6. Income Taxes

The Company’s income tax provision (benefit) consists of the following:

	Fiscal Year Ended
	December 26,			December 27,		December 29,
	2009			2008		2007
Federal:
Current	$	104,186		$	90,655	$	132,452
Deferred		(12,021	)		23,639		(42,193	)
		92,165			114,294		90,259
State:
Current		5,381			1,318		12,569
Deferred		(947	)		1,090		(2,916	)
		4,434			2,408		9,653
Foreign:
Current		18,469			44,279		34,334
Deferred		(10,367	)		20,537		(10,984	)
		8,102			64,816		23,350
Total	$	104,701		$	181,518	$	123,262

The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The sources and tax effects of the differences, including the impact of establishing tax contingency accruals, are as follows:

	Fiscal Year Ended
	December 26,			December 27,			December 29,
	2009			2008			2007
Federal income tax expense at U.S. statutory rate	$	287,228		$	332,278		$	342,396
State income tax expense, net of federal tax effect		2,604			2,030			5,922
Foreign tax rate differential		(219,482	)		(233,928	)		(230,243	)
Taiwan tax holiday benefit		(18,556	)		(24,904	)		(44,128	)
Net change in uncertain tax postions		41,400			87,800			56,100
Other foreign taxes less incentives and credits		10,379			20,428			(117	)
Other, net		1,128			(2,186	)		(6,668	)
Income tax expense	$	104,701		$	181,518		$	123,262

The Company’s income before income taxes attributable to non-U.S. operations was $678,868, $823,364, and $850,102, for the years ended December 26, 2009, December 27, 2008, and December 29, 2007, respectively. The Taiwan tax holiday benefits included in the table above reflect $0.09, $0.12, and $0.20 per weighted-average common share outstanding for the years ended December 26, 2009, December 27, 2008, and December 29, 2007, respectively. The Company currently expects to benefit from these Taiwan tax holidays through 2013, at which time these tax benefits expire.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 26,			December 27,			December 29,
	2009			2008			2007
Deferred tax assets:
Product warranty accruals	$	1,642		$	1,696		$	18,975
Allowance for doubtful accounts		15,346			15,098			2,430
Inventory reserves		10,145			5,331			7,699
Sales program allowances		12,902			14,471			42,832
Reserve for sales returns		-			2,914			5,565
Other accruals		5,414			5,411			3,911
Unrealized intercompany profit in inventory		12,967			3,601			30,006
Unrealized foreign currency loss		248			-			-
Stock option compensation		31,034			20,375			8,887
Tax credit carryforwards, net		36,834			36,406			15,198
Net operating losses of subsidiaries		3,480			2,809			1,800
Other		3,211			5,022			4,649
Valuation allowance related to loss carryforward and tax credits		(35,617	)		(34,487	)		(15,491	)
		97,606			78,647			126,461
Deferred tax liabilities:
Depreciation		13,839			12,872			9,209
Prepaid expenses		2,014			3,031			6,498
Unrealized foreign currency loss		-			522			161
Book basis in excess of tax basis for acquired entities		11,201			15,936			14,867
Unrealized investment gain		833			153			31
Other		202			378			254
		28,089			32,892			31,020
Net deferred tax assets	$	69,517		$	45,755		$	95,441

At December 26, 2009, the company had $36.8 million of tax credit carryover which includes $32.2 million of Taiwan surtax credit with no expiration. There is a full valuation allowance for the Taiwan surtax credits. Additionally, the Company had $3.5 million in Taiwan investment credit which will expire in 2012.