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Income Taxes | 12 Months Ended
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Dec. 29, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income (loss) from continuing operations before income taxes consists of the following:
| Fiscal Year
| 2024 |  | 2023 |  | 2022
| (in millions)
U.S. | $ | 1,008 |  |  | $ | (134) |  |  | $ | 1,059 |
Foreign | 53 |  |  | 5 |  |  | (12) |
Total income (loss) from continuing operations before income taxes | $ | 1,061 |  |  | $ | (129) |  |  | $ | 1,047 |
Income Tax Expense Income tax expense (benefit) from continuing operations consists of the following:
| Fiscal Year
| 2024 |  | 2023 |  | 2022
| (in millions)
Current income tax expense: |  |  |  |  |
Federal | $ | 161 |  |  | $ | 55 |  |  | $ | 206 |
State | 19 |  |  | 33 |  |  | 23 |
Foreign | — |  |  | — |  |  | — |
| 180 |  |  | 89 |  |  | 229 |
Deferred income tax expense (benefit): |  |  |  |  |
Federal | 72 |  |  | (120) |  |  | (6) |
State | 8 |  |  | (6) |  |  | 4 |
Foreign | 11 |  |  | (4) |  |  | 4 |
| 91 |  |  | (130) |  |  | 2 |
Total income tax expense (benefit) | $ | 271 |  |  | $ | (41) |  |  | $ | 231 |
Effective Tax Rate Reconciliation The following table reconciles the federal statutory income tax rate to our effective tax rate:
| Fiscal Year
| 2024 |  | 2023 |  | 2022
Federal income taxes at statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Uncertain tax positions | 3.5 |  |  | (13.0) |  |  | 0.4 |
State income taxes, net of federal tax benefit | 1.7 |  |  | (3.5) |  |  | 2.2 |
Impact of foreign operations | 0.5 |  |  | 0.1 |  |  | (1.0) |
Equity method investments (1) | 0.2 |  |  | 7.4 |  |  | (0.1) |
Officers’ life insurance | (0.1) |  |  | 2.9 |  |  | 0.5 |
Foreign income taxes | (0.4) |  |  | 4.3 |  |  | — |
Tax credits (2) | (1.3) |  |  | 13.0 |  |  | (1.3) |
Other | 0.5 |  |  | — |  |  | 0.4 |
Effective tax rate | 25.5 | % |  | 32.2 | % |  | 22.1 | %
________________ (1)The results of our equity method investments are excluded from income (loss) from continuing operations before income taxes. However, to the extent applicable, income taxes on our equity method investments are included in income tax expense (benefit), which can have significant impact on our computed effective tax rate. (2)We recognized federal tax credits of $14 million, $17 million and $13 million in fiscal years 2024, 2023 and 2022, respectively. The impact of the reconciling items between the federal statutory rate and our effective tax rate were more pronounced in fiscal year 2023 largely due to the pre-tax loss of $129 million in fiscal year 2023 compared to pre-tax income of $1,061 million and $1,047 million in fiscal years 2024 and 2022, respectively. Income Taxes Receivable and Payable Income taxes receivable totaled $99 million and $27 million as of December 29, 2024 and December 31, 2023, respectively, and were included in prepaid expenses and other current assets on the consolidated balance sheets. Income taxes payable totaled $9 million as of December 29, 2024 and was included in accrued expenses and other current liabilities on the consolidated balance sheet. We had long-term income taxes receivable of $13 million as of December 31, 2023 included in other assets on the consolidated balance sheet. Deferred Tax Assets and Liabilities The tax effects of temporary differences between the tax basis and book basis of our assets and liabilities are presented in the table below:
| December 29, 2024 |  | December 31, 2023
| (in millions)
Deferred tax assets: |  |  |
Research and development expenses | $ | 104 |  |  | $ | 98 |
Operating lease obligations | 79 |  |  | 92 |
Pension and other retirement liabilities | 72 |  |  | 67 |
Accrued expenses and other current liabilities | 46 |  |  | 101 |
Tax credits, carryforwards and net operating losses (1) | 26 |  |  | 38 |
Employee benefits | 14 |  |  | 18 |
Deferred payroll taxes | 3 |  |  | 24 |
Other | 28 |  |  | 21 |
Total deferred tax asset before valuation allowance | 372 |  |  | 458 |
Valuation allowance (2) | (8) |  |  | (12) |
Total deferred tax asset | $ | 364 |  |  | $ | 446 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | 412 |  |  | 425 |
Intangible assets | 307 |  |  | 309 |
Operating lease assets | 78 |  |  | 90 |
Inventory | 38 |  |  | 56 |
Investments | 27 |  |  | 25 |
Other | 20 |  |  | 15 |
Total deferred tax liability | $ | 882 |  |  | $ | 920 |
Net deferred tax liability | $ | 518 |  |  | $ | 474 |
________________ (1)We have $3 million of gross foreign net operating losses that will expire between 2030 and 2032. We have $643 million of gross state net operating losses, $37 million of which have no expiration, and $606 million that will expire between 2025 and 2043. We have $3 million of state tax credits that will expire between 2025 and 2038. (2)Valuation allowances are established if the Company’s deferred tax assets are not more likely than not to be realized. The valuation allowance primarily relates to state credits and state net operating loss carryforwards, which are expected to expire unused. Unrecognized Tax Benefits A reconciliation of the beginning and ending liability, excluding interest and penalties, for unrecognized tax benefits is as follows:
| (in millions)
Balance, January 2, 2022 | $ | 21 |
Additions for tax positions taken in fiscal year 2022 | 11 |
Lapse of statute of limitations | (3) |
Balance, January 1, 2023 | 28 |
Additions for tax positions taken in fiscal year 2023 | 1 |
Additions for tax positions taken for prior years | 17 |
Lapse of statute of limitations | (1) |
Balance, December 31, 2023 | 45 |
Additions for tax positions taken in fiscal year 2024 | 5 |
Additions for tax positions taken for prior years | 59 |
Reductions for cash remittances for tax positions taken in prior years | (17) |
Lapse of statute of limitations | (5) |
Balance, December 29, 2024 | $ | 87 |
During fiscal years 2024, 2023 and 2022, we recognized interest and penalties of $2 million, $4 million, and $(2) million, respectively, within income tax expense (benefit). The unrecognized tax benefits, if recognized, would favorably affect income tax expense by $29 million, $25 million, and $13 million in fiscal years 2024, 2023 and 2022, respectively. It is not practicable at this time to estimate the amount of unrecognized tax benefits that will change in the next twelve months. We operate in multiple taxing jurisdictions, both within the U.S. and outside of the U.S., and are subject to examination from various tax authorities. The liability for unrecognized tax benefits included $11 million and $9 million of accrued interest as of December 29, 2024 and December 31, 2023, respectively. We are currently being audited in several tax jurisdictions and remain subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within the U.S. and Mexico, we may be subject to audit by various tax authorities, and our subsidiaries operating within each country may be subject to different statute of limitations expiration dates. We have concluded all U.S. federal income tax matters through the tax year ended January 1, 2017. We are currently under U.S federal examination for all subsequent tax years through December 29, 2024. We are also subject to examination from tax authorities in Mexico and certain U.S. states for the tax years ended January 3, 2021 through December 29, 2024. We consider the earnings of our foreign subsidiaries to be indefinitely reinvested as we intend to use these earnings in our foreign operations. The amount of foreign subsidiary net earnings that was considered indefinitely reinvested was $164 million and $141 million as of December 29, 2024 and December 31, 2023, respectively, which is considered previously taxed income. The determination of any unrecorded deferred tax asset or liability on the remaining excess carrying amount of our investments over their respective tax bases is not practicable due to the uncertainty of how these investments would be recovered and such differences are not expected to be recognized in the foreseeable future.

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