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Income Taxes | 12 Months Ended
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Sep. 29, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income before income taxes, by geographic area, was as follows:
| Fiscal Year Ended
| September 29, 2019 |  | September 30, 2018 |  | October 1, 2017
| (in thousands)
Income before income taxes: |  |  |  |  |  |  |  |
United States | $ | 185,535 |  |  | $ | 180,034 |  |  | $ | 166,074 |
Foreign | (10,399 | ) |  | (5,472 | ) |  | 5,687 |
Total income before income taxes | $ | 175,136 |  |  | $ | 174,562 |  |  | $ | 171,761 |
Income tax expense consisted of the following:
| Fiscal Year Ended
| September 29, 2019 |  | September 30, 2018 |  | October 1, 2017
|  |  | (in thousands) |  |
Current: |  |  |  |  |  |  |  |
Federal | $ | 30,051 |  |  | $ | 46,840 |  |  | $ | 45,604 |
State | 8,923 |  |  | 9,228 |  |  | 8,860 |
Foreign | 15,016 |  |  | 10,897 |  |  | 9,337 |
Total current income tax expense | 53,990 |  |  | 66,965 |  |  | 63,801 |
Deferred: |  |  |  |  |  |  |  |
Federal | (9,108 | ) |  | (22,072 | ) |  | (4,251 | )
State | (1,195 | ) |  | (1,471 | ) |  | (945 | )
Foreign | (27,312 | ) |  | (5,817 | ) |  | (4,761 | )
Total deferred income tax expense | (37,615 | ) |  | (29,360 | ) |  | (9,957 | )
Total income tax expense | $ | 16,375 |  |  | $ | 37,605 |  |  | $ | 53,844 |
Total income tax expense was different from the amount computed by applying the U.S. federal statutory rate to pre-tax income as follows:
| Fiscal Year Ended
| September 29, 2019 |  | September 30, 2018 |  | October 1, 2017
Tax at federal statutory rate | 21.0% |  | 24.5% |  | 35.0%
State taxes, net of federal benefit | 3.4 |  | 4.2 |  | 3.4
Research and Development ("R&D") credits | (4.7) |  | (1.4) |  | (1.8)
Domestic production deduction | — |  | (0.2) |  | (0.7)
Tax differential on foreign earnings | 1.0 |  | 0.5 |  | —
Non-taxable foreign interest income | (1.7) |  | (2.0) |  | (2.9)
Goodwill | 0.9 |  | 1.7 |  | —
Stock compensation | (2.4) |  | (2.7) |  | (2.8)
Valuation allowance | (13.5) |  | (0.5) |  | (0.5)
Change in uncertain tax positions | 2.4 |  | 1.9 |  | 1.8
Revaluation of deferred taxes | (1.4) |  | (8.4) |  | —
Deferred tax adjustments | (0.4) |  | 2.1 |  | —
Transition tax on foreign earnings | 1.4 |  | — |  | —
Other | 3.3 |  | 1.8 |  | (0.2)
Total income tax expense | 9.3% |  | 21.5% |  | 31.3%
The effective tax rates for fiscal 2019, 2018 and 2017 were 9.3%, 21.5% and 31.3%, respectively. These tax rates reflect the impact of the comprehensive tax legislation enacted by the U.S. government on December 22, 2017, which is commonly referred to as the TCJA. The TCJA significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, limiting the deductibility of certain executive compensation, and implementing a modified territorial tax system with the introduction of the Global Intangible Low-Taxed Income ("GILTI") tax rules. The TCJA also imposed a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries. In fiscal 2019, we finalized our fiscal 2018 U.S. federal tax return and recorded a $2.4 million tax expense with respect to the one-time transition tax on foreign earnings. As we have a September 30 fiscal year-end, our U.S. federal corporate income tax rate was blended in fiscal 2018, resulting in a statutory federal rate of 24.5% (3 months at 35% and 9 months at 21%), and was 21% in fiscal 2019. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the tax law was enacted. As a result of the TCJA, we reduced our deferred tax liabilities and recorded a deferred tax benefit of $10.1 million in fiscal 2018 to reflect our estimate of temporary differences in the United States that were to be recovered or settled in fiscal 2018 based on the 24.5% blended corporate tax rate or based on the 21% tax rate in fiscal 2019 and beyond versus the previous enacted 35% corporate tax rate. We finalized this analysis in the first quarter of fiscal 2019 and recorded an additional deferred tax benefit of $2.6 million. Valuation allowances of $23.4 million in Australia were released due to sufficient positive evidence being obtained in fiscal 2019. The valuation allowances were primarily related to net operating loss and R&D credit carry-forwards and other temporary differences. We evaluated the positive evidence against any negative evidence and determined that it was more likely than not that the deferred tax assets will be realized. The factors used to assess the likelihood of realization were the past performance of the related entities, our forecast of future taxable income, and available tax planning strategies that could be implemented to realize the deferred tax assets. Excluding the net deferred tax benefits from the TCJA and the release of the valuation allowance, our effective tax rate in fiscal 2019 was 21.9% in fiscal 2019 compared to 25.1% in fiscal 2018 primarily due to the reduced U.S. corporate income tax rate. With respect to the GILTI provisions of the TCJA, we have analyzed our structure and global results of operations and expect to have a GILTI tax of $0.4 million for fiscal 2019, which was included in our fiscal 2019 income tax expense. We are currently under examination by the Canada Revenue Agency for fiscal years 2011 through 2016 and the California Franchise Tax Board for fiscal years 2014 through 2016. We are also subject to various other state audits. With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for fiscal years before 2011. Temporary differences comprising the net deferred income tax liability shown on the accompanying consolidated balance sheets were as follows:
| Fiscal Year Ended
| September 29, 2019 |  | September 30, 2018
| (in thousands)
Deferred Tax Assets: |  |  |  |  |
State taxes | $ | 764 |  |  | $ | 1,220 |
Reserves and contingent liabilities | 5,500 |  |  | 2,646 |
Allowance for doubtful accounts | 7,506 |  |  | 4,259 |
Accrued liabilities | 28,232 |  |  | 19,611 |
Stock-based compensation | 6,700 |  |  | 6,338 |
Loss carry-forwards | 39,782 |  |  | 23,492 |
Valuation allowance | (20,543 | ) |  | (21,479 | )
Total deferred tax assets | 67,941 |  |  | 36,087 |
Deferred Tax Liabilities: |  |  |  |  |
Unbilled revenue | (21,886 | ) |  | (25,819 | )
Prepaid expense | (3,026 | ) |  | (3,524 | )
Intangibles | (26,482 | ) |  | (23,319 | )
Property and equipment | (1,133 | ) |  | (4,984 | )
Total deferred tax liability | (52,527 | ) |  | (57,646 | )
Net deferred tax assets (liabilities) | $ | 15,414 |  |  | $ | (21,559 | )
At September 29, 2019, undistributed earnings of our foreign subsidiaries, primarily in Canada, amounting to approximately $44.0 million are expected to be permanently reinvested. Accordingly, no provision for foreign withholding taxes has been made. Upon distribution of those earnings, we would be subject to foreign withholding taxes. Assuming the permanently reinvested foreign earnings were repatriated under the laws and rates applicable at September 29, 2019, the incremental foreign withholding taxes applicable to those earnings would be approximately $1.1 million. At September 29, 2019, we had available unused state net operating loss ("NOL") carry forwards of $43.7 million that expire at various dates from 2024 to 2037; and available foreign NOL carry forwards of $134.7 million, of which $29.7 million expire at various dates from 2024 to 2039, and $105.0 million have no expiration date. We have performed an assessment of positive and negative evidence regarding the realization of the deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, availability of carrybacks, cumulative losses in recent years, and estimates of projected future taxable income. Although realization is not assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the assets related to the loss carry-forwards and certain foreign intangibles for which a valuation allowance of $20.5 million has been provided. At September 29, 2019, we had $9.2 million of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate. It is not expected that there will be a significant change in the unrecognized tax benefits in the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Fiscal Year Ended
| September 29, 2019 |  | September 30, 2018 |  | October 1, 2017
| (in thousands)
Beginning balance | $ | 8,328 |  |  | $ | 9,337 |  |  | $ | 22,786 |
Additions for current year tax positions | 1,342 |  |  | 1,928 |  |  | 1,060 |
Additions for prior year tax positions | 356 |  |  | 1,116 |  |  | 2,365 |
Reductions for prior year tax positions | (100 | ) |  | — |  |  | (6,875 | )
Settlements | (757 | ) |  | (4,053 | ) |  | (9,999 | )
Ending balance | $ | 9,169 |  |  | $ | 8,328 |  |  | $ | 9,337 |
We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal years 2019, 2018 and 2017, we accrued additional interest expense of $0.5 million, $0.6 million and $0.4 million, respectively, and recorded reductions in accrued interest of $0.2 million, $0.3 million and $0.9 million, respectively, as a result of audit settlements and other prior-year adjustments. The amount of interest and penalties accrued at September 29, 2019, September 30, 2018 and October 1, 2017 was $2.4 million, $1.2 million and $1.1 million, respectively.

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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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