XML 44 R15.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
 12 Months Ended
Oct. 01, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table presents the components of our consolidated income taxes for continuing operations for years ended October 1, 2021, October 2, 2020 and September 27, 2019 (in thousands):
 For the Years Ended
 October 1, 2021October 2, 2020September 27, 2019
Current income tax (benefit) expense from continuing operations:   
Federal$91,313 $(37,030)$25,549 
State30,886 (5,021)6,639 
Foreign38,959 41,616 57,156 
Total current tax expense from continuing operations161,158 (435)89,344 
Deferred income tax expense (benefit) from continuing operations:   
Federal35,109 53,485 6,607 
State21,826 7,133 20,408 
Foreign56,688 (4,863)(79,405)
Total deferred tax expense (benefit) from continuing operations113,623 55,755 (52,390)
Consolidated income tax expense from continuing operations$274,781 $55,320 $36,954 
Deferred taxes reflect the tax effects of temporary differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The following table presents the components of our net deferred tax (liabilities) assets at October 1, 2021 and October 2, 2020 (in thousands):
 October 1, 2021October 2, 2020
Deferred tax assets:  
Obligations relating to:  
Defined benefit pension plans$9,702 $55,949 
Other employee benefit plans156,931 132,613 
Net operating losses197,929 197,987 
Foreign tax credit87,689 87,259 
Contract revenues and costs81,633 68,870 
Investments— 65,235 
Lease liability155,064 154,979 
Deferred interest9,988 11,410 
Valuation allowance(188,662)(140,578)
Gross deferred tax assets510,274 633,724 
Deferred tax liabilities:  
Depreciation and amortization(436,324)(240,097)
Lease right of use asset(93,338)(89,824)
Unremitted earnings(7,111)(17,295)
Partnership investment(72,560)(66,082)
Other, net(12,128)(12,745)
Gross deferred tax liabilities(621,461)(426,043)
Net deferred tax (liabilities) assets$(111,187)$207,681 
    
Certain amounts have been reclassified to conform to current year presentation.
Tax law changes were enacted in the United Kingdom that, among other provisions, will increase the corporate tax rate to 25% from 19% effective April 1, 2023. The rate change resulted in an increase to our net deferred tax liabilities of $25.6 million and a corresponding increase to income tax expense for the year ended October 1, 2021. Our income tax expense in the United Kingdom will be based on the new rate beginning in April 2023.
A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. The valuation allowance was $188.7 million at October 1, 2021 and $140.6 million at October 2, 2020. Of the $48.1 million increase in the valuation allowance, $27.4 million relates to a change in judgment on the realizability of domestic deferred tax assets which are capital in nature with no expected capital gains to be able to realize them, $11.7 million for a change in judgment on the realizability on state net operating losses, a change of $4.6 million from certain deferred tax assets acquired in the PA Consulting acquisition which have been determined to not be realizable, $3.5 million relates to a tax rate change in the U.K., and $0.9 million attributable to current year activity.
At October 1, 2021 and October 2, 2020, the domestic and international net operating loss (NOL) carryforwards totaled $760.4 million and $783.9 million, resulting in an NOL deferred tax asset of $197.9 million and $198.0 million, respectively. The Company's net operating losses have various expiration periods between 2021 and indefinite periods. At October 1, 2021, the Company has foreign tax credit carryforwards of $87.7 million, which has a full valuation allowance established, expiring between 2022 and 2031.
The following table presents the income tax benefits from continuing operations realized from the exercise of non-qualified stock options and disqualifying dispositions of stock sold under our employee stock purchase plans for the years ended October 1, 2021, October 2, 2020 and September 27, 2019 (in millions):
For the Years Ended
October 1, 2021October 2, 2020September 27, 2019
$9.9 $10.2 $7.9 
The following table reconciles total income tax expense from continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense for continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended October 1, 2021, October 2, 2020 and September 27, 2019 (dollars in thousands):
 For the Years Ended
 October 1, 2021%October 2, 2020%September 27, 2019%
Statutory amount$146,078 21.0 %$92,652 21.0 %$73,701 21.0 %
State taxes, net of the federal benefit14,5642.1 %7,254 1.6 %10,183 2.9 %
Exclusion of tax on non-controlling interests(7,999)(1.1)%(6,622)(1.5)%(4,839)(1.4)%
Foreign:    
Difference in tax rates of foreign operations3,6840.5 %(6,267)(1.4)%1,083 0.3 %
Expense/(benefit) from foreign valuation allowance change2,1480.3 %(16,861)(3.8)%(29,125)(8.3)%
Nondeductible compensation48,7277.0 %— — %— — %
U.S. tax cost (benefit) of foreign operations35,228 5.1 %42,992 9.7 %(17,760)(5.1)%
Tax differential on foreign earnings89,787 12.9 %19,864 4.5 %(45,802)(13.1)%
Foreign tax credits(25,230)(3.6)%(26,471)(6.0)%(15,682)(4.5)%
Tax Rate Change25,588 3.7 %(6,811)(1.5)%— — %
Tax reform—— %— — %36,674 10.4 %
Valuation allowance38,9285.6 %— — %(207)(0.1)%
Uncertain tax positions9780.1 %(11,338)(2.6)%(6,883)(2.0)%
Other items:
Energy efficient commercial buildings deduction(3,760)(0.5)%(7,267)(1.6)%(2,957)(0.8)%
Disallowed officer compensation6,6891.0 %5,081 1.2 %5,568 1.6 %
Stock compensation(9,946)(1.4)%(10,234)(2.3)%(7,864)(2.2)%
Other items – net(896)(0.1)%(788)(0.2)%(4,938)(1.4)%
Total other items(7,913)(1.1)%(13,208)(3.0)%(10,191)(2.8)%
Taxes on income from continuing operations$274,781 39.5 %$55,320 12.5 %$36,954 10.5 %
The following table presents income tax payments, net made during the years ended October 1, 2021, October 2, 2020 and September 27, 2019 (in millions):
October 1, 2021October 2, 2020September 27, 2019
$75.6 $39.8 $291.7 
The following table presents the components of our consolidated earnings from continuing operations before taxes for the years ended October 1, 2021, October 2, 2020 and September 27, 2019 (in thousands):
 For the Years Ended
 October 1, 2021October 2, 2020September 27, 2019
United States earnings$634,820 $208,302 $225,898 
Foreign earnings60,782 232,901 125,061 
 $695,602 $441,203 $350,959 

During the first and second quarters of fiscal year ended 2021, Jacobs management asserted that $4.4 million of undistributed earnings in Canada and $7.7 million of undistributed earnings in India be permanently reinvested. Management considered the additional working capital needs along with the future business operations in Canada and India in determining the permanent reinvestment assertion.
The Company accounts for unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. It accounts for interest and penalties on unrecognized tax benefits as interest and penalties reported above the line (i.e., not as part of income tax expense). The Company’s liability for gross unrecognized tax benefits was $91.9 million and $93.4 million at October 1, 2021 and October 2, 2020, respectively, after ASU 2013-11 netting of $21.7 million and $9.1 million, respectively. If recognized, $84.7 million would affect the Company’s consolidated effective income tax rate. The Company had $41.6 million and $40.4 million in accrued interest and penalties at October 1, 2021 and October 2, 2020, respectively. The Company estimates that, within twelve months, we may realize a decrease in our uncertain tax positions of approximately $5.5 million as a result of concluding various tax audits and closing tax years, as well as an estimated decrease of $15.4 million related to the filing of an amended return which would remove the uncertain tax position from the balance sheet. As of October 1, 2021, the Company’s U.S. federal income tax returns for tax years 2013 and forward remain subject to examination.
The following table presents the reconciliation of the beginning and ending amount of unrecognized tax benefits for both continuing and discontinued operations, with PA Consulting related impacts added and with ECR-sale related impacts removed in the Acquisitions/Divestitures row, for the years ended October 1, 2021, October 2, 2020 and September 27, 2019 (in thousands):
 For the Years Ended
 October 1, 2021October 2, 2020September 27, 2019
Balance, beginning of year$102,484 $104,355 $179,140 
Acquisitions/Divestitures7,639 — (31,004)
Additions based on tax positions related to the current year7,088 1,064 7,455 
Additions for tax positions of prior years1,711 7,472 1,994 
Reductions for tax positions of prior years(4,851)(6,695)(49,849)
Settlement(438)(3,712)(3,381)
Balance, end of year$113,633 $102,484 $104,355 
On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting. On November 24, 2020, the Company completed the acquisition of Buffalo Group. On March 6, 2020, the Company completed the acquisition of John Wood Group's nuclear business and on June 12, 2019, the Company completed the acquisition of KeyW. For income tax purposes, the PA Consulting, John Wood Group's nuclear business and KeyW transactions were accounted for as stock purchases, while the Buffalo Group transaction was structured as an asset purchase. As a result of the acquisitions, the Company adjusted its U.S. GAAP opening balance sheet of PA Consulting, Buffalo Group, John Wood Group and KeyW to reflect estimates of the fair value of the net assets acquired. For income tax purposes, the tax attributes and basis of net assets acquired carryover without any step-up to fair value in the transactions structured as a stock purchase. However, in the Buffalo Group transaction, the basis of the net assets acquired were stepped up to fair value, as the sale was treated as a purchase of assets. For PA Consulting and Buffalo Group, the Company has made preliminary estimates and recorded deferred taxes associated with the purchase accounting. It is expected that the Company will make adjustments to the purchase accounting over the relevant measurement period as allowed by ASC 805. For John Wood Group's nuclear business and KeyW, the Company completed its purchase accounting in the current and prior fiscal years, respectively.