Seagate 2012 Annual Report Download - page 53

Table of Contents
Based on our non-U.S. ownership structure and subject to (i) potential future increases in our valuation allowance for deferred tax assets;
and (ii) a future change in our intention to indefinitely reinvest earnings from our subsidiaries outside of Ireland, we anticipate that our effective
tax rate in future periods will generally be less than the Irish statutory rate.
At June 28, 2013, our deferred tax asset valuation allowance was approximately $989 million.
At June 28, 2013, we had net deferred tax assets of $554 million. The realization of these deferred tax assets is primarily dependent on our
ability to generate sufficient U.S. and certain non-U.S. taxable income in future periods. Although realization is not assured, we believe that it is
more likely than not that these deferred tax assets will be realized. The amount of deferred tax assets considered realizable, however, may
increase or decrease in subsequent periods when we re-evaluate the underlying basis for our estimates of future U.S. and certain non-
U.S. taxable
income.
As of June 28, 2013, the use of approximately $358 million and $90 million of our total U.S. net operating loss and tax credit carry
forwards, respectively, is subject to an aggregate annual limitation of $45 million pursuant to U.S. tax law. If certain ownership changes occur in
the foreseeable future, there may be an additional annual limitation on our ability to use our total U.S. federal and state net operating loss and
credit carryforwards of $2.8 billion, $1.8 billion and $415 million, respectively. It is reasonably possible that such a change could occur. If these
ownership changes were to occur, we estimate a one-time charge for additional U.S. income tax expense of approximately $ 400 to $500 million
may be recorded in the period such change occurs. This additional income tax expense results from a decrease in our net U.S. deferred tax assets
recorded through a combination of the write off of deferred tax assets and associated changes to our valuation allowance. We also estimate that
the ensuing additional annual limitation on our ability to use our tax attribute carryovers may result in increased U.S. income tax expense
associated with such change of approximately $70 to $85 million each year.
As of June 28, 2013 and June 29, 2012, we had approximately $157 million and $135 million, respectively, of unrecognized tax benefits
excluding interest and penalties. The unrecognized tax benefits that, if recognized, would impact the effective tax rate is $157 million and
$135 million as of June 28, 2013 and June 29, 2012, respectively, subject to certain future valuation allowance reversals.
It is our policy to include interest and penalties related to unrecognized tax benefits in the provision for taxes on the Consolidated
Statements of Operations. During fiscal year 2013, we recognized a net tax expense for interest and penalties of $2 million as compared to a net
tax expense for interest and penalties of $2 million and less than $1 million during fiscal year 2012 and fiscal year 2011, respectively. As of
June 28, 2013, we had $19 million of accrued interest and penalties related to unrecognized tax benefits compared to $17 million in fiscal year
2012.
During the fiscal year ended June 28, 2013, our unrecognized tax benefits excluding interest and penalties increased by approximately
$22 million primarily due to (i) increases in current year unrecognized tax benefits of $16 million, (ii) net increases in prior year unrecognized
tax benefits of $10 million, (iii) reductions associated with the expiration of certain statutes of limitation of $5 million, (iv) increases from other
activity, including non-U.S. exchange gains, of $1 million.
During the 12 months beginning June 29, 2013, we expect to reduce our unrecognized tax benefits by approximately $3 million as a result
of the expiration of certain statutes of limitation. We do not believe it is reasonably possible that other unrecognized tax benefits will materially
change in the next 12 months.
We are subject to taxation in many jurisdictions globally and are required to file U.S. federal, U.S. state, and non-
U.S income tax returns. In
February, 2013, we reached a settlement with the IRS on all issues related to fiscal years ending in 2005 through 2007. Settlement of the issues
in this period has no material impact on our financial statements. We are no longer subject to tax examination of U.S. federal income tax returns
for years prior to fiscal year 2008. With respect to U.S. state and non-U.S. income tax returns, we are generally no longer subject to tax
examination for years prior to fiscal year 2004.
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