Symantec 2014 Annual Report Download - page 124

The tax expense in fiscal 2013 was reduced by the following benefits: (1) $17 million tax benefits arising
from the Veritas 2002 through 2005 IRS Appeals matters, including adjustments to state liabilities and a
reduction of interest accrued, (2) $13 million in tax benefits resulting from tax settlements and adjustments to
prior year items, (3) $10 million from lapses of statutes of limitation, and (4) $2 million for the benefit of the
research credit for the fourth quarter of fiscal 2012 resulting from the extension of the federal research credit as
part of the 2012 Taxpayer Relief Act. These tax benefits were offset by a $9 million tax expense from an increase
in valuation allowance on state research tax credits.
The tax expense in fiscal 2012 was reduced by the following benefits: (1) $52 million tax benefit arising
from the Veritas 2002 through 2005 IRS Appeals matters, (2) $14 million from lapses of statutes of limitation,
(3) $17 million from the settlements and effective settlements with tax authorities and related remeasurements,
and (4) $5 million tax benefit from adjustments related to prior year items. This benefit was partially offset by a
$5 million tax expense resulting from a change in valuation allowance for certain deferred tax assets.
The effective tax rates for all periods presented otherwise reflect the benefits of lower-taxed international earnings
and losses from our joint venture with Huawei Technologies Co., Limited, domestic manufacturing incentives, and
research and development credits (the U.S. federal Research and Development credit expired on December 31, 2013),
partially offset by state income taxes. Pretax income from international operations was significantly higher in fiscal
2012 due to the sale of our 49% ownership interest in the joint venture to Huawei on March 30, 2012 for $526
million. A significant portion of the sale proceeds was attributable to international tax jurisdictions resulting in a 20%
tax rate on the sale of the joint venture reducing the overall tax rate in fiscal 2012 by 3%.
We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax
jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in
Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical
mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably
affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of
earnings is dependent upon many factors and is therefore difficult to predict.
For further information on the impact of foreign earnings on our effective tax rate, see Note 12 of the Notes
to Consolidated Financial Statements.
See Critical Accounting Estimates above for additional information about our provision for income taxes.
In assessing the ability to realize our deferred tax assets, we considered whether it was more likely than not
that some portion or all of the deferred tax assets will not be realized. We considered the following: we have
historical cumulative book income, as measured by the current and prior two years, we have strong, consistent
taxpaying history, we have substantial U.S. federal income tax carryback potential; and we have substantial
amounts of scheduled future reversals of taxable temporary differences from our deferred tax liabilities. Levels of
future taxable income are subject to the various risks and uncertainties discussed in Part I, Item 1A, Risk Factors,
set forth in this annual report. We have concluded that this positive evidence outweighs the negative evidence
and, thus, that the deferred tax assets as of March 28, 2014 of $347 million, after application of the valuation
allowances described above, are realizable on a “more likely than not” basis.
On December 2, 2009, we received a Revenue Agent’s Report from the IRS for the Veritas 2002 through
2005 tax years assessing additional taxes due. We contested $80 million of the tax assessed and all penalties. As
a result of negotiations with IRS Appeals in the third quarter of fiscal 2012, we remeasured our liability for
unrecognized tax benefits, resulting in a tax benefit of $52 million. We executed the final closing agreement for
the Veritas 2002 through 2005 tax years on December 26, 2012. Accordingly, we recorded a further tax benefit
of $3 million during the third quarter of fiscal 2013 based on the closing agreement. Further, we amended our
state tax returns for the Veritas 2002 through 2005 tax years in the fourth quarter of fiscal 2013 to reflect the
adjustments in the closing agreement and remeasured our state liability resulting in a benefit of $7 million.
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