Plantronics 2015 Annual Report Download - page 75

The following is a reconciliation between statutory federal income taxes and the income tax expense for fiscal years 2015, 2014,
and 2013:
(in thousands) Fiscal Year Ended March 31,
2015 2014 2013
Tax expense at statutory rate $ 50,838 $ 49,399 $ 48,449
Foreign operations taxed at different rates (15,839)(16,175)(15,244)
State taxes, net of federal benefit 1,331 634 1,978
Research and development credit (2,460)(1,805)(3,380)
Other, net (920)(3,331) 220
Income tax expense $ 32,950 $ 28,722 $ 32,023
The effective tax rate for fiscal years 2015, 2014, and 2013 was 22.7%, 20.4%, and 23.1% respectively. The effective tax rate for
fiscal year 2015 is higher than the previous year due primarily to the absence of several one-time, discrete items that benefited
the tax rate in the previous year, such as the generation of a foreign tax credit carryover, changes in Mexican tax law that resulted
in the reversal of a valuation allowance, and a deduction for qualifying domestic production activities. These factors were offset
by a higher proportion of income earned in foreign jurisdictions that is taxed at lower rates and by an increase in the benefit from
the U.S. federal research tax credit. Our fiscal year 2015 included four quarters of benefit from the U.S. federal research tax
credit because the credit expired on December 31, 2014 but was retroactively reinstated in January 2015. In contrast, during our
fiscal year 2014, the credit was only available for three quarters as the credit expired December 31, 2013 and was not renewed.
In comparison to fiscal year 2013, the decrease in the effective tax rate for fiscal year 2014 was due primarily to changes in Mexican
tax law that resulted in the reversal of a valuation allowance, a deduction for qualifying domestic production activities, and the
generation of a foreign tax credit carryover, offset by a decrease in the benefit from the U.S. federal research tax credit. The U.S.
federal research tax credit expired December 31, 2013 and was therefore only available for three quarters in our fiscal year 2014,
compared to fiscal year 2013, which included a full five quarters of benefit. Five quarters of benefit was recorded in fiscal year
2013 due to the timing of the retroactive reinstatement of the U.S. federal research tax credit. On January 2, 2013, the American
Taxpayer Relief Act of 2012, which included a provision that retroactively extended the federal tax research credit to January 1,
2012 for two years, was signed into law. The Company recognized an approximate $1.8 million discrete tax benefit in the fourth
quarter of fiscal year 2013 for the previously expired period from January 1, 2012 to December 31, 2012.
The effective tax rate for fiscal years 2015, 2014, and 2013 differs from the statutory rate due to the impact of foreign operations
taxed at different statutory rates, income tax credits, state taxes, and other factors. The future tax rate could be impacted by a shift
in the mix of domestic and foreign income, tax treaties with foreign jurisdictions, changes in tax laws in the U.S. or internationally,
or a change in estimate of future taxable income which could result in a valuation allowance being required.
The Company's provision for income taxes does not include provisions for U.S. income taxes and foreign withholding taxes
associated with the repatriation of undistributed earnings of certain foreign operations that it intends to reinvest indefinitely in the
foreign operations. Indefinitely reinvested foreign earnings were approximately $650.8 million at March 31, 2015. The
determination of the tax liability that would be incurred if these amounts were remitted back to the U.S. is not practical but would
likely be material. If these earnings were distributed to the U.S. in the form of dividends or otherwise, the Company would be
subject to additional U.S. income taxes, subject to an adjustment for foreign tax credits and foreign withholding taxes. The
Company's current plans do not require repatriation of earnings from foreign operations to fund the U.S. operations because it
generates sufficient domestic operating cash flow and has access to external funding under its line of credit. As a result, the
Company does not expect a material impact on its business or financial flexibility with respect to undistributed earnings of its
foreign operations.
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