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Income Taxes
 12 Months Ended
Jan. 01, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before income taxes included the following (in millions):
202220212020
Domestic operations$490.3 $108.0 $289.5 
Foreign operations417.8 425.8 180.2 
Total income (loss) before income taxes$908.1 $533.8 $469.7 

The provision for income taxes included the following (in millions):
202220212020
Current provision (benefit)   
Federal$47.2 $43.0 $25.3 
State14.8 10.8 7.0 
Foreign47.8 57.5 39.1 
Total current provision (benefit)109.8 111.3 71.4 
Deferred provision (benefit)   
Federal(39.0)(39.7)(0.5)
State0.3 (0.1)2.3 
Foreign48.1 17.0 (5.4)
Total deferred provision (benefit)9.4 (22.8)(3.6)
Provision (benefit) for income taxes$119.2 $88.5 $67.8 
The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:
202220212020
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
State and local taxes, net of federal benefit1.7 1.8 2.0 
Research and development tax credits(1.8)(3.4)(3.4)
Investment tax credits(0.5)(1.1)(1.0)
Foreign rate differential1.5 1.4 0.6 
Net accruals (reversals) for unrecognized tax benefits (7.9)(2.4)0.7 
Stock-based compensation(1.1)(2.5)(4.5)
U.S. export sales(2.0)(1.3)(2.5)
Acquisition-related costs— 1.7 — 
Other2.2 1.4 1.5 
Effective income tax rate13.1%16.6 %14.4 %
Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse.
The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows (in millions):
Deferred income tax assets:20222021
Long-term:  
Accrued liabilities$32.0 $52.6 
Inventory valuation30.3 41.5 
Accrued vacation8.3 9.6 
Deferred compensation and other benefit plans12.7 39.1 
Postretirement benefits other than pensions1.0 1.7 
Operating lease liabilities29.9 38.7 
Capitalization of research and development 70.8 34.1 
Tax credit and net operating loss carryforward44.6 47.4 
    Other 32.6 — 
Valuation allowance(16.1)(12.7)
Total deferred income tax assets246.1 252.0 
Deferred income tax liabilities:  
Long-term:  
Intangible amortization646.9 751.5 
Property, plant and equipment differences31.9 37.8 
Operating lease right-of-use assets 26.7 35.0 
Unremitted earnings of foreign subsidiaries3.1 15.9 
Other 12.9 7.9 
Total deferred income tax liabilities721.5 848.1 
Net deferred income tax liabilities $475.4 $596.1 
The Company is not permanently reinvested with respect to unremitted earnings of most of its foreign subsidiaries. The Company is subject to U.S. income tax on substantially all of these foreign earnings, while any remaining foreign earnings are eligible for potential U.S. tax deductions. As of January 1, 2023, the incremental tax cost to repatriate these earnings was not material.
The Company continues to make an indefinite reinvestment assertion on its material foreign subsidiaries in Canada, as the unremitted earnings of the Company’s Canadian foreign subsidiaries held for indefinite reinvestment are used to finance Canadian operations and investments. The Company estimates that future cash generation from non-Canadian operations will be sufficient to meet future domestic cash requirements. Determination of the unrecognized deferred tax liability for unremitted Canadian earnings is not practicable due to uncertainty and overall complexity of the potential calculations.
In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies. Based on a review of such information, management believes that it is possible that some portion of deferred tax assets will not be realized as a future benefit and therefore has recorded a valuation allowance. In 2022, the valuation allowance for deferred tax assets increased by $3.4 million in 2022.
At January 1, 2023, the Company had approximately $45.1 million of net operating loss carryforward primarily from the Company’s entities in Denmark, France, the Netherlands and the United Kingdom, of which $36.3 million have no expiration dates and $8.8 million have expiration dates ranging from 2023 to 2040. The Company had Canadian capital loss carryforward in the amount of $3.9 million which has no expiration date. Also, the Company had aggregate Canadian federal and provincial investment tax credits of $13.2 million, which have expiration dates ranging from 2030 to 2042. The Company had Spanish federal research and development credit carryforward in the amount of $0.3 million, which have expiration dates ranging from 2025 to 2028. In addition, the Company had domestic federal and state net operating loss carryforward of $24.7 million and $162.3 million, respectively. Generally, federal net operating loss carryforward amounts are limited in their use by earnings of certain acquired subsidiaries. Of the $24.7 million federal net operation loss carryforward, $15.3 million have no expiration dates and $9.4 million have expiration dates ranging from 2024 to 2037. The state net operating loss carryforward amounts have expiration dates ranging from 2023 to 2043. Finally, the Company had state tax credits of $13.9 million, of which $9.4 million have no expiration date and $4.5 million have expiration dates ranging from 2023 to 2035.
Unrecognized tax benefits (in millions):202220212020
Beginning of year$402.0 $32.3 $24.5 
Increase due to FLIR acquisition— 413.8 — 
Increase for tax positions taken during the current period2.7 6.3 9.4 
Increase in prior year tax positions0.2 2.5 5.1 
Reduction related to settlements with taxing authorities(223.3)(1.6)(1.9)
Reduction related to lapse of the statute of limitations(26.4)(20.7)(4.9)
Impact of exchange rate changes7.6 (30.6)0.1 
End of year$162.8 $402.0 $32.3 
In the next 12 months, the Company anticipates the total unrecognized tax benefit for various federal, state and foreign tax items may be reduced by $89.1 million due to the expiration of statutes of limitation for various federal, state and foreign tax issues.
Teledyne recognized net tax benefits and expense for interest and penalties related to unrecognized tax benefits within the provision for income taxes in our statements of operations of $12.2 million of expense, $2.4 million of expense and $0.1 million of expense, for 2022, 2021 and 2020, respectively. Interest and penalties in the amount of $45.6 million, $160.8 million and $1.2 million were recognized in the 2022, 2021 and 2020 statement of financial position, respectively. In 2021, interest and penalties of $157.0 million were accrued as a result of the acquisition of FLIR. Substantially all of the unrecognized tax benefits as of January 1, 2023, if recognized, would affect our effective tax rate.
Current accrued liabilities on the consolidated balance sheet as of January 2, 2022 included unrecognized tax benefits, including accrued interest and penalties, of $341.0 million. Teledyne paid $296.4 million related to this accrued liability balance on February 2, 2022.
Teledyne files income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. The Company has substantially concluded on all U.S. federal income tax matters for all years through 2011, Canadian income tax matters for all years through 2012, Swedish income tax matters for all years through 2016, Norwegian income tax matters for all years through 2017, Belgian income tax matters for all years through 2019, French income tax matters for all years through 2019 and United Kingdom income tax matters for all years through 2014.
Cash payments for federal, foreign and state income taxes were $212.4 million for 2022, which are net of $20.1 million in tax refunds. Cash payments for federal, foreign and state income taxes were $83.6 million for 2021, which are net of $22.4 million in tax refunds. Cash payments for federal, foreign and state income taxes were $74.5 million for 2020, which are net of $8.1 million in tax refunds.