16. Income Taxes

Income before income taxes consisted of (in thousands):



	Fiscal Years Ended
	March 26,		March 28,		March 29,
	2016		2015		2014
United States	$	108,133	$	133,295	$	155,431
Non-U.S.		67,856		(41,746)		306
	$	175,989	$	91,549	$	155,737

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



	Fiscal Years Ended
	March 26,		March 28,		March 29,
	2016		2015		2014
Current:
Federal	$	28,154	$	42,102	$	10,550
State		159		63		258
Non-U.S.		703		445		335
Total current tax provision	$	29,016	$	42,610	$	11,143

Deferred:
U.S.		18,242		2,136		36,543
Non-U.S.		5,101		(8,375)		(60)
Total deferred tax provision (benefit)		23,343		(6,239)		36,483
Total tax provision	$	52,359	$	36,371	$	47,626

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 26,		March 28,		March 29,
	2016		2015		2014
Expected income tax provision at the U.S. federal statutory rate		35.0		35.0		35.0
Foreign taxes at different rates		(0.6)		7.3		0.1
Research and development tax credits		(5.6)		(3.6)		(0.9)
Recognition of prior year benefit		-		-		(4.1)
Nondeductible expenses		0.1		2.3		0.5
Other		0.9		(1.3)		-
Provision for income taxes		29.8		39.7		30.6

Significant components of our deferred tax assets and liabilities as of March 26, 2016 and March 28, 2015 are (in thousands):



	March 26,		March 28,
	2016		2015
Deferred tax assets:
Inventory valuation	$	-	$	6,377
Accrued expenses and allowances		3,761		4,705
Net operating loss carryforwards		24,592		57,878
Research and development tax credit carryforwards		9,649		14,567
State tax credit carryforwards		142		225
Capitalized research and development		1,160		1,793
Other		24,745		30,695
Total deferred tax assets	$	64,049	$	116,240
Valuation allowance for deferred tax assets		(10,773)		(33,190)
Net deferred tax assets	$	53,276	$	83,050

Deferred tax liabilities:
Depreciation and amortization	$	10,924	$	6,827
Acquisition intangibles		24,527		35,242
Total deferred tax liabilities	$	35,451	$	42,069
Total net deferred tax assets	$	17,825	$	40,981

The deferred tax assets are disclosed as “Deferred tax assets – Long Term” on the Consolidated Balance Sheet as of March 26, 2016, following the adoption of ASU 2015-17 in the current fiscal year, discussed in Note 2 above. As of March 28, 2015, current and long-term deferred tax assets are disclosed separately under their respective captions on the Consolidated Balance Sheet. The deferred tax liabilities are included in “Other long-term liabilities” on the Consolidated Balance Sheet for both periods presented.

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 valuation allowance decreased by $22.4 million in fiscal year 2016, primarily due to the write off of certain fully valued deferred tax assets with no impact to income tax expense. The Company continued to record a valuation allowance on various state net operating losses and tax credits due to the likelihood that they will expire or go unutilized because the Company does not expect to recognize sufficient income in the jurisdictions in which the tax attributes were created. Management believes that the Company’s results from future operations will generate sufficient taxable income in the appropriate jurisdictions such that it is more likely than not that the remaining deferred tax assets will be realized.

At March 26, 2016, the Company had gross federal net operating loss carryforwards of $17.3 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 2019 through 2034. The Company also had $9.9 million of federal research and development credit carryforwards, of which $4.8 million are reflected as deferred tax assets at the end of the fiscal year because, under the “with and without method”, a greater portion is deemed to have been utilized for U.S. GAAP purposes as of the end of fiscal year 2016 than was utilized for tax return purposes. This carryforward will expire in 2034 through 2036.

At March 26, 2016, the Company had gross state net operating loss carryforwards of $57.9 million. The state net operating loss carryforwards expire in fiscal years 2017 through 2033. In addition, the Company had $14.6 million of state research and development tax credit carryforwards. Certain of these state tax credits will expire in fiscal years 2022 through 2027. The remaining state tax credit carryforwards do not expire.

At March 26, 2016, the Company had gross foreign net operating losses of $94.3 million as a result of the Wolfson acquisition. These loss carryforwards are not subject to an annual limit and do not expire.

At March 26, 2016, the undistributed earnings of our foreign subsidiaries of approximately $25.5 million are intended to be indefinitely reinvested outside the U.S. Accordingly, no provision for U.S. federal income and foreign withholding taxes associated with a distribution of these earnings has been made. The amount of unrecognized deferred tax liability related to these undistributed earnings is estimated to be $8.4 million.

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



	March 26,		March 28,
	2016		2015
Beginning balance	$	-	$	-
Additions based on tax positions related to the current year		12,592		-
Additions based on tax positions related to prior years		6,204		-
Ending balance	$	18,796	$	-

The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At March 26, 2016, the Company had gross unrecognized tax benefits of $18.8 million, all of which would impact the effective tax rate if recognized. During fiscal year 2016, the Company had gross increases of $12.6 million related to current year unrecognized tax benefits, as well as gross increases of $6.2 million related to prior year unrecognized tax benefits. The Company’s unrecognized tax benefits are classified either as “Other long-term liabilities” in the Consolidated Balance Sheet or as a reduction to deferred tax assets to the extent that the unrecognized tax benefit relates to deferred tax assets.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of March 26, 2016, the balance of accrued interest and penalties was zero. No interest or penalties were recognized during fiscal year 2016 or 2015.

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 2013 through 2016 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 2013 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company is not currently under an income tax audit in any major taxing jurisdiction.