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Income Taxes | 12 Months Ended
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Dec. 29, 2018
Income Taxes |
Income Taxes | 12. Income Taxes Effects of the Tax Cuts and Jobs Act On December 22, 2017, the Tax Act was signed into U.S. law. The Tax Act significantly changes the Internal Revenue Code of 1986, as amended. The Tax Act, among other things, includes changes to the U.S. corporate tax rate, expands limitations on the deductibility of meals and entertainment, eliminates the exception to the section 162(m) limitation on the deductibility of the compensation paid to certain executive officers for “qualified performance-based compensation,” allows for the expensing of capital expenditures, migrates from a “worldwide” system of taxation to a territorial system, and includes a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. ASC Topic 740, “Accounting for Income Taxes,” requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018. Given the significance of the legislation, the U.S. Securities and Exchange Commission staff issued SAB 118, which allows registrants to record provisional amounts during a one year "measurement period" similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. SAB 118 summarizes a three-step process to be applied at each reporting period to account for and disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the change in tax law where accounting is not complete, but a reasonable estimate has been determined; and (3) current or deferred tax amounts reflected in accordance with law prior to the enactment of the change in tax law because the accounting of the effects of the change in tax law are not complete and a reasonable estimate has not been determined, together with qualitative disclosure of the effects of the changes in tax law for which the accounting is not compete, the reason why the accounting is not complete, and the additional information that is needed to be obtained, prepared or analyzed in order to complete the accounting. During fiscal 2018, CRA applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Act. As of December 29, 2018, CRA has completed its accounting for all the tax effects of the Tax Act. As further discussed below, during fiscal 2018, CRA recognized an adjustment of $0.3 million to the provisional amounts recorded at December 30, 2017 and included this adjustment as a component of income tax expense from continuing operations. Deferred tax assets and liabilities: In response to the Tax Act, CRA remeasured its U.S. related deferred tax assets and liabilities based on the expected rates at which they may reverse in the future, which is generally 21%. CRA recorded a provisional amount of $3.6 million as of December 30, 2017 related to the remeasurement of its deferred tax balances. Upon refinement of its calculations during fiscal 2018, CRA adjusted its provisional amount by $0.1 million. Additionally, as a result of anticipated guidance in connection with the deductibility of compensation paid to certain executive officers for "qualified performance-based compensation," CRA recorded a provisional amount of $0.2 million. Both adjustments were included as a component of income tax expense from continuing operations, the impact of which was to increase the fiscal 2018 effective tax rate from 21.4% to 22.3%. CRA considers its accounting for the remeasurement of deferred tax assets and liabilities as well as accounting for changes to executive compensation to be complete. Foreign Tax Effects The Tax Act includes a one-time mandatory repatriation transition tax on the net accumulated earnings and profits of a U.S. taxpayer's foreign subsidiaries. At December 30, 2017, CRA did not record any transition tax liability as it is in an accumulated deficit position with respect to its foreign subsidiaries based on its earnings and profits ("E&P") analysis. CRA considers its accounting for the transition tax to be complete. The Tax Act imposes an additional minimum tax on certain corporations that make certain "base erosion payments" to foreign related parties. This Base Erosion Anti-Abuse Tax, or "BEAT," is in addition to any other tax imposed on "applicable taxpayers." An applicable taxpayer is a corporation that has average annual gross receipts for the three-taxable year period ending with the preceding tax year of at least $500.0 million and has a "base erosion percentage" of three percent or more for the tax year. Due to CRA not meeting the revenue threshold, this tax is not applicable to CRA. The Tax Act subjects a U.S. shareholder to current tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred. As of the December 29, 2018 reporting period, CRA has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. As such, CRA has included a nominal GILTI provision associated with current-year operations solely within the estimated annual effective tax rate ("EAETR") and has not provided additional GILTI on deferred items. The Tax Act allows U.S. corporations to take a deduction related to its foreign-derived intangible income ("FDII") produced in the U.S. CRA has calculated its FDII deduction for the fiscal year ended December 29, 2018 to be $0.1 million. The components of income before provision for income taxes are as follows (in thousands):
|  | 2018 |  | 2017 |  | 2016
|  | (52 weeks) |  | (52 weeks) |  | (52 weeks)
Income before provision for income taxes: |  |  |  |  |  |  |  |  |
U.S. |  | $ | 21,118 |  | $ | 12,248 |  | $ | 16,905
Foreign |  |  | 7,815 |  |  | 2,916 |  |  | 4,984
Total |  | $ | 28,933 |  | $ | 15,164 |  | $ | 21,889
The provision (benefit) for income taxes consists of the following (in thousands):
|  | Fiscal |  | Fiscal |  | Fiscal
|  | Year |  | Year |  | Year
|  | 2018 |  | 2017 |  | 2016
|  | (52 weeks) |  | (52 weeks) |  | (52 weeks)
Currently payable: |  |  |  |  |  |  |  |  |
Federal |  | $ | 4,015 |  | $ | 4,515 |  | $ | (770)
Foreign |  |  | 1,487 |  |  | 493 |  |  | 664
State |  |  | 1,788 |  |  | 804 |  |  | (637)
|  |  | 7,290 |  |  | 5,812 |  |  | (743)
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | (384) |  |  | 1,809 |  |  | 5,562
Foreign |  |  | (88) |  |  | (85) |  |  | 124
State |  |  | (357) |  |  | (73) |  |  | 2,713
|  | $ | (829) |  | $ | 1,651 |  | $ | 8,399
|  | $ | 6,461 |  | $ | 7,463 |  | $ | 7,656
A reconciliation of CRA’s tax rates with the federal statutory rate is as follows:
|  | Fiscal Year |  | Fiscal Year |  | Fiscal Year |
|  | 2018 |  | 2017 |  | 2016 |
Federal statutory rate |  | 21.0 | % | 35.0 | % | 35.0 | %
State income taxes, net of federal income tax benefit |  | 4.9 |  | 3.9 |  | 6.1 |
Tax law changes |  | 0.9 |  | 23.7 |  | (0.3) |
Share-based compensation |  | (6.3) |  | (15.8) |  | — |
Nondeductible/nontaxable items |  | 2.9 |  | 5.1 |  | 3.0 |
Foreign rate differential |  | — |  | (2.8) |  | (3.3) |
Losses benefited/change in valuation allowance |  | — |  | (0.3) |  | (4.9) |
Uncertain tax positions |  | (1.1) |  | (0.1) |  | (0.2) |
Other |  | — |  | 0.5 |  | (0.4) |
|  | 22.3 | % | 49.2 | % | 35.0 | %
The components of CRA’s deferred tax assets (liabilities) are as follows (in thousands):
|  | December 29, |  | December 30,
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Accrued compensation and related expense |  | $ | 12,691 |  | $ | 11,445
Allowance for doubtful accounts |  |  | 1,694 |  |  | 2,009
Net operating loss carryforwards |  |  | 402 |  |  | 479
Accrued expenses and other |  |  | 5,298 |  |  | 4,356
Total gross deferred tax assets |  |  | 20,085 |  |  | 18,289
Less: valuation allowance |  |  | — |  |  | (8)
Total deferred tax assets net of valuation allowance |  |  | 20,085 |  |  | 18,281
Deferred tax liabilities: |  |  |  |  |  |
Goodwill and other intangible asset amortization |  |  | 4,295 |  |  | 3,802
GNU capital gain upon distribution |  |  | — |  |  | 20
Property and equipment |  |  | 6,762 |  |  | 6,111
Total deferred tax liabilities |  |  | 11,057 |  |  | 9,933
Net deferred tax assets |  | $ | 9,028 |  | $ | 8,348
At December 29, 2018, CRA had foreign net operating losses of $1.2 million with an indefinite life. The aggregate changes in the balances of gross unrecognized tax benefits were as follows (in thousands):
|  | December 29, |  | December 30,
|  | 2018 |  | 2017
Balance at beginning of period |  | $ | 1,031 |  | $ | 1,059
Additions for tax positions taken during the prior years |  |  | 132 |  |  | 9
Reductions for tax positions taken during prior years |  |  | — |  |  | —
Additions for tax positions taken during the current year |  |  | — |  |  | —
Reductions as a result of a lapse of the applicable statute of limitations |  |  | (296) |  |  | (37)
Settlements with tax authorities |  |  | — |  |  | —
Balance at end of the period |  | $ | 867 |  | $ | 1,031
CRA files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which CRA has unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, CRA believes that its unrecognized tax benefits reflect the most likely outcome. CRA adjusts these unrecognized tax benefits, and the associated interest, in light of changing facts and circumstances. At the end of fiscal 2018, CRA had $0.1 million of interest included in its provision for income taxes, net of federal and state benefit , which is consistent with fiscal 2017. CRA’s total unrecognized tax benefit at the end of fiscal 2018 is $1.0 million. Of the total unrecognized tax benefit balance, $0.1 million is offset by a future tax deduction when recognized. Settlement of any particular position could require the use of cash. Of the total $0.9 million balance at the end of fiscal 2018, a favorable resolution would result in $0.8 million being recognized as a reduction to the effective income tax rate in the period of resolution. It is reasonably likely that $0.6 million of gross unrecognized tax benefits will reverse within the next twelve months due to lapse of the applicable statute of limitations or exam closures. The number of years with open tax audits varies depending on the tax jurisdiction. CRA’s major taxing jurisdiction is the United States where CRA is no longer subject to U.S. federal examinations by the Internal Revenue Service for years before fiscal 2015. Within the significant states where CRA is subject to income tax, CRA is no longer subject to examinations by state taxing authorities before fiscal 2014. CRA’s United Kingdom subsidiary’s corporate tax returns are no longer subject to examination by Her Majesty’s Revenue and Customs for fiscal years before fiscal 2017. During fiscal 2018, an examination by the Internal Revenue Service for fiscal 2014 was completed. CRA believes its reserves for uncertain tax positions are adequate. CRA has not provided for deferred income taxes or foreign withholding taxes on undistributed earnings and other basis differences that may exist from its foreign subsidiaries as of December 29, 2018 because such earnings are considered to be indefinitely reinvested. CRA does not rely on these unremitted earnings as a source of funds for its domestic business as it expects to have sufficient cash flow in the U.S. to fund its U.S. operational and strategic needs. If CRA were to repatriate its foreign earnings that are indefinitely reinvested, it would accrue substantially no additional tax expense.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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