|9 Months Ended|
Sep. 29, 2018
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
During the three and nine months ended September 29, 2018, the Company determined that a revised state filing position could be taken which would reduce the taxable income apportioned for certain state income tax purposes. The Company concluded that amended state income tax returns would be filed for the open tax years of 2014 through 2017 to reflect this revised tax position and claim the associated tax benefits. Due to the revised filing position, the associated deferred tax liabilities have been revalued as well. Accordingly, the Company has recorded a discrete tax benefit of $4.0 million (net of a $1.7 million uncertain tax position reserve) related to these items in three and nine month periods ended September 29, 2018. The Company has also reflected this filing position in calculating its 2018 tax provision.
The effective tax rates were approximately (9.1)% and 29.9% for the three months ended and 6.5% and 27.0% for the nine months ended September 29, 2018 and September 30, 2017, respectively. In addition to the adjustments described above, the 2018 tax rate was favorably impacted by a reduction to the provisional income tax on the deemed repatriation of foreign earnings and profits of approximately $0.4 million which was recognized as a discrete item during the period. Absent these discrete adjustments, the tax rate for the three and nine months ended September 29, 2018 would have been 18.5% and 19.3% respectively. Finally, the 2018 tax rate was favorably impacted by the federal research and development tax credit, the impact of which was partially offset by state tax expense.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a 21% rate, effective January 1, 2018.
While the Tax Cuts and Jobs Act provides for a territorial tax system, beginning in 2018, it includes the foreign-derived intangible income (“FDII”) and global intangible low-taxed income (“GILTI”) provisions. The Company elected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The GILTI tax expense resulted from required allocations of interest expense to the GILTI income, which created a U.S. foreign tax credit limitation. The FDII provisions allow for a deduction equal to a percentage of the foreign-derived intangible income of a domestic corporation. As a result of these provisions, net, the Company’s effective tax rate decreased approximately 0.3% and increased approximately 0.2% for the six months and three months ended September 29, 2018, respectively.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. The Company recognized provisional tax impacts related to the deemed repatriated earnings and the revaluation of deferred tax assets and liabilities in its consolidated financial statements for the year ended December 31, 2017. During the six months and three months ended September 29, 2018, the Company did not make any adjustments to its provisional amounts included in its consolidated financial statements for the year ended December 31, 2017. During the three and nine months ended September 29, 2018, the Company made an adjustment to its provisional amounts included in its consolidated financial statements for the year ended December 31, 2017 resulting in a benefit of approximately $0.4 million. The Company expects that there could be more changes in interpretations and assumptions made by the Company or additional regulatory guidance issued that would further adjust the provisional tax amounts. As such, the accounting for the income tax effects of the Act are provisional as of September 29, 2018. The accounting will be completed in the fourth quarter of 2018.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef