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Income Taxes
3 Months Ended
Jul. 03, 2015
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Our effective tax rate was approximately 32% and 23% for the three months ended July 3, 2015 and July 4, 2014, respectively. Our effective tax rate differs from the federal statutory income tax rate primarily due to the benefits of lower-taxed international earnings and domestic manufacturing incentives, partially offset by state income taxes. The higher effective tax rate for the three months ended July 3, 2015 as compared to the three months ended July 4, 2014 is due primarily to a different geographic mix of earnings and the treatment of certain transaction costs in determining the effective tax rate. The tax benefit associated with certain of these transaction costs will change as a result of the sale of the information management business. For additional information about the planned divestiture of our information management business see Note 11.
For the three months ended July 3, 2015 and July 4, 2014, the effective tax rate was reduced by tax benefits primarily resulting from settlements with certain taxing authorities and lapses of statutes of limitations of $3 million and $14 million, respectively. For the three months ended July 3, 2015, these tax benefits were offset as a result of certain transaction costs not fully deductible for tax purposes.
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could decrease (whether by payment, release, or a combination of both) in the next 12 months by $33 million, which could reduce our income tax provision and therefore benefit the resulting effective tax rate.
On July 27, 2015, the U.S. Tax Court invalidated a U.S. Treasury regulation requiring the inclusion of stock-based compensation in certain intercompany cost-sharing agreements. We are currently evaluating the impact of this decision on our current and historic tax filing positions. We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected tolling of the statute of limitations in various taxing jurisdictions.