation commonly referred to as the Tax Cuts and Jobs Act ("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. Because the Company elected to treat global intangible low-taxed income ("GILTI") as a period cost, the capitalization of research and development costs in the computation of GILTI resulted in an increase in the Company's provision for income taxes in fiscal years 2023 and 2024.

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 30, 2024, the remaining balance of our transition tax obligation was $19.3 million, which will be paid over the next two years.

Significant components of our deferred tax assets and liabilities as of March 30, 2024 and March 25, 2023 are (in thousands): 

	March 30, 2024		March 25, 2023
Deferred tax assets:
Accrued expenses and allowances	$	3,559	$	7,913
Net operating loss carryforwards	932		1,132
Research and development tax credit carryforwards	12,547		13,283
Stock-based compensation	28,437		24,842
Lease liabilities	25,564		21,602
Capitalized research and development	11,307		9,183
Depreciation and amortization	994		—
Other	938		1,119
Total deferred tax assets	$	84,278	$	79,074
Valuation allowance for deferred tax assets	(12,508)		(13,076)
Net deferred tax assets	$	71,770	$	65,998
Deferred tax liabilities:
Depreciation and amortization	$	—	$	3,395
Right of use asset	22,279		19,226
Acquisition intangibles	845		7,782
Other	—		37
Total deferred tax liabilities	$	23,124	$	30,440
Total net deferred tax assets	$	48,646	$	35,558

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 decreased by $0.6 million in fiscal year 2024.  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 30, 2024, the Company had gross federal net operating loss carryforwards of $2.2 million, all of which are subject to certain limitations under Section 382 of the Internal Revenue Code and expire in fiscal years 2025 through 2031. At March 30, 2024 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 $5.4 million that expire in fiscal years 2025 through 2030. In addition, the Company had $12.7 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 2025 through 2034, and others do not expire.

At March 30, 2024, 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 30, 2024		March 25, 2023
Beginning balance	$	32,879	$	32,879
Additions based on tax positions related to the current year	—		—
Reduction for the lapse of applicable statute of limitations	(802)		—
Ending balance	$	32,077	$	32,879

At March 30, 2024, the Company had gross unrecognized tax benefits of $32.1 million, all of which would impact the effective tax rate if recognized. During fiscal year 2024, the Company recorded a decrease of $0.8 million due to the expiration of the statute of limitations for a prior year unrecognized tax position. 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 2024 and 2023 we recognized interest expense, net of tax, of approximately $2.4 million and $1.7 million, respectively. The total amount of interest accrued as of March 30, 2024 was $9.2 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 including the United Kingdom. Fiscal years 2017 through 2019 and 2021 through 2024 remain open to examination by the major taxing jurisdictions in which the Company operates. 

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. The final Revenue Agent’s Report asserted additional tax of approximately $168.3 million, excluding interest, and imposed penalties of approximately $63.7 million. We do not agree with the IRS's positions and have not accrued an additional liability. We intend to vigorously dispute the proposed adjustments. We are pursuing 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.