Medtronic 2016 Annual Report Download - page 111

Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
108
In fiscal year 2014, the Company recorded a $71 million net tax benefit associated with the reversal of excess tax accruals. This
net tax benefit included $63 million related to the settlement of certain issues reached with the IRS involving the review of the
Company’s fiscal years 2009 through 2011 domestic income tax returns and the remaining amount related to the resolution of
various state and foreign audit proceedings covering multiple years and issues. The $71 million net tax benefit was recorded in
the provision for income taxes in the consolidated statement of income for fiscal year 2014.
No deferred taxes have been provided for any portion of the approximately $29.0 billion and $27.8 billion of undistributed earnings
of the Company’s subsidiaries as of April 29, 2016 and April 24, 2015, respectively, since these earnings have been, and under
current plans will continue to be, permanently reinvested in these subsidiaries. The Company has not provided U.S. income taxes
on approximately $20.5 billion of undistributed earnings, net, from non-U.S. subsidiaries as of April 25, 2014. Due to the number
of legal entities and jurisdictions involved and the complexity of the legal entity structure of the Company, the complexity of the
tax laws in the relevant jurisdictions, including, but not limited to the rules pertaining to the utilization of foreign tax credits in the
United States and the impact of projections of income for future years to any calculations, the Company believes it is not practicable
to estimate, within any reasonable range, the amount of additional taxes which may be payable upon distribution of these earnings.
Currently, the Company’s operations in Puerto Rico, Switzerland, Singapore, Dominican Republic, Costa Rica, and Israel have
various tax incentive grants. The tax reductions as compared to the local statutory rate favorably impacted earnings per diluted
share by $0.33 in fiscal year 2016, $0.37 in fiscal year 2015, and $0.42 in fiscal year 2014. Unless these grants are extended, they
will expire between fiscal years 2017 and 2029. The Company’s historical practice has been to renew, extend, or obtain new tax
incentive grants upon expiration of existing tax incentive grants. If the Company is not able to renew, extend, or obtain new tax
incentive grants, the expiration of existing tax incentive grants could have a material impact on the Company’s financial results
in future periods.
The Company had $2.7 billion, $2.9 billion, and $1.2 billion of gross unrecognized tax benefits as of April 29, 2016, April 24,
2015, and April 25, 2014, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal
years 2016, 2015, and 2014 is as follows:
Fiscal Year
(in millions) 2016 2015 2014
Gross unrecognized tax benefits at beginning of fiscal year $ 2,860 $ 1,172 $ 1,068
Gross increases:
Prior year tax positions 36 331 64
Current year tax positions 202 231 166
Acquisitions — 1,199 —
Gross decreases:
Prior year tax positions (116)(40)(58)
Settlements (275)(33)(66)
Statute of limitation lapses (4) — (2)
Gross unrecognized tax benefits at end of fiscal year $ 2,703 $ 2,860 $ 1,172
Cash advance paid in connection with proposed settlements (384)(378) —
Gross unrecognized tax benefits at end of fiscal year, net of cash advance $ 2,319 $ 2,482 $ 1,172
If all of the Company’s unrecognized tax benefits as of April 29, 2016, April 24, 2015, and April 25, 2014 were recognized, $2.1
billion, $2.2 billion, and $1.1 billion would impact the Company’s effective tax rate, respectively. Although the Company believes
that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax
authorities could have a material impact on the Company’s effective tax rate in future periods. The Company has recorded $7
million of gross unrecognized tax benefits as a current liability, and $2.7 billion as a long-term liability. The Company estimates
that within the next 12 months, it is reasonably possible that its uncertain tax positions, excluding interest, could decrease by as
much as $500 million, net as a result of the resolution of tax matters with the U.S. Tax Court, Appeals Division of the IRS, other
settlements with taxing authorities as well as statute of limitation lapses.
The Company recognizes interest and penalties related to income tax matters in the provision for income taxes in the consolidated
statements of income and records the liability in the current or long-term accrued income taxes in the consolidated balance sheets,
as appropriate. The Company had $609 million, $656 million, and $141 million of accrued gross interest and penalties as of