INCOME TAX

12 Months Ended

Sep. 28, 2024

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

Domestic and foreign components of income before income taxes were as follows: 

	Year Ended
	September 28, 2024		September 30, 2023		October 1, 2022
	(In thousands)
Domestic	$	131,930	$	157,548	$	145,671
Foreign	185,605		255,259		156,649
Total	$	317,535	$	412,807	$	302,320

The provision for income taxes consists of the following: 

	Year Ended
	September 28, 2024		September 30, 2023		October 1, 2022
	(In thousands)
Federal:
Current	$	1,814	$	362	$	1,070
Deferred	23,581		36,431		25,399
State:
Current	2,888		3,188		1,711
Deferred	3,048		3,329		3,081
Foreign:
Current	44,816		53,346		31,241
Deferred	3,637		(11,362)		(566)
Total provision for income taxes	$	79,784	$	85,294	$	61,936

The Company's provision for income taxes for 2024, 2023 and 2022 was $80 million (25% of income before taxes), $85 million (21% of income before taxes) and $62 million (20% of income before taxes), respectively.

The effective tax rate for 2024 was higher than the expected U.S. statutory rate of 21% primarily due to foreign earnings taxed at rates higher than the U.S. statutory rate, state taxes, and unfavorable permanent differences. The effective tax rates for 2023 and 2022 were lower than the expected U.S. statutory rate of 21% primarily due to a $12 million and $16 million tax benefit, respectively, resulting from the release of certain foreign tax reserves due to lapse of time and expiration of statutes of limitations.

In connection with the sale of shares of Sanmina SCI India Private Limited (“SIPL”) to Reliance Strategic Business Ventures Limited ("RSBVL") on October 3, 2022, the Company recognized tax expense of $6 million for the year ended September 30, 2023, which was allocated to additional paid-in-capital. See Note 16 "Strategic Transactions".

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	As of
	September 28, 2024		September 30, 2023
	(In thousands)
Deferred tax assets:
U.S. net operating loss carryforwards	$	15,600	$	51,741
Foreign net operating loss carryforwards	111,332		109,089
Intangibles	14,268		17,921
Accruals not currently deductible	45,515		43,831
Property, plant and equipment	25,945		28,932
Tax credit carryforwards	23,086		20,235
Reserves not currently deductible	17,332		23,341
Stock compensation expense	6,725		6,049
Federal benefit of foreign operations	25,679		22,486
Capitalized research and development	13,630		4,965
Lease deferred tax asset	17,802		16,987
Other	13,822		2,720
Valuation allowance	(121,035)		(116,075)
Total deferred tax assets	209,701		232,222
Deferred tax liabilities on undistributed earnings	(21,414)		(14,775)
Deferred tax liabilities on branch operations	(23,473)		(24,001)
Revenue recognition	—		(1,874)
Lease deferred tax liability	(17,510)		(16,671)
Net deferred tax assets	$	147,304	$	174,901
Recorded as:
Deferred tax assets	$	160,703	$	177,597
Deferred tax liabilities	(13,399)		(2,696)
Net deferred tax assets	$	147,304	$	174,901

A valuation allowance is established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company regularly assesses its valuation allowance against deferred tax assets on a jurisdiction-by-jurisdiction basis. The Company considers all available positive and negative evidence, including future reversals of temporary differences, projected future taxable income, tax planning strategies and recent financial results. Significant judgment is required in assessing the Company’s ability to generate revenue, gross profit, operating income and jurisdictional taxable income in future periods. The Company’s valuation allowance as of September 28, 2024 relates primarily to foreign net operating losses, except for $13 million related to U.S. state net operating losses.

The Company provides deferred tax liabilities for the tax consequences associated with the undistributed earnings that are expected to be repatriated to the subsidiaries' parent unless the subsidiaries' earnings are considered indefinitely reinvested. As of September 28, 2024, income taxes and foreign withholding taxes have not been provided for approximately $438 million of cumulative undistributed earnings of several non-U.S. subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside of the U.S. Determination of the amount of unrecognized deferred tax liabilities on these undistributed earnings is not practicable.

As of September 28, 2024, the Company has cumulative net operating loss carryforwards for state and foreign tax purposes of $255 million and $446 million, respectively, and none for federal tax. The state net operating loss carryforwards begin expiring in fiscal year 2025 and expire at various dates through September 26, 2043. Certain foreign net operating losses will begin expiring in 2025. However, the majority of foreign net operating losses carryforward indefinitely. As of September 28, 2024, the Company has federal tax credits of $22 million that expire between 2031 and 2044. There are certain restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an “ownership change” as defined in the Internal Revenue Code. The utilization of certain net operating losses may be restricted due to changes in ownership and business operations.

Following is a reconciliation of the statutory federal tax rate to the Company's effective tax rate: 

	Year Ended
	September 28, 2024		September 30, 2023		October 1, 2022
Federal tax at statutory tax rate	21.00	%	21.00	%	21.00	%
Effect of foreign operations	2.15		0.81		3.52
Permanent items	1.87		0.96		0.08
Federal credits	(0.98)		(0.57)		(0.73)
Other	(0.20)		0.06		0.59
State income taxes, net of federal benefit	2.24		1.43		1.60
Release of foreign tax reserves	(0.95)		(3.03)		(5.57)
Effective tax rate	25.13	%	20.66	%	20.49	%

A reconciliation of the beginning and ending amount of total liabilities for unrecognized tax benefits, excluding accrued penalties and interest, is as follows:

	Year Ended
	September 28, 2024		September 30, 2023		October 1, 2022
	(In thousands)
Balance, beginning of year	$	44,707	$	53,552	$	67,781
Increase (decrease) related to prior year tax positions	3,480		(331)		(4,456)
Increase related to current year tax positions	2,500		2,040		7,154
Settlements	—		(1,911)		(7,596)
Decrease related to lapse of time and expiration of statutes of limitations	(2,144)		(8,643)		(9,331)
Balance, end of year	$	48,543	$	44,707	$	53,552

The Company had reserves of $8 million as of each of September 28, 2024 and September 30, 2023 for the payment of interest and penalties relating to unrecognized tax benefits. During 2024, the Company recognized an income tax benefit for interest and penalties of $1 million due to lapse of time and expiration of statutes of limitations compared to an income tax benefit of $4 million in 2023. The Company recognizes interest and penalties related to liabilities for unrecognized tax benefits as a component of income tax expense. Should the Company be able to ultimately recognize all of these uncertain tax positions, it would result in a benefit to net income of $36 million in 2024.

The Company conducts business globally and, as a result, files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world.

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal 2008 through 2010, the Company received a Revenue Agent’s Report (“RAR”) on November 17, 2023 asserting an underpayment of tax of approximately $8 million for fiscal 2009. The asserted underpayment results from the IRS’s proposed disallowance of a $503 million worthless stock deduction in fiscal 2009. Such disallowance, if upheld, would reduce the Company’s available net operating loss carryforwards and result in additional tax and interest attributable to fiscal 2021 and later years, which could be material. The Company disagrees with the IRS’s position as asserted in the RAR and is vigorously contesting this matter through the applicable IRS administrative and judicial procedures, as appropriate. The Company does not expect resolution of this matter within twelve months and cannot predict with any certainty the timing of such resolution. Although the final resolution of this matter remains

uncertain, the Company continues to believe that it is more likely than not the Company’s tax position will be sustained. However, an unfavorable resolution of this matter could have a material adverse impact on the Company’s consolidated financial statements.

Additionally, the Company is being audited by various state tax agencies and certain foreign countries. To the extent the final tax liabilities are different from the amounts accrued, the increases or decreases would be recorded as income tax expense or benefit in the consolidated statements of income. Although the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, the outcome is subject to uncertainty.

In general, the Company is no longer subject to United States federal or state income tax examinations for years before 2003, and to foreign examinations for years prior to 2006 in its major foreign jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits could decrease in the next twelve months by approximately $8 million related to payments, the resolution of audits and expiration of statutes of limitations. In addition, there could be a corresponding decrease in accrued interest and penalties of approximately $2 million.

The Organization for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. Various countries have enacted or have announced plans to enact new tax laws to implement the global minimum tax and where enacted, the rules begin to be effective for the Company in fiscal 2025. The Pillar Two rules are considered an alternative minimum tax and therefore deferred taxes would not be recognized or adjusted for the estimated effects of the future minimum tax. The adoption and effective dates of these rules may vary by country and could increase tax complexity and uncertainty and may adversely affect the Company’s provision for income taxes. The Company does not expect any material impact from these tax law changes in fiscal 2025.