Medtronic 2015 Annual Report Download - page 122

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Medtronic plc
Notes to Consolidated Financial Statements (Continued)
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.
At April 24, 2015, no deferred taxes have been provided for any portion of the approximately $27.837 billion of undistributed
earnings of the Company’s subsidiaries, 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 $20.529
billion, and $18.123 billion of undistributed earnings, net, from non-U.S. subsidiaries as of April 25, 2014 and April 26, 2013,
respectively. 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 $0.37 in fiscal year 2015, $0.42 in fiscal year 2014, and $0.42 in fiscal year 2013. Unless these grants are extended,
they will expire between fiscal years 2016 and 2027. 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 $2.860 billion, $1.172 billion, and $1.068 billion of gross unrecognized tax benefits as of April 24, 2015,
April 25, 2014, and April 26, 2013, respectively. A reconciliation of the beginning and ending amount of unrecognized tax
benefits for fiscal years 2015, 2014, and 2013 is as follows:
Fiscal Year
(in millions) 2015 2014 2013
Gross unrecognized tax benefits at beginning of fiscal year $ 1,172 $ 1,068 $ 917
Gross increases:
Prior year tax positions 331 64 12
Current year tax positions 231 166 169
Acquisitions 1,199 — —
Gross decreases:
Prior year tax positions (40) (58) (21)
Settlements (33) (66) (6)
Statute of limitation lapses — (2) (3)
Gross unrecognized tax benefits at end of fiscal year $ 2,860 $ 1,172 $ 1,068
Cash advance paid in connection with proposed settlements (378) — —
Gross unrecognized tax benefits at end of fiscal year, net of cash advance $ 2,482 $ 1,172 $ 1,068
If all of the Company’s unrecognized tax benefits as of April 24, 2015, April 25, 2014, and April 26, 2013 were recognized,
$2.233 billion, $1.104 billion, and $1.028 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 $267 million of gross unrecognized tax benefits as a current liability, and $2.593 billion as a long-term liability.
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 $656 million, $141 million, and $88 million of accrued gross interest and
penalties as of April 24, 2015, April 25, 2014, and April 26, 2013, respectively. During the fiscal years ended April 24, 2015,
April 25, 2014, and April 26, 2013, the Company recognized gross interest expense of approximately $142 million, $36 million,
and $33 million in the provision for income taxes in the consolidated statements of income, respectively.
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