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Income Taxes | 12 Months Ended
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Dec. 26, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the U.S. enacted legislation referred to as the "Tax Act". Among other things, the Tax Act reduced the U.S. corporate federal income tax rate from 35% to 21%, added base broadening provisions which limit deductions and address excessive international tax planning, imposed a Toll Charge on accumulated earnings of certain non-U.S. subsidiaries and enabled repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. In the fourth quarter of 2018, within the measurement period outlined in SEC SAB No. 118, the Company finalized its estimates of the impact of the Tax Act and recorded a charge of $3.2 million, including $2.3 million for the Toll Charge and $0.9 million for the net impact of other items. In addition, the Company recorded $7.0 million for the Toll Charge associated with IXYS as part of the IXYS acquisition purchase price allocation. This was reflected in the opening balance sheet as an increase to goodwill and other long-term liabilities. The Company elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act. The long-term portion of this Toll Charge which remains payable as of December 26, 2020, totaling $20.8 million, is recorded in Other long-term liabilities, and the anticipated 2021 annual installment payment of $3.0 million is included in Accrued income taxes, on the Consolidated Balance Sheet as of December 26, 2020. The Company did not elect to pay the 2018 IXYS Toll Charge over the eight year period provided by the Tax Act and therefore there is no 2018 IXYS Toll Charge which remains payable as of December 26, 2020. One of the base broadening provisions of the Tax Act is commonly referred to as the “GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense. Domestic and foreign income (loss) before income taxes is as follows:
(in thousands) | 2020 |  | 2019 |  | 2018
Domestic | $ | (16,732) |  |  | $ | (11,970) |  |  | $ | (49,995) |
Foreign | 177,985 |  |  | 177,854 |  |  | 254,937 |
Income before income taxes | $ | 161,253 |  |  | $ | 165,884 |  |  | $ | 204,942 |
Federal, state and foreign income tax expense (benefit) consists of the following:
(in thousands) | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | 437 |  |  | $ | (3,495) |  |  | $ | (3,193) |
State | 203 |  |  | 834 |  |  | 119 |
Foreign | 33,841 |  |  | 30,610 |  |  | 48,130 |
Subtotal | 34,481 |  |  | 27,949 |  |  | 45,056 |
Deferred: |  |  |  |  |
Federal and State | (5,354) |  |  | 1,839 |  |  | (3,896) |
Foreign | 2,140 |  |  | (2,986) |  |  | (783) |
Subtotal | (3,214) |  |  | (1,147) |  |  | (4,679) |
Provision for income taxes | $ | 31,267 |  |  | $ | 26,802 |  |  | $ | 40,377 |
The current federal tax benefit for 2019 includes a benefit of $3.3 million from the recognition of previously unrecognized tax benefits (and the reversal of the related accrued interest) due to a lapse in the statute of limitations. The current federal tax benefit for 2018 includes the benefit of current year losses (which served to partially offset the amount of the IXYS Toll Charge that would otherwise have been payable). A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below:
(in thousands) | 2020 |  | 2019 |  | 2018
Tax expense at statutory rate of 21% | $ | 33,863 |  |  | $ | 34,836 |  |  | $ | 43,038 |
Non-U.S. income tax rate differential | (19,730) |  |  | (22,457) |  |  | (20,472) |
Tax impact of non-deductible goodwill impairment charge | 5,642 |  |  | — |  |  | — |
Tax on unremitted earnings | 3,955 |  |  | 2,136 |  |  | 4,660 |
Net impact associated with the GILTI tax provisions | 3,731 |  |  | 6,469 |  |  | 5,075 |
Non-U.S. losses and expenses with no tax benefit | 2,774 |  |  | 6,570 |  |  | 3,107 |
Certain changes in unrecognized tax benefits and related accrued interest | 2,160 |  |  | (1,468) |  |  | 208 |
State and local taxes, net of federal tax benefit | (584) |  |  | 1,080 |  |  | (1,238) |
Nondeductible professional fees | 236 |  |  | 195 |  |  | 1,001 |
2017 Toll Charge (2018 adjustment) | — |  |  | — |  |  | 2,278 |
Provisional Tax Act impact other than Toll Charge (2018 adjustment) | — |  |  | — |  |  | 966 |
Other, net | (780) |  |  | (559) |  |  | 1,754 |
Provision for income taxes | $ | 31,267 |  |  | $ | 26,802 |  |  | $ | 40,377 |
Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at December 26, 2020 and December 28, 2019, are as follows:
(in thousands) | 2020 |  | 2019
Deferred tax assets: |  |  |
Accrued expenses and reserves | $ | 31,123 |  |  | $ | 28,294 |
Domestic and non-U.S. net operating loss carryforwards | 24,763 |  |  | 10,511 |
Non-U.S. interest expense carryforwards | 10,352 |  |  | 5,324 |
U.S. research credit carryforwards | 3,724 |  |  | 2,581 |
Capitalized expenses | 4,178 |  |  | 2,400 |
U.S. foreign tax credit carryforwards | 772 |  |  | 1,320 |
Other | 117 |  |  | 1,261 |
Gross deferred tax assets | 75,029 |  |  | 51,691 |
Less: Valuation allowance | (13,131) |  |  | (5,957) |
Total deferred tax assets | 61,898 |  |  | 45,734 |
Deferred tax liabilities: |  |  |
Excess of book basis over the tax basis for intangible assets and goodwill | 76,472 |  |  | 71,229 |
Tax on unremitted earnings | 14,223 |  |  | 12,968 |
Unrealized foreign currency exchange gains | 5,719 |  |  | — |
Excess of book basis over the tax basis for property, plant, and equipment | 4,394 |  |  | 3,231 |
Total deferred tax liabilities | 100,808 |  |  | 87,428 |
Net deferred tax liabilities | $ | 38,910 |  |  | $ | 41,694 |
The deferred tax asset valuation allowance is related to certain non-U.S. net operating loss and non-U.S. interest expense carryforwards which are not expected to be realized. The remaining U.S. and non-U.S. net operating loss and non-U.S. interest expense carryforwards either have no expiration date or are expected to be utilized prior to expiration. No deferred tax asset nor valuation allowance has been recorded for certain U.S. and non-U.S. net operating loss carryforwards for which the possibility of usage has been determined to be remote. The Company paid income taxes of $35.2 million, $47.6 million, and $46.2 million in 2020, 2019, and 2018, respectively, and received income tax refunds of $7.6 million, $7.1 million, and $4.3 million in 2020, 2019, and 2018, respectively. Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. The Company believes the determination of the amount of such deferred income taxes is impractical as it would depend upon income tax laws and circumstances at the time of the hypothetical distributions or dispositions. As of December 26, 2020, unremitted earnings of the Company’s non-U.S. subsidiaries was approximately $767 million. A distribution of such earnings will generally not be subject to U.S. federal income tax. The Company recognized deferred tax liabilities of $14.2 million ($13.9 million for non-U.S. taxes net of related U.S. foreign tax credits, and $0.3 million for U.S. state taxes) as of December 26, 2020 and $13.0 million ($12.6 million for non-U.S. taxes net of related U.S. foreign tax credits, and $0.4 million for U.S. state taxes) as of December 28, 2019, related to taxes on certain non-U.S. earnings which are not considered to be permanently reinvested. Some of these non-U.S. taxes will provide a U.S. federal income tax benefit as a foreign tax credit, and the amounts as of December 26, 2020 and December 28, 2019 are net of such benefit. The Company has two subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply for three-year periods, subject to extension. The tax holiday for one of these subsidiaries expired at the end of 2020, and it will seek an extension. Such tax holidays contributed $4.1 million in tax benefits, or $0.17 per diluted share, during 2020. Future year tax benefits will depend upon the Company’s ability to obtain extensions, and the level of income earned by the two applicable subsidiaries. A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 26, 2020, December 28, 2019, and December 29, 2018 is as follows:
(in thousands) | Unrecognized Tax Benefits
Balance at December 29, 2018 | $ | 18,259 |
Additions for tax positions taken in the current year | 1,305 |
Decreases due to a lapse in the statute of limitations | (2,758) |
Other | (85) |
Balance at December 28, 2019 | 16,721 |
Additions for tax positions taken in the current year | 700 |
Decreases due to a lapse in the statute of limitations | (103) |
Other | 119 |
Balance at December 26, 2020 | 17,437 |
The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The company recognized such interest expense of $1.6 million, $1.3 million (net of a $0.6 million decrease due to a lapse in the statute of limitations), and $1.5 million (net of a $0.3 million decrease due to a lapse in the statute of limitations) in 2020, 2019, and 2018, respectively. Accrued interest for such matters included in Other long-term liabilities within the Consolidated Balance Sheets was $8.8 million and $7.2 million as of December 26, 2020 and December 28, 2019, respectively. The amount of unrecognized tax benefits included in Other long-term liabilities within the Consolidated Balance Sheets was $17.4 million and 16.7 million as of December 26, 2020 and December 28, 2019, respectively. The December 26, 2020 total represents the net amount of tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. Of this amount, only an insignificant amount may be recognized in 2021 based upon the possible lapse in the statute of limitations. None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The U.S. federal statute of limitations remains open for the Company for the 2017 tax year and later years. The U.S. federal statute of limitations remains open for the IXYS pre-acquisition tax period ending January 17, 2018. Non-U.S. and U.S. state statutes of limitations generally range from three to seven years, although certain jurisdictions do not have a statute expiration. Non-U.S. tax examinations occur from time to time, including examinations currently in process in Italy, the Philippines, and Hong Kong. The company does not expect to recognize a significant amount of additional tax expense as a result of concluding these examinations. The Company has been informed that it will receive a notice of assessment from the Canadian tax authorities as a consequence of concluding their recent audit. Although the exact amount of the assessment is not known, it is estimated to approximate $3 million. The Company believes the assessment is in error and intends to appeal. The Company does not expect to recognize a significant amount of additional tax expense upon conclusion of such appeal.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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