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Income Taxes | 6 Months Ended
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Jul. 01, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The U.S. government enacted tax legislation commonly known as the U.S. Tax Cuts and Jobs Act of 2017 on December 22, 2017 (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including but not limited to, a reduction to the U.S. federal corporate income tax rate from 35% to 21%; a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”); eliminating the corporate alternative minimum tax (AMT) and changing realization of AMT credits; changing rules related to uses and limitations of net operating loss (NOL) carryforwards created in tax years after December 31, 2017; changes to the limitations on available interest expense deductions; and changes to other existing deductions and business-related exclusions. The SEC issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act” (“SAB 118”), which provides guidance on the accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date to complete the accounting under ASC 740, “Income Taxes.” The Company’s accounting for the income tax effects of the Tax Act is incomplete. In accordance with SAB 118, the Company was able to make reasonable estimates on certain effects of the Tax Act reflected in the financial statements as of December 31, 2017. There have been no material changes to the provisional amounts as disclosed in the 2017 Form 10-K. We are continuing to evaluate the estimates used to record and disclose the effects of the Tax Act. The Tax Act subjects a U.S. parent to the base erosion minimum tax (“BEAT”) and a current tax on its global intangible low-taxed income (“GILTI”). The Company has elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred. The Company estimates that the effect from the BEAT and GILTI taxes on its effective tax rate will not be material. A reconciliation of the income tax provision from continuing operations computed by applying the statutory federal income tax rate of 21% to loss from continuing operations before income taxes to the income tax provision for the three and six months ended July 1, 2018, and applying the statutory federal income tax rate of 35% to loss from continuing operations before income taxes to the income tax provision for the three and six months ended June 25, 2017 was as follows (in millions):
| For the Three Months Ended |  | For the Six Months Ended
| July 1, 2018 |  | June 25, 2017 |  | July 1, 2018 |  | June 25, 2017
Income tax benefit at federal statutory rate | $ | (0.8 | ) |  | $ | (2.0 | ) |  | $ | (0.3 | ) |  | $ | (5.0 | )
State and foreign taxes, net of federal tax benefit and valuation allowance | (0.1 | ) |  | 0.2 |  |  | 0.1 |  |  | 0.4 |
GILTI | (0.3 | ) |  | — |  |  | (0.2 | ) |  | — |
Nondeductible expenses and other | (0.3 | ) |  | 0.6 |  |  | (0.2 | ) |  | 1.0 |
Impact of deferred tax liabilities for indefinite-lived assets | (0.8 | ) |  | 1.6 |  |  | (0.4 | ) |  | 2.7 |
Increase (decrease) in reserves for uncertain tax positions | 1.1 |  |  | (0.1 | ) |  | 1.4 |  |  | — |
Increase in federal valuation allowance | 1.3 |  |  | 1.0 |  |  | 0.6 |  |  | 3.6 |
Total income tax provision | $ | 0.1 |  |  | $ | 1.3 |  |  | $ | 1.0 |  |  | $ | 2.7 |
In assessing the Company’s ability to realize deferred tax assets, management considers, on a periodic basis, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As such, management has determined that it is appropriate to maintain a full valuation allowance against the Company’s U.S. federal, combined state and certain foreign deferred tax assets, with the exception of an amount equal to its deferred tax liabilities, which can be expected to reverse over a definite life. Federal and state income tax laws impose restrictions on the utilization of net operating losses (“NOLs”) and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”). In general, an ownership change occurs when shareholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOLs or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any three-year period. The annual base Section 382 limitation is calculated by multiplying the loss corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the Internal Revenue Service in the month of the ownership change or the two preceding months. This base limitation is subject to adjustments, including an increase for built-in gains recognized in the five-year period after the ownership change. In March 2010, an “ownership change” occurred that will limit the utilization of NOL carryforwards. In July 2011, another “ownership change” occurred. The March 2010 ownership change limitation is more restrictive. In prior years, the Company acquired corporations with NOL carryforwards at the date of acquisition (“Acquired NOLs”). The Acquired NOLs are subject to separate limitations that may further restrict the use of Acquired NOLs. As a result, the Company’s federal annual utilization of NOL carryforwards was limited to $27.0 million a year for the five years succeeding the March 2010 ownership change and $11.6 million for each year thereafter subject to separate limitations for Acquired NOLs. If the entire limitation amount is not utilized in a year, the excess can be carried forward and utilized in future years. For the six months ended July 1, 2018, such limitations did not impact the income tax provision, since the amount of taxable income did not exceed the annual limitation amount. However, future equity offerings or acquisitions that have equity as a component of the purchase price could also cause an “ownership change.” If and when any other “ownership change” occurs, utilization of the NOLs or other tax attributes may be further limited. As discussed elsewhere, deferred tax assets relating to the NOLs and credit carryforwards are offset by a full valuation allowance. In addition, utilization of state tax loss carryforwards is dependent upon sufficient taxable income apportioned to the states. The Company is subject to taxation in the U.S. and various state and foreign tax jurisdictions. The Company’s tax years for 2000 and later are subject to examination by the U.S. and state tax authorities due to the existence of the NOL carryforwards. Generally, the Company’s tax years for 2002 and later are subject to examination by various foreign tax authorities as well. As of December 31, 2017, the Company had $14.0 million of unrecognized tax benefits that, if recognized, would impact the Company’s effective income tax rate for continuing operations, subject to possible offset by an increase in the deferred tax asset valuation allowance. During the six months ended July 1, 2018, unrecognized tax benefits increased by $1.0 million relating to various current year positions. As of December 31, 2017, the Company had $1.6 million of unrecognized tax benefits related to discontinued operations. During the six months ended July 1, 2018, there was a decrease of $1.6 million in unrecognized tax benefits related to discontinued operations due to the disposition of the Company’s PSS division. In connection with the Company’s disposition of the PSS division, the Company entered into an agreement to indemnify the Buyer for any pre-acquisition tax liabilities. As a result of this arrangement, the Company recorded amounts that have historically been classified as unrecognized tax benefits into other long term liabilities. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. For the six months ended July 1, 2018 and June 25, 2017, a $0.4 million expense and $0.2 million expense, respectively, were recorded related to interest and penalties related to unrecognized tax benefits. For the six months ended July 1, 2018, there was a decrease of $0.8 million for interest and penalties removed as a result of the disposition of PSS. For the six months ended June 25, 2017, there was no material benefit recorded related to the removal of interest and penalties. The Company believes that it is reasonably possible that as much as $0.4 million of the liabilities for uncertain tax positions will expire within twelve months of July 1, 2018 due to the expiration of various applicable statutes of limitation.

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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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