SanDisk 2014 Annual Report Download - page 184

SANDISK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax benefit from share-based plans was applied to capital in excess of par value in the amount of
$45.1 million, $0.6 million and $11.7 million in fiscal years 2014, 2013 and 2012, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
Fiscal years ended
December 28, December 29, December 30,
2014 2013 2012
Balance, beginning of year .............................. $ 185,250 $ 179,522 $ 185,826
Additions:
Tax positions related to current year ................. 17,656 8,255 8,164
Tax positions related to prior years .................. 14,411 15,938 942
Reductions:
Tax positions related to prior years .................. (9,597) (1,737) (7,186)
Expiration of statute of limitations .................. (8,039) (7,419) (2,003)
Settlements with taxing authorities .................. (71,121) — —
Foreign currency translation adjustment ............... (3,387) (9,309) (6,221)
Balance, end of year .................................. $ 125,173 $ 185,250 $ 179,522
The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized,
was $100.4 million as of December 28, 2014. 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 as of December 28, 2014 and December 29, 2013 was
$30.1 million and $32.7 million, respectively. Interest and penalties, net, included in the Company’s tax
expense was ($0.2) million, $2.2 million and $2.9 million for fiscal years 2014, 2013 and 2012, respectively.
It is reasonably possible that the unrecognized tax benefits could decrease by approximately
$56.2 million within the next 12 months as a result of the expiration of statutes of limitations and the
settlement of income tax audits. The Company is currently under audit by several tax authorities in which
the timing of the resolution and/or closure of these audits is highly uncertain. Therefore it is not possible to
estimate other changes to the amount of unrecognized tax benefits for positions existing as of
December 28, 2014.
The Company is subject to U.S. federal income tax as well as income taxes in multiple state and
foreign jurisdictions. In August 2014, the Company received and signed the closing agreement with the
Internal Revenue Service (‘‘IRS’’) relating to its federal income tax returns for the years 2005 through
2008. In fiscal year 2014, the Company recorded a benefit of $25.2 million as a result of several audit
settlements.
The IRS is currently conducting an examination of the Company’s federal income tax returns for fiscal
years 2009 through 2011. Though the Company can reasonably expect the current cycle to be resolved
within the next 12 months, the timing of the resolution of income tax examinations is highly uncertain as
are the amounts and timing of tax payments that are part of any audit settlement process. In addition, the
Company is currently under audit by various state and international tax authorities. The Company cannot
reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these
examinations will not materially harm the Company’s financial position, results of operations or liquidity.
The Company has a tax holiday in Malaysia that expires in December 2023. The impact of the tax
holiday was immaterial to income taxes and earnings per share in the Company’s Consolidated Financial
Statements.
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