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Income Taxes | 12 Months Ended
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Sep. 28, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s (loss) income before income taxes consisted of the following:
|  | Years ended
September 28, 2019 |  | September 29, 2018 |  | September 30, 2017
Domestic |  | $ | (174.3 | ) |  | $ | (581.9 | ) |  | $ | 1,105.8 |
Foreign |  | (83.4 | ) |  | 163.3 |  |  | 124.7 |
|  | $ | (257.7 | ) |  | $ | (418.6 | ) |  | $ | 1,230.5 |
The (benefit) provision for income taxes contained the following components:
|  | Years ended
September 28, 2019 |  | September 29, 2018 |  | September 30, 2017
Federal: |  |  |  |  |  |
Current |  | $ | 142.9 |  |  | $ | 137.1 |  |  | $ | 701.1 |
Deferred |  | (189.9 | ) |  | (461.9 | ) |  | (276.9 | )
|  | (47.0 | ) |  | (324.8 | ) |  | 424.2 |
State: |  |  |  |  |  |
Current |  | 22.1 |  |  | 11.0 |  |  | 53.1 |
Deferred |  | (41.0 | ) |  | (11.3 | ) |  | (15.9 | )
|  | (18.9 | ) |  | (0.3 | ) |  | 37.2 |
Foreign: |  |  |  |  |  |
Current |  | 16.5 |  |  | 21.9 |  |  | 13.9 |
Deferred |  | (4.7 | ) |  | (4.1 | ) |  | (0.3 | )
|  | 11.8 |  |  | 17.8 |  |  | 13.6 |
|  | $ | (54.1 | ) |  | $ | (307.3 | ) |  | $ | 475.0 |
The income tax (benefit) provision differed from the tax (benefit) provision computed at the U.S. federal statutory rate due to the following:
|  | Years ended
September 28, 2019 |  | September 29, 2018 |  | September 30, 2017
Income tax (benefit) provision at federal statutory rate |  | (21.0 | )% |  | (24.5 | )% |  | 35.0 | %
Increase (decrease) in tax resulting from: |  |  |  |  |  |
Domestic production activities deduction |  | — |  |  | (3.1 | ) |  | (1.7 | )
State income taxes, net of federal benefit |  | (0.7 | ) |  | 0.7 |  |  | 2.3 |
U.S. tax on foreign earnings |  | (2.1 | ) |  | 0.1 |  |  | — |
Internal restructuring |  | (3.8 | ) |  | — |  |  | — |
Non-deductible goodwill |  | — |  |  | 39.4 |  |  | 9.2 |
Tax credits |  | (3.3 | ) |  | (1.9 | ) |  | (0.8 | )
Tax reform |  | 2.0 |  |  | (82.7 | ) |  | — |
Unrecognized tax benefits |  | (0.1 | ) |  | 1.8 |  |  | (1.4 | )
Compensation |  | 0.8 |  |  | 0.3 |  |  | (0.5 | )
Foreign rate differential |  | (5.4 | ) |  | (5.2 | ) |  | (2.6 | )
Change in deferred tax rate |  | — |  |  | 1.2 |  |  | 0.2 |
Change in valuation allowance |  | 9.5 |  |  | (0.5 | ) |  | (1.5 | )
Other |  | 3.1 |  |  | 1.0 |  |  | 0.4 |
|  | (21.0 | )% |  | (73.4 | )% |  | 38.6 | %
The Company’s effective tax rate in fiscal 2019, applied to an overall pre-tax loss resulting in a benefit, was equal to the statutory tax rate primarily due to the offsetting impacts of a discrete benefit related to an internal restructuring, earnings in jurisdictions subject to lower tax rates, reserves for uncertain tax positions and releases resulting from statute of limitations expirations and favorable audit settlements, a valuation allowance resulting from the Medical Aesthetics impairment charge, and finalizing the impact of the enactment of the Tax Cuts and Jobs Act (the "Act") in the first quarter of fiscal 2019. As of December 29, 2018, the Company completed its accounting for the tax effects of enactment of the Act, recording a benefit reduction of $5.0 million in the three months ended December 29, 2018. The Company recognized a final net benefit amount of $341.2 million related to the Act, which was included as a component of income tax expense. The Company’s effective tax rate in fiscal 2018, applied to an overall pre-tax loss resulting in a benefit, differed from the statutory rate primarily due to the favorable impact of the Act, which required the Company to remeasure its U.S. net deferred tax liabilities at a lower rate, partially offset by the unfavorable impact of the Medical Aesthetics goodwill impairment charge, substantially all of which was non-deductible. The net result of implementing the Act was a benefit of $346.2 million representing the Company’s best estimate based on its interpretation of the Act as of September 29, 2018. As of September 29, 2018, the Company was still accumulating data to finalize the underlying calculations, and the U.S. Treasury was expected to issue further guidance on the application of certain provisions of the Act. The Company's effective tax rate in fiscal 2017 differed from the statutory rate primarily due to non-deductible goodwill related to the sale of the Blood Screening business, partially offset by the release of valuation allowances for capital losses utilized against the capital gain generated on the sale of the Blood Screening business, earnings in jurisdictions subject to lower tax rates, the domestic production activities deduction benefit, the release of reserves for uncertain tax positions due to statutes of limitations expirations and audit settlements, stock compensation benefits, and federal and state tax credits. The Company uses the asset and liability method to account for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferred income taxes are recognized for the future tax consequences of differences between the tax and financial accounting bases of assets and liabilities at each reporting period. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the period in which these differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company’s significant deferred tax assets and liabilities were as follows:
|  | September 28, 2019 |  | September 29, 2018
Deferred tax assets |  |  |  |
Net operating loss carryforwards |  | $ | 34.5 |  |  | $ | 30.9 |
Capital losses |  | 6.4 |  |  | 6.5 |
Non-deductible accruals |  | 24.7 |  |  | 30.7 |
Non-deductible reserves |  | 22.7 |  |  | 22.1 |
UK intangible assets |  | 25.4 |  |  | — |
Stock-based compensation |  | 20.9 |  |  | 24.0 |
Research and other credits |  | 14.8 |  |  | 13.3 |
Nonqualified deferred compensation plan |  | 12.9 |  |  | 12.3 |
Other temporary differences |  | 17.8 |  |  | 11.5 |
|  | 180.1 |  |  | 151.3 |
Less: valuation allowance |  | (60.7 | ) |  | (25.5 | )
|  | $ | 119.4 |  |  | $ | 125.8 |
Deferred tax liabilities |  |  |  |
Depreciation and amortization |  | $ | (373.0 | ) |  | $ | (606.6 | )
Debt discounts and deferrals |  | (4.5 | ) |  | (4.5 | )
|  | $ | (377.5 | ) |  | $ | (611.1 | )
|  | $ | (258.1 | ) |  | $ | (485.3 | )
Under ASC 740, the Company can only recognize the future benefit of deferred tax assets to the extent that it is “more likely than not” that these assets will be realized. After considering all available positive and negative evidence, the Company established a valuation allowance against specifically identified deferred tax assets because it is more-likely-than-not that these assets will not be realized. In making this determination, the Company considered numerous factors including historical profitability, estimated future taxable income and the character of such income. The valuation allowance increased $35.2 million in fiscal 2019 from fiscal 2018 primarily due to the impact of the Medical Aesthetics impairment charge and tax reform partially offset by attribute expiration and valuation allowance releases. At September 28, 2019, the Company had $29.3 million, $31.1 million, and $37.6 million in gross federal, state, and foreign net operating losses, respectively, and $5.0 million, $10.4 million, and $1.2 million in federal, state, and foreign credit carryforwards, respectively. These losses and credits expire between 2020 and 2039, except for $36.8 million in losses and $3.3 million in credits that have unlimited carryforward periods. The federal, state, and foreign net operating losses exclude $4.5 million, $74.6 million, and $46.6 million, respectively, in net operating losses, that the Company expects will expire unutilized. As of September 28, 2019, the Company had $101.6 million in gross unrecognized tax benefits excluding interest, of which $87.3 million, if recognized, would reduce the Company's effective tax rate. As of September 29, 2018, the Company had $89.5 million in gross unrecognized tax benefits excluding interest, of which $79.0 million, if recognized, would have reduced the Company's effective tax rate. The $12.1 million increase in gross unrecognized tax benefits from fiscal 2018 primarily related to the impact of the Medical Aesthetics impairment charge and other current year positions, partially offset by audit settlements and the expiration of statutes of limitations. In the next twelve months it is reasonably possible that the Company will reduce its gross unrecognized tax benefits by up to $13.4 million due to expiring statutes of limitations. The Company’s unrecognized income tax benefits activity for fiscal 2019 and 2018 was as follows:
|  | 2019 |  | 2018
Balance at beginning of fiscal year |  | $ | 89.5 |  |  | $ | 90.3 |
Tax positions related to current year: |  |  |  |
Additions |  | 22.7 |  |  | 9.0 |
Reductions |  | — |  |  | — |
Tax positions related to prior years: |  |  |  |
Additions related to change in estimate |  | — |  |  | 6.6 |
Reductions |  | (4.8 | ) |  | (15.4 | )
Payments |  | — |  |  | — |
Lapses in statutes of limitations |  | (5.8 | ) |  | (1.4 | )
Acquired tax positions: |  |  |  |
Additions related to reserves acquired from acquisitions |  | — |  |  | 0.4 |
Balance as of the end of the fiscal year |  | $ | 101.6 |  |  | $ | 89.5 |
The Company’s policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense. As of September 28, 2019, and September 29, 2018, gross accrued interest was $11.1 million and $9.0 million, respectively. As of September 28, 2019, no significant penalties have been accrued. The Company and its subsidiaries are subject to various federal, state, and foreign income taxes. The Company’s U.S. Federal income tax returns are generally no longer subject to examination prior to tax year 2016; however, one federal income tax examination is ongoing for Cynosure Inc. and subsidiaries (fiscal years 2015-2017). State income tax returns are generally no longer subject to examination prior to fiscal year 2015. The Company is undergoing a tax examination in Massachusetts (fiscal years 2014-2015). The Company is undergoing a tax examination in the United Kingdom (fiscal year 2016). During fiscal 2017, the Internal Revenue Service completed its audit for fiscal years 2013 and 2014. The Company made a cash payment of $1.7 million and recorded an income tax benefit of $10.9 million, including interest, related to the reversal of unrecognized tax benefits. Transition Tax

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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