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Income Taxes
 3 Months Ended
Apr. 02, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company calculates its interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes. At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.
For the three months ended April 2, 2023 and April 3, 2022, the Company recognized a Provision for income taxes of $11.2 million and $140.7 million, respectively, in relation to Income before provision for income taxes of $60.0 million and $620.6 million, respectively, resulting in effective tax rates of 18.7% and 22.7%, respectively. For the three months ended April 2, 2023, the effective tax rate was impacted by income tax benefits related to non-U.S. earnings being taxed at rates that are different than the U.S. statutory rate, R&D credits, foreign tax credits, and foreign exchange losses, partially offset by income taxes owed in U.S. states and Global Intangible Low-Tax Income. For the three months ended April 3, 2022, the effective tax rate was impacted primarily by income taxes owed in U.S. states.
The balance of unrecognized tax benefits at April 2, 2023, not including interest and penalties, was $39.9 million, of which $28.2 million could affect the effective income tax rate in future periods, if recognized. The Company also recognizes interest and penalties related to unrecognized tax benefits in tax expense. At April 2, 2023, the Company had approximately $8.2 million of interest and penalties accrued related to unrecognized tax benefits. The Company estimates that within the next 12 months, its uncertain tax positions, excluding interest, will decrease by $2.0 million.
The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized credits, the Company’s federal tax years from 2012 and onwards are subject to examination by the U.S. authorities. The Company’s state and foreign tax years for 2001 and onwards are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter.
Indemnification Assets
On January 16, 2014, Ortho entered into a stock and asset purchase agreement of (i) certain assets and liabilities and (ii) all of the equity interests and substantially all of the assets and liabilities of certain entities, which, together with their subsidiaries, comprised the Ortho business from Johnson & Johnson. The agreement generally provided that Johnson & Johnson retained all income tax liabilities accrued as of the date of the acquisition, including reserves for unrecognized tax benefits. The indemnification receivable from Johnson & Johnson totaled $16.2 million and $16.8 million as of April 2, 2023 and January 1, 2023, respectively, and is included as a component of Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheet. The Company recorded $0.3 million of interest and penalties during the three months ended April 2, 2023.