SanDisk 2012 Annual Report Download - page 201

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
exception of certain net operating losses. As a result, the Company released $306.0 million of valuation
allowance related to federal and state deferred tax assets in fiscal year 2010.
The Company has federal and state net operating loss carryforwards of $82.4 million and $208.4 million,
respectively. The net operating losses will begin to expire in fiscal year 2014 if not utilized. The Company also
has California research credit carryforwards of $36.7 million. California research credits can be carried forward
to future years indefinitely. Some of these carryforwards are subject to annual limitations, including under
Section 382 and Section 383 of the U.S. Internal Revenue Code of 1986, as amended, for U.S. tax purposes and
similar state provisions.
The Company provides for U.S. income taxes on the earnings of foreign subsidiaries unless the earnings are
considered indefinitely invested outside of the U.S. No provision has been made for U.S. income taxes or foreign
withholding taxes on $582.9 million of cumulative unremitted earnings of certain foreign subsidiaries as of
December 30, 2012, since the Company intends to indefinitely reinvest these earnings outside the U.S. The
Company determined that the calculation of the amount of unrecognized deferred tax liability related to these
cumulative unremitted earnings was not practicable. If these earnings were distributed to the Company’s U.S.
entity, the Company would be subject to additional U.S. income taxes and foreign withholding taxes would be
reduced by available foreign tax credits.
The tax benefit from share-based plans was applied to capital in excess of par value in the amount of
$11.7 million, $20.5 million and $26.8 million in fiscal years 2012, 2011 and 2010, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 2, 2011 ................................................................... $ 172,060
Additions:
Tax positions related to current year .................................................... 10,090
Tax positions related to prior years ..................................................... 4,489
Reductions:
Tax positions related to prior years ..................................................... (296)
Expiration of statute of limitations ..................................................... (517)
Balance at January 1, 2012 ................................................................... 185,826
Additions:
Tax positions related to current year .................................................... 1,943
Tax positions related to prior years ..................................................... 942
Reductions:
Tax positions related to prior years ..................................................... (7,186)
Expiration of statute of limitations ..................................................... (2,003)
Balance at December 30, 2012 ................................................................ $ 179,522
The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, is
$83.1 million at December 30, 2012. The Company recognizes interest and penalties related to unrecognized tax
benefits in income tax expense. Accrued interest and penalties included in the Company’s liability related to
unrecognized tax benefits at December 30, 2012 and January 1, 2012 was $32.2 million and $34.1 million,
respectively. Interest and penalties, net, included in the Company’s tax expense for fiscal years 2012, 2011 and
2010, was $2.9 million, $3.2 million and ($2.4) million, respectively.
It is reasonably possible that the unrecognized tax benefits could decrease by approximately $6.6 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
December 30, 2012.
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