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Income Taxes | 12 Months Ended
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Dec. 29, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In December 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted, which included a number of changes to previous U.S. tax laws that impacted the Company, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. Effective January 1, 2018, the TCJA requires the acceleration of certain types of revenue for tax purposes. The new rules prohibit the Company from deferring revenue on unbilled accounts receivable later than when the amounts are recognized as revenue for book purposes. This change impacts several accounting methods previously used by the Company and is expected to result in an acceleration of taxability of such revenue as compared with prior U.S. tax laws. Additionally, future interest deductions of the Company will be limited to 30% of tax adjusted EBITDA through 2021. Additionally, effective January 1, 2018, the TCJA imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder each year. The computation of GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. The Company has made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. The components of income (loss) from continuing operations before income taxes are comprised of the following (in millions):
| December 29, 2019 |  | December 30, 2018 |  | December 31, 2017
Domestic | $ | 6.8 |  |  | $ | 2.2 |  |  | $ | (60.5 | )
Foreign | 8.9 |  |  | 6.5 |  |  | 3.4 |
Total | $ | 15.7 |  |  | $ | 8.7 |  |  | $ | (57.1 | )
The provision (benefit) for income taxes from continuing operations are comprised of the following (in millions):
| Year Ended
| December 29, 2019 |  | December 30, 2018 |  | December 31, 2017
Federal income taxes: |  |  |  |  |
Current | $ | (0.2 | ) |  | $ | (0.4 | ) |  | $ | (2.9 | )
Deferred | (3.9 | ) |  | (1.8 | ) |  | (9.0 | )
Total Federal | (4.1 | ) |  | (2.2 | ) |  | (11.9 | )
State and local income taxes: |  |  |  |  |
Current | 1.0 |  |  | 0.4 |  |  | 0.5 |
Deferred | (0.9 | ) |  | 1.4 |  |  | (0.3 | )
Total State and local | 0.1 |  |  | 1.8 |  |  | 0.2 |
Foreign income taxes: |  |  |  |  |
Current | 9.0 |  |  | 4.8 |  |  | 2.0 |
Deferred | (0.2 | ) |  | 0.2 |  |  | (0.5 | )
Total Foreign | 8.8 |  |  | 5.0 |  |  | 1.5 |
Total | $ | 4.8 |  |  | $ | 4.6 |  |  | $ | (10.2 | )
A reconciliation of the total income tax provision (benefit) to the amount computed by applying the statutory federal income tax rate of 21% to the income from continuing operations before income taxes for the years ended December 29, 2019 and December 30, 2018, and applying the statutory federal income tax rate of 35% to the loss from continuing operations before income taxes for the year ended December 31, 2017 is as follows (in millions):
| Year Ended
| December 29, 2019 |  | December 30, 2018 |  | December 31, 2017
Income tax (benefit) at federal statutory rate | $ | 3.3 |  |  | $ | 1.8 |  |  | $ | (20.0 | )
State taxes, net of federal tax benefit and valuation allowance | 0.6 |  |  | 0.9 |  |  | 0.5 |
Difference in tax rates between U.S. and foreign | 1.9 |  |  | 0.7 |  |  | — |
Increase (decrease) in valuation allowance | (3.3 | ) |  | 4.7 |  |  | (45.6 | )
Nondeductible expense | 1.0 |  |  | 0.6 |  |  | 1.1 |
Increase in reserve for uncertain tax positions | 7.7 |  |  | 4.0 |  |  | 1.3 |
Changes to indefinite life items and separate state deferred taxes | 0.4 |  |  | (0.7 | ) |  | (1.8 | )
One-time transition tax on previously undistributed foreign earnings | — |  |  | 2.2 |  |  | 6.2 |
Goodwill impairment | — |  |  | — |  |  | 8.1 |
Decrease in deferred taxes related to disposition | — |  |  | (9.6 | ) |  | — |
Impact related to the 2017 Tax Cuts and Jobs Act | — |  |  | — |  |  | 40.0 |
Release of valuation allowance due to FTT acquisition | (5.2 | ) |  | — |  |  | — |
Stock-based compensation | (1.6 | ) |  | — |  |  | — |
Total | $ | 4.8 |  |  | $ | 4.6 |  |  | $ | (10.2 | )
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities are as follows (in millions):
| December 29, 2019 |  | December 30, 2018
Deferred tax assets: |  |  |
Allowance for doubtful accounts | $ | 0.6 |  |  | $ | 0.6 |
Sundry accruals | 2.3 |  |  | 1.1 |
Vacation accrual | 3.0 |  |  | 2.7 |
Stock-based compensation | 5.3 |  |  | 4.2 |
Payroll related accruals | 6.2 |  |  | 2.4 |
Lease accruals | 22.1 |  |  | 2.0 |
Investments | 1.3 |  |  | 1.3 |
Net operating loss carryforwards | 75.1 |  |  | 81.7 |
Capital loss carryforwards | 1.3 |  |  | 1.9 |
Tax credit carryforwards | 11.2 |  |  | 9.9 |
Deferred revenue | 1.1 |  |  | 1.5 |
Reserves and other | 13.6 |  |  | 10.8 |
| 143.1 |  |  | 120.1 |
Valuation allowance | (88.6 | ) |  | (92.2 | )
Total deferred tax assets, net of valuation allowance | 54.5 |  |  | 27.9 |
Deferred tax liabilities: |  |  |
Unearned revenue | (19.0 | ) |  | (23.9 | )
Operating lease right-of-use assets | (20.2 | ) |  |
Other intangibles | (21.0 | ) |  | (8.9 | )
Property and equipment, principally due to differences in depreciation | (2.0 | ) |  | (0.9 | )
Other | (1.3 | ) |  | (1.2 | )
Total deferred tax liabilities | (63.5 | ) |  | (34.9 | )
Net deferred tax liability | $ | (9.0 | ) |  | $ | (7.0 | )
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 its deferred tax assets will not be realized. In making this assessment, the Company has concluded that negative evidence, including cumulative losses in recent years, continues to outweigh the positive evidence. Accordingly, the Company has maintained a full valuation allowance against the Company’s U.S. federal, combined state and certain foreign net deferred tax assets. However, given the Company’s more recent earnings history, management believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of valuation allowance would result in the recognition of certain deferred tax assets with a corresponding decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release will be predicated on the basis of the level of profitability that the Company is able to actually achieve. During fiscal 2019, the Company recorded a net decrease in its valuation allowance of $3.6 million. At December 29, 2019, the Company had federal tax loss carryforwards of $307.8 million and various state tax loss carryforwards of $266.9 million. The federal tax loss carryforwards will begin to expire in 2027 and state tax loss carryforwards will begin to expire in 2020 in certain states. Additionally, the state capital loss carryforward generated in 2018 will begin to expire in 2023. 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 3-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 tax years 2010 and 2011 the Company experienced a Section 382 “ownership change” that will limit the utilization of NOL carryforwards. Additionally, 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. For the year ended December 29, 2019, there was no impact of such Section 382 limitations on 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 of December 31, 2017, all accumulated undistributed earnings of our foreign subsidiaries were subject to the one-time transition tax on foreign earnings required by the 2017 Tax Cuts and Jobs Act. It is the Company’s intention to permanently reinvest undistributed earnings of its foreign subsidiaries. As such, the Company has not provided deferred U.S. income taxes or foreign withholding taxes of approximately $9.4 million on temporary differences relating to the outside basis in its investment in foreign subsidiaries. As of December 29, 2019, the Company has $24.6 million of cash and cash equivalents available for distribution. The Company is subject to taxation in the U.S., various state tax jurisdictions and various 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 NOL carryforwards. Generally, the Company’s tax years for 2002 and later are subject to examination by various foreign tax authorities, as well. During 2018 the Company was notified by the Internal Revenue Service that its federal income tax return for the calendar year ending December 27, 2015 had been selected for examination. The Company is currently awaiting a final determination letter from the Internal Revenue Service and does not anticipate any significant changes in tax liability to the year under audit. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
Balance as of December 25, 2016 | $ | 18.6 |
Increases related to prior periods | 0.4 |
Increases related to current year tax positions | 1.1 |
Expiration of applicable statutes of limitations | (0.6 | )
Decrease in federal tax rate | (3.9 | )
Balance as of December 31, 2017 | 15.6 |
Increases related to prior periods | 0.5 |
Increases related to current year tax positions | 4.0 |
Expiration of applicable statutes of limitations | (0.4 | )
Decreases related to prior year tax positions | (0.3 | )
Decreases related to disposition | (1.7 | )
Balance as of December 30, 2018 | 17.7 |
Increases related to prior periods | 0.2 |
Increases related to current year tax positions | 6.3 |
Expiration of applicable statutes of limitations | (0.1 | )
Decreases related to settlement with tax authorities | (0.1 | )
Balance as of December 29, 2019 | $ | 24.0 |
Included in the balance of unrecognized tax benefits at December 29, 2019, are $24.0 million of tax benefits that, if recognized, would affect the effective tax rate. Included in this amount is $11.1 million that would become a deferred tax asset if the tax benefit were recognized. As such, this benefit may be impacted by a corresponding valuation allowance depending upon the Company’s assessment of the realizability of the deferred tax asset at the time the benefits are recognized. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. For the years ended December 29, 2019, December 30, 2018 and December 31, 2017, the Company recorded $1.3 million, $0.6 million, and $0.5 million, respectively, in interest or penalty expenses. These amounts are netted by a benefit for interest and penalties related to the reversal of prior positions and the disposition of PSS in the prior year of $0.1 million, $1.1 million, and $0.2 million for the years ended December 29, 2019, December 30, 2018, and December 31, 2017, respectively. As of December 29, 2019, December 30, 2018, and December 31, 2017, the Company had accrued total interest and penalties of $2.8 million, $1.6 million and $2.2 million, respectively. The Company believes that it is reasonably possible that as much as $0.1 million of the liabilities for uncertain tax positions will expire within 12 months of December 29, 2019 due to the expiration of various applicable statues of limitations.

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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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