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Income Taxes | 12 Months Ended
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Sep. 27, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES: The Company accounts for income taxes using the asset and liability method. Under this method, the provision for income taxes represents income taxes payable or refundable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases in assets and liabilities and are adjusted for changes in tax rates and enacted tax legislation. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The components of income before income taxes by source of income are as follows (in thousands):
|  | Fiscal Year Ended
|  | September 27, 2019 |  | September 28, 2018 |  | September 29, 2017
United States |  | $ | 418,902 |  |  | $ | 326,277 |  |  | $ | 362,783 |
Non-U.S. |  | 137,270 |  |  | 145,599 |  |  | 157,859 |
|  | $ | 556,172 |  |  | $ | 471,876 |  |  | $ | 520,642 |
The provision (benefit) for income taxes consists of (in thousands):
|  | Fiscal Year Ended
|  | September 27, 2019 |  | September 28, 2018 |  | September 29, 2017
Current: |  |  |  |  |  |
Federal |  | $ | 8,781 |  |  | $ | (48,249 | ) |  | $ | 111,175 |
State and local |  | 19,966 |  |  | 11,356 |  |  | 15,455 |
Non-U.S. |  | 38,456 |  |  | 44,618 |  |  | 57,681 |
|  | 67,203 |  |  | 7,725 |  |  | 184,311 |
Deferred: |  |  |  |  |  |
Federal |  | 35,251 |  |  | (113,475 | ) |  | (21,956 | )
State and local |  | 7,683 |  |  | 7,408 |  |  | 3,165 |
Non-U.S. |  | (2,431 | ) |  | 1,778 |  |  | (19,065 | )
|  | 40,503 |  |  | (104,289 | ) |  | (37,856 | )
|  | $ | 107,706 |  |  | $ | (96,564 | ) |  | $ | 146,455 |
Current taxes receivable of $35.1 million and $7.5 million at September 27, 2019 and September 28, 2018, respectively, are included in "Prepayments and other current assets" in the Consolidated Balance Sheets. Current income taxes payable of $8.1 million and $47.9 million at September 27, 2019 and September 28, 2018, respectively, are included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheets. The provision for income taxes varies from the amount determined by applying the United States Federal statutory rate to pretax income as a result of the following (all percentages are as a percentage of income before income taxes):
|  | Fiscal Year Ended
|  | September 27, 2019 |  | September 28, 2018 |  | September 29, 2017
United States statutory income tax rate |  | 21.0 | % |  | 24.5 | % |  | 35.0 | %
Increase (decrease) in taxes, resulting from: |  |  |  |  |  |
State income taxes, net of Federal tax benefit |  | 4.2 |  |  | 3.2 |  |  | 2.3 |
Foreign taxes(1) |  | 2.2 |  |  | 3.3 |  |  | (4.3 | )
Permanent book/tax differences |  | 0.4 |  |  | (1.2 | ) |  | (3.8 | )
Uncertain tax positions |  | — |  |  | (0.3 | ) |  | 1.4 |
U.S. Tax Reform - Remeasurement of deferred taxes |  | — |  |  | (49.3 | ) |  | — |
U.S. Tax Reform - Foreign tax credit valuation allowance |  | (2.3 | ) |  | 2.8 |  |  | — |
Sale of Healthcare Technologies |  | (4.4 | ) |  | — |  |  | — |
Tax credits & other |  | (1.7 | ) |  | (3.5 | ) |  | (2.5 | )
Effective income tax rate |  | 19.4 | % |  | (20.5 | )% |  | 28.1 | %
(1) | Includes differences between the United States statutory tax rate and tax rates in foreign jurisdictions, foreign withholding taxes and taxation of foreign earnings, which includes the transition tax on deemed repatriated earnings of foreign subsidiaries and the tax on "Global Intangible Low-Taxed Income" ("GILTI").
The effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available to the Company in the various jurisdictions in which it operates. Judgment is required in determining the effective tax rate and in evaluating the tax return positions. Reserves are established when positions are "more likely than not" to be challenged and not sustained. Reserves are adjusted at each financial statement date to reflect the impact of audit settlements, expiration of statutes of limitation, developments in tax law and ongoing discussions with tax authorities. Accrued interest and penalties associated with uncertain tax positions are recognized as part of the income tax provision. As of September 27, 2019, certain subsidiaries have recorded deferred tax assets of $27.4 million associated with accumulated federal, state and foreign net operating loss ("NOL") carryforwards. The Company believes it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards will not be realized. As a result, the Company has recorded a valuation allowance of approximately $17.5 million on the deferred tax asset related to these state and foreign NOL carryforwards. The impact of the change in valuation allowances for state and foreign NOLs is presented in the State income taxes, net of Federal tax benefit and Foreign taxes lines, respectively, of the effective income tax rate reconciliation. As of September 27, 2019, the Company has approximately $28.1 million of foreign tax credit ("FTC") carryforwards, which expire in 2027, and approximately $0.9 million of interest restriction carryforwards. As of September 27, 2019 and September 28, 2018, the components of deferred taxes are as follows (in thousands):
|  | September 27, 2019 |  | September 28, 2018
Deferred tax liabilities: |  |  |  |
Property and equipment |  | $ | 137,293 |  |  | $ | 126,345 |
Investments |  | 11,902 |  |  | 12,213 |
Other intangible assets, including goodwill |  | 462,637 |  |  | 474,263 |
Cost to fulfill - Rental merchandise in-service |  | 83,483 |  |  | 63,835 |
Derivatives |  | — |  |  | 21,599 |
Other |  | 37,309 |  |  | 17,450 |
Gross deferred tax liability |  | 732,624 |  |  | 715,705 |
Deferred tax assets: |  |  |  |
Derivatives |  | 11,949 |  |  | — |
Insurance |  | 34,112 |  |  | 40,240 |
Employee compensation and benefits |  | 113,269 |  |  | 136,603 |
Accruals and allowances |  | 31,844 |  |  | 19,338 |
Net operating loss/credit carryforwards and other |  | 56,508 |  |  | 60,576 |
Gross deferred tax asset, before valuation allowances |  | 247,682 |  |  | 256,757 |
Valuation allowances |  | (17,532 | ) |  | (29,023 | )
Net deferred tax liability |  | $ | 502,474 |  |  | $ | 487,971 |
Rollforward of the valuation allowance is as follows:
|  | September 27, 2019 |  | September 28, 2018
Balance, beginning of year |  | $ | (29,023 | ) |  | $ | (11,513 | )
Additions(1) |  | (2,330 | ) |  | (21,101 | )
Subtractions(2) |  | 13,821 |  |  | 3,591 |
Balance, end of year |  | $ | (17,532 | ) |  | $ | (29,023 | )
(1) | The additions in fiscal 2019 were mainly driven by losses in certain foreign subsidiaries. The additions in fiscal 2018 were mainly driven by the Tax Cuts and Jobs Act impacting the ability to utilize FTC carryforwards going forward, as well as the inability to use foreign NOL carryforwards.
(2) | Valuation allowances against FTC carryforwards were released during fiscal 2019 as a result of Treasury Regulations. During fiscal 2018, tax planning resulted in taxable income in separate Company states that had historical losses.
Deferred tax liabilities of approximately $519.9 million and $503.4 million as of September 27, 2019 and September 28, 2018, respectively, are included in "Deferred Income Taxes and Other Noncurrent Liabilities" in the Consolidated Balance Sheets. Deferred tax assets of approximately $17.4 million and $15.5 million as of September 27, 2019 and September 28, 2018, respectively, are included in "Other Assets" in the Consolidated Balance Sheets. The Company has approximately $36.3 million of total gross unrecognized tax benefits as of September 27, 2019, of which $33.4 million, if recognized, would impact the effective tax rate and $2.9 million would result in an adjustment to the deferred tax liability. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows (in thousands):
| September 27, 2019 |  | September 28, 2018
Balance, beginning of year | $ | 29,089 |  |  | $ | 30,812 |
Additions based on tax positions taken in the current year | 3,713 |  |  | 709 |
Additions for tax positions taken in prior years | 6,531 |  |  | 1,505 |
Reductions for remeasurements, settlements and payments | (1,484 | ) |  | (2,368 | )
Reductions due to statute expiration | (1,577 | ) |  | (1,569 | )
Balance, end of year | $ | 36,272 |  |  | $ | 29,089 |
The Company has approximately $5.5 million and $4.9 million accrued for interest and penalties as of September 27, 2019 and September 28, 2018, respectively, and recorded $0.6 million and an immaterial amount in interest and penalties during fiscal 2019 and fiscal 2018, respectively. Interest and penalties related to unrecognized tax benefits are recorded in "Provision (Benefit) for income taxes" in the Consolidated Statements of Income. Unrecognized tax benefits are not expected to significantly change within the next 12 months. Generally, a number of years may elapse before a tax reporting year is audited and finally resolved. With few exceptions, the Company is no longer subject to U.S. federal, state or local examinations by tax authorities before 2015. While it is often difficult to predict the final outcome or the timing of or resolution of a particular tax matter, the Company does not anticipate any adjustments resulting from U.S. federal, state or foreign tax audits that would result in a material change to the financial condition or results of operations. Adequate amounts are established for any adjustments that may result from examinations for tax years after 2015. However, an unfavorable settlement of a particular issue would require use of the Company's cash and cash equivalents. On December 22, 2017, “H.R.1,” commonly referred to as the “Tax Cuts and Jobs Act” (the “Tax Legislation”) was signed into U.S. law. The Tax Legislation, which was effective on January 1, 2018, significantly revised the U.S. tax code by, among other things, lowering the corporate income tax rate from 35.0% to 21.0% and implementing new international tax provisions that included a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. Though certain key aspects of the new law were effective January 1, 2018 and had an immediate accounting impact, other significant provisions were not effective or did not result in accounting implications for the Company until after the fiscal year end ended September 28, 2018. The provisions effective for fiscal 2019 are the tax on GILTI, the deduction for "Foreign-Derived Intangible Income" ("FDII"), the Internal Revenue Code ("IRC") Section163(j) limitation on interest expense and the IRC Section 162(m) limitation on certain executive compensation. The Tax Legislation required the Company to use a blended rate for its fiscal 2018 tax year by applying a prorated percentage of days before and after the January 1, 2018 effective date. As a result, the Company's 2018 annual statutory rate was reduced to 24.5%. During fiscal 2018, the Company made reasonable estimates related to certain impacts of the Tax Legislation and, in accordance with the Securities and Exchange Commission (“SEC”) Staff Accountant Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act (“SAB 118”), recorded a provisional estimate during a measurement period, when it did not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in tax law. As a result of the enactment of the Tax Legislation, the Company was required to recognize the effect of the corporate income tax rate change on its deferred tax assets and liabilities in fiscal 2018, the period in which the legislation was enacted. The Company recorded a tax benefit from the corporate income tax rate change and certain other adjustments, which resulted in a noncash benefit to the provision (benefit) for income taxes of approximately $237.8 million, which was recorded to the Consolidated Statements of Income for the fiscal year ended September 28, 2018. A corresponding reduction to the Company's deferred income tax liability was also recorded to the Consolidated Balance Sheets during the fiscal year ended September 28, 2018. The Tax Legislation also required the Company to calculate a one-time transition tax on unremitted earnings of certain non-U.S. subsidiaries. Based on an estimate, the Company believed there was no transition tax due, net of foreign tax credits. As a result of the Tax Legislation, the Company reassessed the ability to recover its $27.2 million of FTC carryforwards. Based on then currently available information, the Company believed it would not generate sufficient foreign source income in the carryforward period to utilize a portion of these credits. As a result, the Company recorded a valuation allowance of $13.1 million against its FTC carryforward during fiscal 2018 as a provisional estimate. On the basis of proposed Treasury Regulations issued subsequent to the filing of the Company's Annual Report on Form 10-K on November 21, 2018, the Company recorded an adjustment to reduce the $13.1 million valuation allowance by $9.5 million, which was recorded as a tax benefit to the provision for income taxes during the first quarter of fiscal 2019. During the second quarter of fiscal 2019, the Company reduced the remaining $3.6 million valuation allowance and recorded a related uncertain tax position of $2.7 million, resulting in a net benefit to the provision for income taxes of $0.9 million. The Tax Legislation contains additional international provisions which impact the Company beginning in fiscal 2019, including the tax on GILTI. The impact of the GILTI liability did not have a significant impact on the financial statements for the fiscal year ending September 27, 2019. The Company is electing to treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the "period cost method"). The accounting for the impact of the Tax Legislation is complete and the Company closed the measurement period related to SAB 118 during the first quarter of fiscal 2019. As the result of the new rules, which include a shift from a worldwide system of taxation to a participation exemption system, the Company generally will not incur additional U.S. tax liability on the distribution of unremitted foreign earnings. However, other items continue to trigger additional tax expense for which no deferred tax liability has been recorded, including Section 986(c) currency gain/loss, foreign withholding taxes and state taxes. The undistributed earnings of certain foreign subsidiaries for which no deferred tax liability was recorded amounted to approximately $184.0 million and $86.3 million as of September 27, 2019 and September 28, 2018, respectively. The foreign withholding tax cost associated with remitting these earnings is approximately $11.0 million and $5.1 million as of September 27, 2019 and September 28, 2018, respectively. Such amounts have not been accrued by the Company as it believes those foreign earnings are permanently reinvested.

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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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