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INCOME TAXES | 12 Months Ended
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Dec. 28, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income from continuing operations before income taxes and the related provision for income taxes are presented below:
| Fiscal Year
| 2019 |  | 2018 |  | 2017
| (in thousands)
Income from continuing operations before income taxes: |  |  |  |  |  |
U.S. | $ | 108,326 |  |  | $ | 95,062 |  |  | $ | 123,896 |
Non-U.S. | 195,758 |  |  | 186,619 |  |  | 173,059 |
| $ | 304,084 |  |  | $ | 281,681 |  |  | $ | 296,955 |
Income tax provision (benefit): |  |  |  |  |  |
Current: |  |  |  |  |  |
Federal | $ | 18,101 |  |  | $ | 17,390 |  |  | $ | 93,871 |
Foreign | 43,489 |  |  | 38,557 |  |  | 37,150 |
State | 9,915 |  |  | 8,837 |  |  | 12,361 |
Total current | 71,505 |  |  | 64,784 |  |  | 143,382 |
Deferred: |  |  |  |  |  |
Federal | (3,226 | ) |  | (7,145 | ) |  | 9,416 |
Foreign | (17,111 | ) |  | (4,104 | ) |  | 14,953 |
State | (1,145 | ) |  | 928 |  |  | 3,618 |
Total deferred | (21,482 | ) |  | (10,321 | ) |  | 27,987 |
| $ | 50,023 |  |  | $ | 54,463 |  |  | $ | 171,369 |
Included in the fiscal year 2019 tax expense of $50.0 million is a $20.6 million tax benefit for the recognition of $315.5 million of historical foreign net operating loss deferred tax assets, partially offset by a $294.9 million valuation allowance. Prior to 2019, these deferred tax assets were not recognized as the Company believed the ability to utilize the net operating losses was remote. As a result of both U.S. Tax Reform and European tax legislation, the Company made changes in 2019 to its financing structure, resulting in the ability to utilize a portion of the net operating losses previously considered remote in nature. The Company’s accounting for the elements of U.S. Tax Reform is complete based on all published tax law and corresponding guidance. However, proposed and final clarifying guidance is anticipated for various aspects of U.S. Tax Reform which are relevant to the Company. The effects of any additional guidance will be recorded in the period such guidance is issued. Reconciliations of the statutory U.S. federal income tax rate to effective tax rates are as follows:
| Fiscal Year
| 2019 |  | 2018 |  | 2017
U.S. statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 35.0 | %
Foreign tax rate differences | 2.7 |  |  | 0.5 |  |  | (6.8 | )
State income taxes, net of federal tax benefit | 2.6 |  |  | 2.4 |  |  | 2.0 |
Non-deductible compensation | 1.7 |  |  | 1.0 |  |  | 1.3 |
Research tax credits and enhanced deductions | (4.4 | ) |  | (2.9 | ) |  | (2.4 | )
Stock-based compensation | (2.2 | ) |  | (2.1 | ) |  | (3.2 | )
Enacted tax rate changes | (0.7 | ) |  | (0.1 | ) |  | (4.2 | )
Transition Tax | — |  |  | (0.3 | ) |  | 24.8 |
Impact of tax uncertainties | (2.6 | ) |  | (1.1 | ) |  | (0.4 | )
Tax on unremitted earnings | 1.7 |  |  | 1.2 |  |  | 7.3 |
Impact of acquisitions and restructuring | 2.7 |  |  | 0.3 |  |  | 3.8 |
Net operating loss deferred tax asset recognition, net of valuation allowance (NOL DTA) | (6.8 | ) |  | — |  |  | — |
Other | 0.8 |  |  | (0.6 | ) |  | 0.5 |
Effective income tax rate | 16.5 | % |  | 19.3 | % |  | 57.7 | %
The components of deferred tax assets and liabilities are as follows:
| December 28, 2019 |  | December 29, 2018
| (in thousands)
Deferred tax assets: |  |  |
Compensation | $ | 40,582 |  |  | $ | 36,724 |
Accruals and reserves | 13,687 |  |  | 13,183 |
Net operating loss and credit carryforwards | 367,269 |  |  | 35,679 |
Operating lease liability | 33,785 |  |  | — |
Other | 7,181 |  |  | 5,060 |
Valuation allowance | (309,962 | ) |  | (9,788 | )
Total deferred tax assets | 152,542 |  |  | 80,858 |
Deferred tax liabilities: |  |  |
Goodwill and other intangibles | (174,847 | ) |  | (154,743 | )
Depreciation related | (29,317 | ) |  | (19,373 | )
Venture capital investments | (12,806 | ) |  | (10,557 | )
Tax on unremitted earnings | (17,282 | ) |  | (14,140 | )
Right-of-use assets | (34,953 | ) |  | — |
Other | (5,961 | ) |  | (2,296 | )
Total deferred tax liabilities | (275,166 | ) |  | (201,109 | )
Net deferred taxes | $ | (122,624 | ) |  | $ | (120,251 | )
The valuation allowance increased by $300.2 million from $9.8 million as of December 29, 2018 to $310.0 million as of December 28, 2019. The increase is primarily related to the recognition of $315.5 million of net operating loss deferred tax assets due to changes in the Company’s financing structure, $294.9 million of which the Company does not believe is more likely than not to be utilized. As of December 28, 2019, the Company had foreign net operating loss carryforwards of $337.3 million, as compared to $35.7 million as of December 29, 2018. Of this amount, $23.3 million are definite-lived and begin to expire in 2020, and the remainder of $314.0 million can be carried forward indefinitely. The Company has tax credit carryforwards of $30.1 million, which will begin to expire after 2035 and beyond. Additionally, the Company records a benefit to operating income for research and development and other credits in Quebec, France, the Netherlands, and the U.K. related to its DSA facilities. The Company has recognized its deferred tax assets on the belief that it is more likely than not that they will be realized. The only exceptions relate to deferred tax assets primarily for net operating losses in Hong Kong, Luxembourg, certain capital losses, and fixed assets in the U.K. A reconciliation of the Company’s beginning and ending unrecognized income tax benefits is as follows:
| Fiscal Year
| 2019 |  | 2018 |  | 2017
| (in thousands)
Beginning balance | $ | 18,827 |  |  | $ | 24,710 |  |  | $ | 24,186 |
Additions to tax positions for current year | 3,691 |  |  | 2,477 |  |  | 1,791 |
Additions to tax positions for prior years | 5,234 |  |  | — |  |  | 1,428 |
Reductions to tax positions for prior years | (1,033 | ) |  | (4,543 | ) |  | — |
Settlements | (274 | ) |  | (3,380 | ) |  | (1,754 | )
Expiration of statute of limitations | (6,780 | ) |  | (437 | ) |  | (941 | )
Ending balance | $ | 19,665 |  |  | $ | 18,827 |  |  | $ | 24,710 |
The $0.8 million increase in unrecognized income tax benefits during fiscal year 2019 as compared to the corresponding period in 2018 is primarily attributable to increases due to business combinations and an additional year of Canadian SR&ED credit, partially offset by expiration of statutes of limitations. The amount of unrecognized income tax benefits that, if recognized, would favorably impact the effective tax rate was $17.0 million as of December 28, 2019 and $17.6 million as of December 29, 2018. The $0.6 million decrease is primarily attributable to expiration of statutes of limitations, partially offset by increases due to business combinations and an additional year of Federal Canadian SR&ED credit. It is reasonably possible as of December 28, 2019 that the liability for unrecognized tax benefits for the uncertain tax position will decrease by $4.0 million over the next twelve month period, primarily as a result of lapsing statutes of limitations. The Company continues to recognize interest and penalties related to unrecognized income tax benefits in income tax expense. The total amount of accrued interest related to unrecognized income tax benefits as of December 28, 2019 and December 29, 2018 was $2.3 million and $2.7 million, respectively. There were no accrued penalties related to unrecognized income tax benefits as of December 28, 2019 or as of December 29, 2018. The Company conducts business in a number of tax jurisdictions. As a result, it is subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the U.S., the U.K., China, France, Germany, and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2016. The Company and certain of its subsidiaries have ongoing tax controversies in the U.S., France and Canada. The Company does not anticipate resolution of these audits will have a material impact on its financial statements.

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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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