Note 12. Income Taxes

The components of the provision for income taxes are as follows:


	Year Ended
	March 29, 2013	March 30, 2012	April 1, 2011
	(In millions)
Current:
Federal	$ 104	$ 123	$ 17
State	23	30	18
International	87	121	70
	214	274	105
Deferred:
Federal	32	32	26
State	6	(9)	3
International	6	1	(29)
	44	24	—
Total provision of income taxes	$ 258	$ 298	$ 105

Pretax income from international operations was $652 million, $891 million, and $460 million for fiscal 2013, fiscal 2012, and 2011, respectively.

The difference between our effective income tax and the federal statutory income tax is as follows:


	Year Ended
	March 29, 2013	March 30, 2012	April 1, 2011
	(In millions)
Expected Federal statutory tax	$ 358	$ 515	$ 255
State taxes, net of federal benefit	25	12	12
Foreign earnings taxed at less than the federal rate	(96)	(160)	(84)
Domestic production activities deduction	(12)	(20)	(9)
Federal research and development credit	(10)	(12)	(10)
Valuation allowance increase (decrease)	—	5	(15)
Benefit of losses from joint venture	—	(1)	(2)
VERITAS tax positions (including valuation allowance release)	(9)	(52)	(49)
Other, net	2	11	7
	$ 258	$ 298	$ 105

The principal components of deferred tax assets are as follows:


	As of
	March 29, 2013	March 30, 2012
	(In millions)
Deferred tax assets:
Tax credit carryforwards	$ 54	$ 43
Net operating loss carryforwards of acquired companies	102	137
Other accruals and reserves not currently tax deductible	144	152
Deferred revenue	93	95
Loss on investments not currently tax deductible	10	23
State income taxes	29	33
Goodwill	—	36
Stock-based compensation	36	60
Other	—	4
	468	583
Valuation allowance	(66)	(55)
Total deferred tax assets	$ 402	$ 528

Deferred tax liabilities:
Tax over book depreciation	$ (73)	$ (41)
Goodwill	(19)	—
Intangible assets	(102)	(208)
Unremitted earnings of foreign subsidiaries	(372)	(329)
Other	(3)	—
Total deferred tax liabilities	$ (569)	$ (578)

Net deferred tax assets	$ (167)	$ (50)

The $66 million total valuation allowance provided against our deferred tax assets as of March 29, 2013 is mainly attributable to net operating loss and tax credit carryforwards of acquired companies, state tax credits, and net operating losses in foreign jurisdictions. The valuation allowance increased by a net of $11 million in fiscal 2013, related mostly to state research tax credits that are not deemed more likely than not to be realized.

As of March 29, 2013, we have U.S. federal net operating losses attributable to various acquired companies of approximately $90 million, which, if not used, will expire between fiscal 2014 and 2032. These net operating loss carryforwards are subject to an annual limitation under Internal Revenue Code §382, but are expected to be fully realized. Furthermore, we have U.S. state net operating loss and credit carryforwards attributable to various acquired companies of approximately $279 million and $68 million, respectively. If not used, our U.S. state net operating losses will expire between fiscal 2014 and 2032 and the majority of our U.S. state credit carryforwards can be carried forward indefinitely. In addition, we have foreign net operating loss carryforwards attributable to various acquired foreign companies of approximately $331 million net of valuation allowances, the majority of which, under current applicable foreign tax law, can be carried forward indefinitely.

In assessing the ability to realize our deferred tax assets, we considered whether it was more likely than not that some portion or all the deferred tax assets will not be realized. We considered the following: we have historical cumulative book income, as measured by the current and prior two years, we have strong, consistent taxpaying history, we have substantial U.S. federal income tax carryback potential; and we have substantial amounts of scheduled future reversals of taxable temporary differences from our deferred tax liabilities. We have concluded that this positive evidence outweighs the negative evidence and, thus, that the deferred tax assets as of March 29, 2013 of $402 million, after application of the valuation allowances described above, are realizable on a “more likely than not” basis.

As of March 29, 2013, no provision has been made for federal or state income taxes on $2.8 billion of cumulative unremitted earnings of certain of our foreign subsidiaries since we plan to indefinitely reinvest these earnings. As of March 29, 2013, the unrecognized deferred tax liability for these earnings was $830 million.

The aggregate changes in the balance of gross unrecognized tax benefits from April 2, 2010 to March 29, 2013 were as follows (in millions):


Balance as of April 2, 2010	$ 543
Settlements and effective settlements with tax authorities and related remeasurements	(6)
Lapse of statute of limitations	(27)
Increases in balances related to tax positions taken during prior years	13
Decreases in balances related to tax positions taken during prior years	(36)
Increases in balances related to tax positions taken during current year	40
Balance as of April 1, 2011	$ 527
Settlements and effective settlements with tax authorities and related remeasurements	(62)
Lapse of statute of limitations	(12)
Increases in balances related to tax positions taken during prior years	78
Decreases in balances related to tax positions taken during prior years	(30)
Increases in balances related to tax positions taken during current year	118
Balance as of March 30, 2012	$ 619
Settlements and effective settlements with tax authorities and related remeasurements	(114)
Lapse of statute of limitations	(98)
Increases in balances related to tax positions taken during prior years	11
Decreases in balances related to tax positions taken during prior years	(20)
Increases in balances related to tax positions taken during current year	14
Balance as of March 29, 2013	$ 412

Of the $207 million of changes in gross unrecognized tax benefits during the fiscal year as disclosed above, approximately $1 million was provided through purchase accounting in connection with acquisitions during fiscal 2013. This gross liability does not include offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, interest deductions, and state income taxes, as well as payments made to date.

Of the total unrecognized tax benefits at March 29, 2013, $411 million, if recognized, would favorably affect the Company’s effective tax rate, while $1 million would affect the cumulative translation adjustments. However, one or more of these unrecognized tax benefits could be subject to a valuation allowance if and when recognized in a future period, which could impact the timing of any related effective tax rate benefit.

At March 29, 2013, before any tax benefits, we had $46 million of accrued interest and penalties on unrecognized tax benefits. Interest included in our provision for income taxes was a benefit of approximately $37 million, offset by accruals of $12 million for the year ended March 29, 2013. If the accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced in the period that such determination is made, and reflected as a reduction of the overall income tax provision.

We file income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. Our most significant tax jurisdictions are the U.S., Ireland, and Singapore. Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. Our 2005 through 2013 fiscal years remain subject to examination by the Internal Revenue Service (“IRS”) for U.S. federal tax purposes, our 2009 through 2013 fiscal years remain subject to examination by the appropriate governmental agencies for Irish tax purposes, and our 2007 through 2013 fiscal years remain subject to examination by the appropriate governmental agencies for Singapore tax purposes. Other significant jurisdictions include California, Japan, the UK and India. As of March 29, 2013, we are under examination regarding Symantec U.S. federal income taxes for the fiscal years 2005 through 2008. In addition, we are under examination by the California Franchise Tax Board for the Symantec California income taxes for the 2009 through 2010 tax years. We are also under audit by the Singapore income tax authorities for fiscal years 2007 through 2011 and by the Indian income tax authorities for fiscal years 2004 through 2011.

On December 10, 2009, the U.S. Tax Court issued its opinion in VERITAS v. Commissioner, finding that our transfer pricing methodology, with appropriate adjustments, was the best method for assessing the value of the transaction at issue between VERITAS and its international subsidiary in the 2000 to 2001 tax years. In June 2010, we reached an agreement with the IRS concerning the amount of the adjustment based on the U.S. Tax Court decision. As a result of the agreement, we reduced our liability for unrecognized tax benefits, resulting in a $39 million tax benefit in the first quarter of fiscal 2011. In March 2011, we reached agreement with Irish Revenue concerning compensating adjustments arising from this matter, resulting in an additional $10 million tax benefit in the fourth quarter of fiscal 2011. This matter has now been closed and no further adjustments to the accrued liability are expected.

On December 2, 2009, we received a Revenue Agent’s Report from the IRS for the VERITAS 2002 through 2005 tax years assessing additional taxes due. We contested $80 million of the tax assessed and all penalties. As a result of negotiations with IRS Appeals in the third quarter of fiscal 2012, we remeasured our liability for unrecognized tax benefits, resulting in a tax benefit of $52 million. We executed the final closing agreement for the VERITAS 2002 through 2005 tax years on December 26, 2012. Accordingly, we recorded a further tax benefit of $3 million during the third quarter of fiscal 2013 based on the closing agreement. Further, we amended our state tax returns for the VERITAS 2002 through 2005 tax years in the fourth quarter of fiscal 2013 to reflect the adjustments in the closing agreement and remeasured our state liability resulting in a benefit of $7 million.

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 between $15 million and $130 million. Depending on the nature of the settlement or expiration of statutes of limitations, we estimate at least $15 million could affect our income tax provision and therefore benefit the resulting effective tax rate. As of March 29, 2013, we have $76 million on deposit with the IRS pertaining to U.S. tax matters in the Symantec 2005 through 2008 audit cycle.

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.