

	Years Ended
	June 27, 2020		June 29, 2019			June 30, 2018
Federal:
Current	$	—	$	—		$	(4.5	)
Deferred	—		—			(1.7		)
Total federal income tax (benefit)	—		—			(6.2		)
State:
Current	2.7		0.1			—
Deferred	—		—			(0.1		)
Total state income tax (benefit) expense	2.7		0.1			(0.1		)
Foreign:
Current	50.1		33.3			22.0
Deferred	12.5		(1.9		)	(2.8		)
Total foreign income tax (benefit) expense	62.6		31.4			19.2
Total income tax expense	$	65.3	$	31.5		$	12.9

The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions and withholding tax paid on the repatriation of foreign earnings during the year. The foreign deferred tax benefit expense relates to the accrual of withholding tax on unrepatriated foreign earnings.



	Years Ended
	June 27, 2020			June 29, 2019			June 30, 2018
Income tax (benefit) expense computed at federal statutory rate	$	19.8		$	8.3		$	(10.0	)
Withholding Taxes	34.2			1.5			0.7
US Inclusion of foreign earnings	12.8			16.0			1.0
Tax Reform E&P Inclusion	—			—			14.3
Valuation allowance	0.7			1.0			13.0
Foreign rate differential	4.5			4.8			(1.1		)
Reserves	2.3			3.5			0.4
AMT Tax Repeal	—			—			(4.5		)
Permanent items	(0.3		)	(1.4		)	0.7
Fair value change of the earn-out liability	(6.6		)	(1.3		)	—
Reversal of previously accrued taxes	(3.7		)	(1.2		)	(1.2		)
Research and experimentation benefits and other tax credits	(0.2		)	—			(0.7		)
State taxes	2.1			0.1			—
Other	(0.3		)	0.2			0.3
Income tax expense	$	65.3		$	31.5		$	12.9



	Balance as of
	June 27, 2020			June 29, 2019			June 30, 2018
Gross deferred tax assets:
Tax credit carryforwards	$	159.5		$	164.3		$	158.8
Net operating loss carryforwards	1,118.6			1,206.9			1,219.0
Capital loss carryforwards	63.9			63.9			63.9
Inventories	20.3			9.6			4.2
Accruals and reserves	61.6			55.6			20.5
Acquisition-related items	45.1			42.1			31.5
Capitalized research costs	72.0			—			—
Other	44.6			43.1			43.8
Gross deferred tax assets	1,585.6			1,585.5			1,541.7
Valuation allowance	(1,405.5		)	(1,405.3		)	(1,382.1		)
Deferred tax assets	180.1			180.2			159.6
Gross deferred tax liabilities:
Acquisition-related items	(31.8		)	(33.5		)	(26.8		)
Tax on unrepatriated earnings	(15.6		)	(1.8		)	(1.6		)
Foreign branch taxes	(21.4		)	(22.0		)	—
Other	(29.8		)	(29.1		)	(37.4		)
Deferred tax liabilities	(98.6		)	(86.4		)	(65.8		)
Total net deferred tax assets	$	81.5		$	93.8		$	93.8

As of June 27, 2020, the Company had federal, state and foreign tax net operating loss carryforwards of $4,752.2 million, $575.8 million and $590.2 million, respectively, and federal, state and foreign research and other tax credit carryforwards of $105.8 million, $52.6 million and $0.9 million, respectively. The tax net operating loss, tax credit and capital loss carryforwards will start to expire in calendar 2021 and at various other dates through 2038 if not utilized. In addition, a portion of the foreign tax net operating loss, tax credit and capital loss carryforwards have an indefinite carryforward period. Utilization of the tax net operating losses may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state and foreign provisions. Loss carryforward limitations may result in the expiration or reduced utilization of a portion of the Company’s net operating losses. During the preparation of the fiscal 2019 US tax return, the Company elected to capitalize research and development costs as a result there is true-up adjustment to our estimated beginning of year capitalized research costs deferred tax asset of $37.5 million with an offsetting decrease in the beginning net operating loss carryforward deferred tax asset.

Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have not been provided on $9.3 million of undistributed earnings for certain foreign subsidiaries. The Company intends to reinvest these earnings indefinitely outside of the United States. The Company estimates that an additional $1.2 million of foreign withholding taxes would have to be provided if these earnings were repatriated back to the U.S.

During fiscal year 2020, in light of the economic uncertainty caused by COVID-19, the Company reevaluated its historic assertion on foreign earnings and no longer considers a majority of its earnings to be permanently reinvested resulting in a $32.5 million charge for withholding taxes expected to be paid on the repatriation of $324.0 million of foreign earnings that the Company does not consider to be permanently reinvested. During the third quarter of fiscal 2020, which included changing the Company’s intent with regard to the indefinite reinvestment of such foreign earnings, the Company initially accrued $31.6 million for withholding taxes expected to be paid on the repatriation of $316.4 million of accumulated foreign earnings that it no longer considers to be permanently reinvested as of the third quarter. During the Fiscal year 2020, the Company paid $19.5 million withholding income tax on the repatriation of foreign earnings. The repatriation of these earnings increases available cash in the U.S. and provides greater U.S. financial flexibility to assist the Company in navigating the expected downturn in the economy.

On March 27, 2020, the House passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief bill, and the president signed the legislation into law. Tax provisions of the Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The provisions of the legislation did not have a significant impact on the effective tax rate or the income tax payable and deferred income tax positions of the Company. The Company continues to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

During fiscal year 2018, the U.S. Tax Cuts and Jobs Act was enacted. Income tax effects resulting from changes in tax laws were accounted for by the Company in accordance with the authoritative guidance, which required that these tax effects be recognized in the period in which the law was enacted, and the effects were recorded as a component of the provision for income taxes from continuing operations. The law had significantly changed the way the U.S. taxes corporations. The Act repealed the alternative minimum tax (AMT) for corporations and provided that the existing AMT credit carryforwards would be fully refunded in 2022 if not utilized. As a result, the Company recognized a benefit of $4.5 million for the year ended June 30, 2018 for the release of the valuation allowance previously maintained against the AMT credit deferred tax asset. As a result, the Company’s deferred tax liability associated with indefinite-lived intangible assets offset these indefinite-lived deferred tax assets, resulting in a benefit of $2.0 million for the year ended June 30, 2018 due to release of valuation allowance.

The Act imposed a deemed repatriation of the Company’s foreign subsidiaries’ post-1986 earnings and profits (E&P) which had previously been deferred from US income tax. This deemed repatriation was reported in the Company’s fiscal 2018 U.S. tax return. The Company completed the calculation of the total post-1986 foreign E&P for all foreign subsidiaries during the quarter ended December 29, 2018. The change in estimate did not materially impact the Company’s financial statements.

The Act reduced the U.S. federal corporate tax rate from 35% to 21% as of January 1, 2018. The Company remeasured its US deferred tax assets and liabilities which resulted in a net reduction of $734.9 million of our net deferred tax assets and an equal and offsetting reduction to the valuation allowance against these deferred tax assets.

Upon adoption of the new guidance on share-based payment awards in fiscal 2018, the Company had $117.7 million of net operating loss carryforwards resulting from excess tax benefit deductions. The deferred tax asset recorded for these net operating loss carryforwards was fully offset by a corresponding increase in valuation allowance, resulting in no impact to opening accumulated deficit. In addition, due to the full valuation allowance on the U.S. deferred tax assets, there was no impact to the income tax provision from excess tax benefits for the year ended June 30, 2018.

The valuation allowance increased by $0.2 million in fiscal 2020, increased by $23.2 million in fiscal 2019, and decreased by $712.9 million in fiscal 2018. The increase during fiscal 2020 was primarily due to the business acquired during the year. The increase during fiscal 2019 was primarily due to the net increase of deferred tax assets resulting from the inclusion of the Company’s foreign subsidiaries in the U.S. tax return as a consequence of the U.S. Tax Cuts and Jobs Act. The decrease during fiscal 2018 was primarily due to the revaluation of the U.S. deferred tax assets as a result of the Act. The following table provides information about the activity of our deferred tax valuation allowance (in millions):



Deferred Tax Valuation Allowance	Balance at Beginning of Period		Additions Charged to Expenses or Other Accounts (1)		Deductions Credited to Expenses or Other Accounts (2)			Balance at End of Period
Year Ended June 27, 2020	$	1,405.3	$	95.1	$	(94.9	)	$	1,405.5
Year Ended June 29, 2019	$	1,382.1	$	72.8	$	(49.6	)	$	1,405.3
Year Ended June 30, 2018	$	2,095.0	$	31.7	$	(744.6	)	$	1,382.1



Balance at July 1, 2017	$	38.9
Additions based on tax positions related to current year	4.4
Additions based on tax positions related to prior year	5.6
Reductions for lapse of statute of limitations	(0.3		)
Balance at June 30, 2018	48.6
Additions based on tax positions related to current year	1.7
Additions based on tax positions related to prior year	7.3
Reduction based on tax positions related to prior year	(2.8		)
Reductions for lapse of statute of limitations	(0.6		)
Balance at June 29, 2019	54.2
Additions based on tax positions related to current year	2.2
Additions based on tax positions related to prior year	0.3
Reduction based on tax positions related to prior year	(3.8		)
Reduction related to settlement	(0.4		)
Reductions for lapse of statute of limitations	(0.5		)
Balance at June 27, 2020	$	52.0

The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S. tax credits. Included in the balance of unrecognized tax benefits at June 27, 2020 are $8.5 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits at June 27, 2020 are $39.9 million of tax benefits that, if recognized, would result in adjustments to the valuation allowance.

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within the income tax provision. The amount of interest and penalties accrued as of June 27, 2020, June 29, 2019 and June 30, 2018 was approximately $2.7 million, $3.7 million, and $1.9 million, respectively. During fiscal 2020, the Company’s accrued interest and penalties decreased by $0.9 million. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year. Although we do not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, we are unable to estimate the full range of possible adjustments to this balance.