Plantronics 2014 Annual Report Download - page 44

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Income Tax Expense
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2014
March 31,
2013 Change
March 31,
2013
March 31,
2012 Change
Income before income
taxes $ 141,139 $ 138,425 $ 2,714 2.0 % $ 138,425 $ 142,602 $ (4,177) (2.9)%
Income tax expense 28,722 32,023 (3,301) (10.3)% 32,023 33,566 (1,543) (4.6)%
Net income $ 112,417 $ 106,402 $ 6,015 5.7 % $ 106,402 $ 109,036 $ (2,634) (2.4)%
Effective tax rate 20.4% 23.1% 23.1% 23.5%
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. We 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.
In comparison to fiscal year 2012, the decrease in the effective tax rate for fiscal year 2013, as described above, was due primarily
to the increased benefit from the U.S. federal research tax credit in fiscal 2013 offset by a smaller proportion of income earned in
foreign jurisdictions that is taxed at lower rates.
Our effective tax rate for fiscal years 2014, 2013, and 2012 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. Our 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.
We had $12.6 million of unrecognized tax benefits as of March 31, 2014 compared to $11.1 million and $11.1 million as of
March 31, 2013 and 2012, respectively. The unrecognized tax benefits as of the end of fiscal year 2014 would favorably impact
the effective tax rate in future periods, if recognized.
It is our continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. As of
March 31, 2014, we had approximately $1.7 million of accrued interest related to uncertain tax positions, compared to $2.0 million
and $1.7 million as of March 31, 2013 and 2012, respectively. No penalties have been accrued.
The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which the statute
of limitations could expire without assessment from tax authorities. Currently, we cannot reasonably estimate the amount of
reductions, if any, during the next twelve months.
We and our subsidiaries are subject to taxation in various foreign and state jurisdictions, including the U.S. We are currently under
examination by the Internal Revenue Service for our 2010 tax year. The California Franchise Tax Board completed its examination
of our 2007 and 2008 tax years. We received a Notice of Proposed Assessment and responded by filing a protest letter. The amount
of the proposed assessment is not material. Foreign income tax matters for material tax jurisdictions have been concluded for tax
years prior to fiscal year 2007, except the United Kingdom for which tax matters have been concluded for tax years prior to fiscal
year 2013.