SanDisk 2009 Annual Report Download - page 148

Notes To Consolidated Financial Statements
No provision has been made for U.S. income taxes or foreign withholding taxes on approximately
$56 million of cumulative unremitted earnings of certain foreign subsidiaries as of January 3, 2010, since the
Company intends to indefinitely reinvest these earnings outside the U.S. If these earnings were distributed to the
U.S., the Company would be subject to additional U.S. income taxes and foreign withholding taxes (subject to
adjustment for foreign tax credits). As of January 3, 2010, the unrecognized deferred tax liability for these
earnings was approximately $17 million.
The tax benefit (charge) associated with the exercise of stock options was applied to capital in excess of par
value in the amount of zero, ($3.9) million and $18.4 million in fiscal years 2009, 2008 and 2007, respectively.
The tax benefit associated with the exercise of stock options credited to goodwill in fiscal years 2009 and 2008
was zero and fiscal year 2007 was $0.6 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
Balance at December 31, 2007 ......................................................... $ 70,194
Additions:
Tax positions related to current year ............................................ 26,342
Tax positions related to prior years ............................................. 44,247
Reductions:
Tax positions related to prior years ............................................. (13,501)
Expiration of statute of limitations .............................................. (2,845)
Balance at December 28, 2008 ......................................................... 124,437
Additions:
Tax positions related to current year ............................................ 29,263
Tax positions related to prior years ............................................. 26,064
Balance at January 3, 2010 ............................................................ $179,764
The total amount of unrecognized tax benefits that would impact the effective tax rate is approximately
$98 million at January 3, 2010. The Company recognizes interest and penalties related to unrecognized tax
benefits in income tax expense. The liability related to unrecognized tax benefits included accrued interest and
penalties of approximately $31.9 million, and $24.3 million at January 3, 2010 and December 28, 2008,
respectively. Tax expense for the years ended January 3, 2010 and December 28, 2008 included interest and
penalties of $6.4 million and $12.3 million, respectively.
It is reasonably possible that the unrecognized tax benefits could decrease by approximately $3.0 million
within the next 12 months as a result of the expiration of statutes of limitation. The Company is currently under
audit by several tax authorities. Because timing of the resolution and/or closure of these audits is highly uncertain
it is not possible to estimate other changes to the amount of unrecognized tax benefits for positions existing at
January 3, 2010.
The Company is subject to U.S. federal income tax as well as income taxes in many state and foreign
jurisdictions. In October 2009, the Internal Revenue Service commenced an examination of our federal income
tax returns for fiscal years 2005 through 2008. We do not expect a resolution to be reached during the next
twelve months. In addition, we are currently under audit by various state and international tax authorities. We
cannot reasonably estimate that the outcome of these examinations will not have a material effect on our
financial position, results of operations or liquidity. The statutes of limitation in state jurisdictions remain open in
general from tax years 2002 through 2008. The major foreign jurisdictions remain open for examination in
general for tax years 2003 through 2008.
F-36