NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) allowance on deferred tax assets will be reversed and up to a $39.0 million income tax benefit, and up to a $0.4 million reduction to goodwill may be recognized. The Company will need to generate $180.2 million of future United States federal taxable income to utilize our United States deferred tax assets as of September 30, 2011. Based on the Company’s evaluation of the realizability of its United States net deferred tax assets and other future deductible items through the generation of future taxable income, during fiscal year 2010 the Company recognized a net decrease in its valuation allowance of $1.0 million. The change in the valuation allowance resulted in a tax expense of $2.8 million and an increase to additional paid-in capital of $3.8 million. On February 20, 2009, the California governor signed into law tax legislation that permitted California taxpayers to apportion their income using a single sales factor apportionment formula for tax years beginning on or after January 1, 2011. As a result of this legislation, the Company recognized a net decrease to its deferred tax assets as of September 30, 2011 of $0.8 million, resulting in a corresponding tax expense. The Mexican presidential decree allowing Mexican Maquiladoras to calculate their tax using an income based method was set to expire on December 31, 2011. Accordingly, the Company would then be required to use the alternative Flat Tax Regime to compute its annual tax. This resulted in a decrease in the Company’s deferred tax assets of $1.1 million and a corresponding tax expense. After September 30, 2011, but prior to the release of the Company’s financial statement, the Mexican Government extended the special tax incentives for Mexican Maquiladoras. As a result, the Company expects to recognize an increase to its deferred tax assets and a corresponding tax benefit in the first quarter of fiscal year 2012. Deferred tax assets are recognized for foreign operations when management believes it is more likely than not that the deferred tax assets will be recovered during the carry forward period. The Company will continue to assess its valuation allowance in future periods. As of September 30, 2011, the Company has United States federal net operating loss carry forwards of approximately $60.5 million, including $43.3 million related to the acquisition of SiGe, which will expire at various dates through 2030 and aggregate state net operating loss carry forwards of approximately $1.3 million, which will expire at various dates through 2020. The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions. The Company also has United States federal and state income tax credit carry forwards of approximately $80.1 million, of which $23.0 million of federal income tax credit carry forwards have not been recorded as a deferred tax asset. The United States federal tax credits expire at various dates through 2031. The state tax credits relate primarily to California research tax credits which can be carried forward indefinitely. The Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities will increase the Company’s earnings attributable to foreign jurisdictions. As of September 30, 2011, no provision has been made for United States federal, state, or additional foreign income taxes related to approximately $147.0 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested. The Company’s gross unrecognized tax benefits totaled $32.1 million and $19.9 million as of September 30, 2011 and October 1, 2010, respectively. Of the total unrecognized tax benefits at September 30, 2011, $19.7 million would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance and certain positions which were required to be capitalized. There are no positions which the Company anticipates could change within the next twelve months. Page 109 Skyworks / Annual Report 2011