Altera (ALTR)

Provision for Income Taxes

Our effective tax rate for the three and nine months ended September 26, 2008 was 16.5%, compared with 14.0% for the three and nine months ended September 28, 2007. The increase in our effective tax rate was primarily due to the expiration of the federal research and development credit. See further discussion of the federal research and development credit in the Subsequent Events section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained herein. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

As of September 26, 2008, we had $174.5 million of unrecognized tax benefits after a payment of $18.0 million to the IRS during the three months ended September 26, 2008. For the remaining liability, we are unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority will occur.

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Provision for Income Taxes

Our effective tax rate for the three and six months ended June 27, 2008 was 16.5%, compared with 14% for the three and six months ended June 29, 2007. The increase in our effective tax rate was primarily due to the expiration of the federal research and development credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

As of June 27, 2008, we had a liability under FIN 48 for unrecognized tax benefits totaling $183.0 million, of which $17.6 million is expected to be paid in the next 12 months. For the remaining liability, we are unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority will occur.

Provision for Income Taxes

Our effective tax rate for the three months ended March 28, 2008 was 16.5%, compared with 14% for the three months ended March 30, 2007. The increase in our effective tax rate was primarily due to the expiration of the federal Research and Development Credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

As of March 28, 2008, we had a liability under FIN 48 for unrecognized tax benefits and an accrual for the payment of related interest and penalties totaling $175.1 million, of which $13.6 million is expected to be paid in the next 12 months. For the remaining liability, the company is unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority will occur.

PROVISION FOR INCOME TAXES

Our effective tax rate reflects the impact of significant amounts of our income being taxed in foreign jurisdictions at rates substantially below the U.S. statutory rate. Our effective tax rates were 14% for 2007, 10% for 2006, and 22% for 2005. The increase in our effective tax rate in 2007 compared to 2006 was due to a one time tax benefit in 2006 for closure of a foreign tax examination, a change in the geographical mix of income, and a decrease in tax-exempt income as a percentage of total income in 2007. Our 2005 effective tax rate also included an additional income tax provision related to the repatriation of foreign earnings under the American Jobs Creation Act of 2004 (“AJCA”), partially offset by an income tax benefit from the settlement of federal and California income tax audits.

PROVISION FOR INCOME TAXES

FACE="Times New Roman" SIZE="2">Our effective tax rate reflects the impact of significant amounts of our income being taxed in foreign jurisdictions at rates substantially below the U.S. statutory rate. Our effective tax rates were 14% for 2007, 10%
for 2006, and 22% for 2005. The increase in our effective tax rate in 2007 compared to 2006 was due to a one time tax benefit in 2006 for closure of a foreign tax examination, a change in the geographical mix of income, and a decrease in tax-exempt
income as a percentage of total income in 2007. Our 2005 effective tax rate also included an additional income tax provision related to the repatriation of foreign earnings under the American Jobs Creation Act of 2004 (“AJCA”), partially
offset by an income tax benefit from the settlement of federal and California income tax audits.

Provision for Income Taxes

Our effective tax rate for the three and nine months ended September 28, 2007 was 14%, compared with 15% for the three and nine months ended September 29, 2006. The decrease in our effective tax rate was primarily due to the reinstatement in December 2006 of the federal Research & Development (“R&D”) tax credit. In addition, our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

We adopted the provisions of Financial Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”) on December 30, 2006, the first day of our 2007 fiscal year. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of income or statement of cash flows. The effect of adoption of FIN 48 on our condensed consolidated balance sheet as at September 28, 2007 is summarized in Note 9 – Income Taxes.

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Provision for Income Taxes

Our effective tax rate for the three and six months ended June 29, 2007 was 14%, compared with 15% for the three and six months ended June 30, 2006. The decrease in our effective tax rate was primarily due to the reinstatement in December 2006 of the federal R&D tax credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

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We adopted the provisions of FIN 48 on December 30, 2006, the first day of our 2007 fiscal year. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of income. The effect of adoption of FIN 48 on our condensed consolidate balance sheet as at June 29, 2007 is summarized in Note 9 – Income Taxes.

Provision for Income Taxes

Our effective tax rate for the three months ended March 30, 2007 was 14%, compared with 15% for the three months ended March 31, 2006. The decrease in our effective tax rate was primarily due to the reinstatement in December 2006 of the federal R&D tax credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

We adopted the provisions of FIN 48 on December 30, 2006, the first day of our 2007 fiscal year. The adoption of FIN 48 did not have any impact on our condensed consolidated statement of income. The effect of adoption of FIN 48 on our condensed consolidate balance sheet as at March 30, 2007 is summarized in Note 9 – Income Taxes.

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Provision for Income Taxes

Our effective tax rate for the three and nine months ended September 29, 2006 was 15%, compared with 21% and 23% for the three months and nine months ended September 30, 2005. The decrease in our effective tax rate was primarily due to the impact associated with expensing predominantly U.S. related stock-based compensation in accordance with SFAS 123(R), a favorable change in the geographical mix of income, and an increase in tax-exempt income. This decrease was partially offset due to the expiration of the Research and Development Tax Credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

Our adoption of SFAS 123(R) for the nine months ended September 29, 2006 has had a favorable impact on our 2006 effective tax rate of approximately two percentage points. SFAS 123(R) may have a favorable or unfavorable impact on our effective tax rate in the future.

Provision for Income Taxes

Our effective tax rate for the three months ended March 31, 2006 was 15%, compared with 20% for the three months ended April 1, 2005. The decrease in our effective tax rate was primarily due to the impact associated with expensing predominantly U.S. related stock-based compensation in accordance with SFAS 123(R), a favorable change in the geographical mix of income, and an increase in tax-exempt income. This decrease was partially offset due to the expiration of the Research and Development Tax Credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

Our adoption of SFAS 123(R) in the quarter ended March 31, 2006 has had a favorable impact on our 2006 effective tax rate of approximately two percentage points. SFAS 123(R) may have a favorable or unfavorable impact on our effective tax rate in the future.

Provision for Income Taxes

Our effective tax rate for the three and six months ended June 30, 2006 was 15%, compared with 26% and 23% for the three months and six months ended July 1, 2005. The decrease in our effective tax rate was

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primarily due to the impact associated with expensing predominantly U.S. related stock-based compensation in accordance with SFAS 123(R), a favorable change in the geographical mix of income, and an increase in tax-exempt income. This decrease was partially offset due to the expiration of the Research and Development Tax Credit. Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate.

Our adoption of SFAS 123(R) in the quarter ended June 30, 2006 has had a favorable impact on our 2006 effective tax rate of approximately two percentage points. SFAS 123(R) may have a favorable or unfavorable impact on our effective tax rate in the future.

PROVISION FOR INCOME TAXES

Our effective tax rate reflects the impact of significant amounts of our earnings being taxed in foreign jurisdictions at rates below the U.S. statutory rate. Our effective tax rates were 22% for 2005, 17% for 2004 (as restated), and 28% for 2003 (as restated). The results of the restatement had no impact to our effective tax rate for 2005, an insignificant impact for 2004, and an approximate one percentage point increase for 2003. The increase in our effective tax rate in 2005 compared to 2004 is due to an additional provision of $24.6 million related to the repatriation during 2005 of $535.1 million of foreign earnings of which $500 million represented an extraordinary dividend under the American Jobs Creation Act of 2004, partially offset by an income tax benefit of $12.6 million arising primarily from the settlement of federal and California income tax audits. Our 2004 effective tax rate also included an income tax benefit of $17.1 million, primarily related to a tax settlement with the Hong Kong Inland Revenue Department, which contributed to a 5 percentage point rate decrease in our effective tax rate in 2004.

Our adoption of SFAS 123R in the quarter ending March 31, 2006 is currently expected to have a favorable impact on our 2006 effective tax rate and may have a favorable or unfavorable impact on our effective tax rate in future years.

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Provision for Income Taxes

Our effective tax rates were 17% for 2004, 27% for 2003, and 26% for 2002. An income tax benefit of $17.1 million, primarily related to a tax settlement with the Hong Kong Inland Revenue Department, contributed to a 5 percentage point rate decrease in our effective tax rate in 2004 from 2003. The remaining decrease in our effective tax rate was due to a favorable change in the geographic mix of income, partially offset by smaller benefits from tax-exempt income and research and development tax credits.

The increase in the effective tax rate in 2003 over 2002 primarily resulted from the decreased benefit of tax-exempt income and research and development tax credits, which was partially offset by a favorable change in the geographic mix of income.