Plantronics 2014 Annual Report Download - page 78

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The 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. 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. Permanently reinvested foreign earnings were approximately $594.2 million at March 31, 2014. 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.
Deferred tax assets and liabilities represent the tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting and income tax purposes. Significant components of the Company's deferred tax assets and
liabilities as of March 31, 2014 and 2013 are as follows:
March 31,
(in thousands) 2014 2013
Accruals and other reserves $ 8,459 $ 7,983
Net operating loss carry forward 4,580 5,956
Stock compensation 8,957 8,199
Other deferred tax assets 3,937 3,643
Valuation allowance (3,351)(5,984)
Total deferred tax assets 22,582 19,797
Deferred gains on sales of properties (1,756)(1,756)
Unremitted earnings of certain subsidiaries (3,064)(3,064)
Fixed asset depreciation (3,571)(4,402)
Other deferred tax liabilities — (2,197)
Total deferred tax liabilities (8,391)(11,419)
Net deferred tax assets $ 14,191 (1) $ 8,378
(1) The long-term portion of the Company's deferred tax assets for the fiscal year ending March 31, 2014 is included as a component of other assets in the
consolidated balance sheets.
The Company evaluates its deferred tax assets, including a determination of whether a valuation allowance is necessary, based
upon its ability to utilize the assets using a more likely than not analysis. Deferred tax assets are only recorded to the extent that
they are realizable based upon past and future income. The Company has a long established earnings history with taxable income
in its carryback years and forecasted future earnings. The Company has concluded that no valuation allowance is required, except
for the specific items discussed below.
The valuation allowance of $3.4 million as of March 31, 2014 was related to the net operating losses of a foreign subsidiary with
an insufficient history of earnings to support the realization of the deferred tax asset.
The impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more likely
than not to be sustained. An uncertain income tax position will not be recognized unless it has a greater than 50% likelihood of
being sustained. As of March 31, 2014, 2013, and 2012, the Company had $12.6 million, $11.1 million, and $11.1 million,
respectively, of unrecognized tax benefits. The unrecognized tax benefits as of March 31, 2014 would favorably impact the
effective tax rate in future periods if recognized.