17. Income Taxes

Income before income taxes consisted of (in thousands):



	Year Ended
	March 30,		March 31,		March 26,
	2013		2012		2011
United States	$	200,124	$	79,425	$	83,569
Non-U.S.		1,066		558		645
	$	201,190	$	79,983	$	84,214

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



	Year Ended
	March 30,		March 31,		March 26,
	2013		2012		2011
Current:
Federal	$	3,537	$	1,322	$	163
State		323		518		312
Non-U.S.		243		261		204
Total current tax provision	$	4,103	$	2,101	$	679

Deferred:
U.S.		60,506		(10,102)		(120,057)
Non-U.S.		(17)		1		89
Total deferred tax provision (benefit)		60,489		(10,101)		(119,968)
Total tax provision (benefit)	$	64,592	$	(8,000)	$	(119,289)

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



	Year Ended
	March 30,		March 31,		March 26,
	2013		2012		2011
Expected income tax provision at the U.S. federal statutory rate		35.0		35.0		35.0
Valuation allowance changes affecting the provision of income taxes		(1.3)		(46.7)		(178.6)
Foreign taxes at different rates		(0.1)		-		0.1
R&D credit		(2.1)		-		-
Stock compensation		0.1		1.0		(0.1)
Nondeductible expenses		0.3		0.1		1.1
Other		0.2		0.6		0.9
Provision (benefit) for income taxes		32.1		(10.0)		(141.6)

Significant components of our deferred tax assets and liabilities as of March 30, 2013 and March 31, 20121 are (in thousands):



	March 30,		March 31,
	2013		2012
Deferred tax assets:
Inventory valuation	$	12,065	$	3,240
Accrued expenses and allowances		5,077		3,656
Net operating loss carryforwards		28,162		105,220
Research and development tax credit carryforwards		37,054		36,032
State tax credit carryforwards		237		244
Capitalized research and development		6,601		9,779
Other		21,505		18,747
Total deferred tax assets	$	110,701	$	176,918
Valuation allowance for deferred tax assets		(23,232)		(29,075)
Net deferred tax assets	$	87,469	$	147,843

Deferred tax liabilities:
Depreciation and amortization	$	5,238	$	287
Acquisition intangibles		623		5,348
Total deferred tax liabilities	$	5,861	$	5,635
Total net deferred tax assets	$	81,608	$	142,208

These net deferred tax assets have been categorized on the Consolidated Balance Sheets as of March 30, 2013 and March 31, 2012 as follows:



	March 30,		March 31,
	2013		2012
Current deferred tax assets	$	64,937	$	53,137
Long-term deferred tax assets		16,671		89,071
Total net deferred tax assets	$	81,608	$	142,208

The current and long-term deferred tax assets are disclosed separately under their respective captions on the consolidated balance sheets.

The valuation allowance decreased by $5.8 million in fiscal year 2013 and $39.3 million in fiscal year 2012. During fiscal year 2013, the valuation allowance that the Company had maintained on its capital loss carryforward was released due to the capital gain income generated by the sale of assets associated with the Company’s Apex products. The Company maintained its valuation allowance on various state net operating losses and credits due to the likelihood that they will expire or go unutilized because the Company no longer has a significant apportionment in the jurisdiction in which the attribute was created. The decrease in the fiscal year 2012 allowance was the result of a release of the valuation allowance on Federal net operating losses, research credits and other Federal deductions due to an expectation that forecasted income as of the end of fiscal year 2012 would be sufficient to utilize these deferred tax assets. With regard to the remaining deferred tax assets, Management believes that the Company’s results from future operations will generate sufficient taxable income such that it is more likely than not that these deferred tax assets will be realized.

At March 30, 2013, we had federal net operating loss carryforwards of $177.1 million. Of that amount, $20.9 million related to companies we acquired during fiscal year 2002 and are, therefore, subject to certain limitations under Section 382 of the Internal Revenue Code. Because the Company has elected the “with and without” method for purposes of tracking its excess stock deductions, the amount of federal net operating loss included in deferred tax assets is $56.8 million, which yields a tax effected deferred tax asset of $19.9 million. The Company had $120.3 million of excess stock deductions which are not included in deferred tax assets. The tax benefit from these deductions will increase additional paid-in capital when they are deemed realized under the “with and without” method. We had net operating losses in various states that total $101.6 million. The federal net operating loss carryforwards expire in fiscal years 2019 through 2033. The state net operating loss carryforwards expire in fiscal years 2014 through 2029. We also have non-U.S. net operating losses of $2.0 million, which do not expire.

There are federal research and development credit carryforwards of $22.5 million that expire in fiscal years 2014 through 2033. There are $14.5 million of state research and development credits. Of that amount, $2.8 million will expire in fiscal years 2022 through 2027. The remaining $11.7 million of state research and development credits are not subject to expiration. The American Taxpayer Relief Act of 2012 (the “Act”) was enacted on January 2, 2013. The Act retroactively reinstates the federal research and development credit from January 1, 2012 through December 31, 2013. As a result of the retroactive extension of the R&D credit, we recognized a $4.2 million benefit to tax expense during fiscal year 2013, a portion of which related to qualified research expenditures that were incurred during the last quarter of fiscal year 2012.

We have approximately $228 thousand of cumulative undistributed earnings in certain non-U.S. subsidiaries. We have not recognized a deferred tax liability on these undistributed earnings because the Company currently intends to reinvest these earnings in operations outside the U.S. The unrecognized deferred tax liability on these earnings is approximately $81 thousand.

We record unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):


Balance at March 31, 2012	$	-
Additions based on tax positions related to the current year		-
Reductions for tax positions of prior years		-
Settlements		-
Reductions related to expirations of statutes of limitation		-
Balance at March 30, 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. We did not record any interest or penalties during fiscal year 2013 or 2012.

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.