XML 43 R27.htm IDEA: XBRL DOCUMENT v3.22.2
INCOME TAXES
 9 Months Ended
Jul. 03, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The effective tax rate for the three and nine month periods ended July 3, 2022 and July 4, 2021 was as follows:
Three Month Periods EndedNine Month Periods Ended
Effective tax rateJuly 3, 2022July 4, 2021July 3, 2022July 4, 2021
SBH40.2 %122.4 %28.5 %36.3 %
SB/RH34.9 %110.3 %28.6 %35.7 %
The estimated annual effective tax rate applied to the three and nine month periods ended July 3, 2022 differs from the US federal statutory rate of 21% principally due to income earned outside the U.S. that is subject to U.S. tax, including the U.S. tax on global intangible low taxed income (“GILTI”), certain nondeductible expenses, foreign rates that differ from the U.S. federal statutory rate, and state income taxes. The Company has U.S. net operating loss carryforwards ("NOL"), which do not allow it to take advantage of the foreign-derived intangible income deduction. The Company’s federal effective tax rate on GILTI is therefore 21%.
During the nine month period ended July 3, 2022, the Company recorded a $3.2 million tax benefit as an adjustment to the estimated benefit recorded in Fiscal 2021 for the Final Regulations issued under Internal Revenue Code Section 951A relating to the treatment of income that is subject to a high rate of tax under the GILTI regime. The Company completed and filed the amended return implementing these Regulations during the nine month period ending July 3, 2022. The Company also recorded a $2.5 million tax benefit during the nine month period ended July 3, 2022 for windfalls associated with the vesting of share compensation during the year. The Company generated a pretax loss on continuing operations year to date, so additional discrete tax benefits result in an increase to the tax rate.
In addition, the Company recorded $2.2 million of tax expense during the three and nine month periods ended July 3, 2022 for taxes associated with preparing the Company for a strategic separation of the HPC segment. The Company expects to record additional taxes related to the transactions necessary to prepare for a strategic separation in the three month period ending September 30, 2022.
On April 4, 2022, the U.S. District Court for the District of Colorado ruled that the IRC Section 245A temporary regulations (“245A Regulations”) adopted by the Treasury Department in June of 2019 were invalid. The ruling is expected to be appealed, and the Company has been advised that similar challenges are ongoing in other U.S. districts. Subsequent to the end of the quarter, the Company filed a protective amended U.S. income tax return consistent with the 245A Regulations being invalid. The Company has determined that this position is not more likely than not to be upheld and therefore did not record a tax benefit for this amended return in the period ended July 3, 2022. Should the 245A Regulations ultimately be found invalid, the Company estimates it would recognize a tax benefit of approximately $64.2 million.
As of July 3, 2022, and September 30, 2021, there was $8.3 million of income tax receivable and $8.0 million of income taxes payable, respectively, with its parent company, on the SB/RH Condensed Consolidated Statements of Financial Position, calculated as if SB/RH were a separate taxpayer.