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Income Taxes
 3 Months Ended
Apr. 02, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
At the end of each interim reporting period, the Company makes an estimate of its annual effective income tax rate. Tax expense in interim periods is calculated at the estimated annual effective tax rate plus or minus the tax effects of items of income and expense that are discrete to the period. The estimate used in providing for income taxes on a year-to-date basis may change in subsequent interim periods.
In January 2022, the Company completed an intra-group transfer of certain intellectual property ("IP") rights from non-U.S. wholly-owned subsidiaries of the Company to the United States in order to better align with current and future business operations. The transfer resulted in a step-up in tax basis driven by the fair value of the transferred IP rights, resulting in a one-time net deferred benefit of $77 million in the quarter ended April 2, 2022. The determination of the fair value involves judgment on future revenue growth, operating margins and discount rates. The Company expects to realize the net deferred tax asset recorded as a result of the IP transfer and will periodically assess such realizability. The tax-deductible amortization related to the transferred IP rights will be recognized over a 15-year period.
The following table provides details of income taxes:
Three Months Ended
April 2, 2022April 3, 2021
Net earnings before income taxes$219 $289 
Income tax expense (benefit)(49)44 
Effective tax rate(22)%15 %
The effective tax rate for the three months ended April 2, 2022 of (22)% was lower than the U.S. federal statutory tax rate of 21% primarily due to a net deferred tax benefit as a result of an intra-group transfer of certain IP rights (as described above), a higher foreign derived intangible income deduction and the excess tax benefits of share-based compensation.
The effective tax rate for the three months ended April 3, 2021 of 15% was lower than the U.S. federal statutory tax rate of 21% due to the excess tax benefits on share-based compensation, offset by state tax expense.
The effective tax rate for the three months ended April 2, 2022 of (22)% was lower than the effective tax rate for the three months ended April 3, 2021 of 15%, primarily due to a net deferred tax benefit as a result of an intra-group transfer of certain IP rights (as described above) and a higher tax rate benefit from the foreign derived intangible income deduction and share-based compensation in 2022 compared to 2021