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Income Taxes
9 Months Ended
Sep. 24, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
The Company’s effective tax rate for the three months ended September 24, 2016 and September 26, 2015 was 29.2% and 28.7%, respectively. The Company’s effective tax rate was 30.4% and 18.3% for the nine months ended September 24, 2016 and September 26, 2015, respectively. For the three months ended September 24, 2016, the increase was primarily attributable to the accrual of withholding taxes in order to access cash from the Company’s Canadian and Chinese operations for use outside of the U.S. and an unbenefited loss due to a site closure, offset by a $1.4 million tax benefit as a result of an enacted U.K. tax law change and favorability from the amount and mix of earnings. For the nine months ended September 24, 2016, the increase reflects the items above as well as a prior year reduction in unrecognized tax benefits and related interest of $10.4 million due to the expiration of the statute of limitations associated with pre-acquisition tax positions on forgiveness of debt and a prior year non-taxable bargain purchase gain of $9.9 million associated with the acquisition of Sunrise.
During the three months ended September 24, 2016, the Company’s unrecognized tax benefits increased by $0.2 million to $25.5 million, primarily due to an additional quarter of Canadian Scientific Research and Experimental Development credit reserves offset by the expiration of the statute of limitations on federal reserves. The amount of unrecognized income tax benefits that would impact the effective tax rate stayed constant at $22.2 million. The amount of accrued interest and penalties on unrecognized tax benefits was $1.6 million and $0.2 million, respectively, at September 24, 2016. The Company estimates that it is reasonably possible that the unrecognized tax benefits will decrease by up to $3.5 million over the next twelve-month period, primarily as a result of the outcome of a pending tax ruling and competent authority proceedings.
The Company conducts business in a number of tax jurisdictions. As a result, it is subject to tax audits in jurisdictions including the U.S., U.K., China, Japan, France, Germany, and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2013.
The Company and certain of its subsidiaries have ongoing tax controversies with various tax authorities in the U.S., Canada, China, and France. The Company does not believe that resolution of these controversies will have a material impact on its financial position or results of operations.
In accordance with the Company’s policy, the remaining undistributed earnings of its non-U.S. subsidiaries remain indefinitely reinvested as of September 24, 2016, as they are required to fund needs outside the U.S. and cannot be repatriated in a manner that is substantially tax free.
Income tax expense related to change in unrecognized pension gains, losses, and prior service costs was $0.1 million and $0.2 million for the three months ended September 24, 2016 and September 26, 2015, respectively. Income tax expense related to changes in unrecognized pension gains, losses, and prior service costs was $0.4 million and $0.7 million for the nine months ended September 24, 2016 and September 26, 2015, respectively.