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INCOME TAXES | 12 Months Ended
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Dec. 25, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 6. INCOME TAXES The components of income (loss) from continuing operations before income taxes consisted of the following:
(In millions) |  | 2021 |  |  | 2020 |  |  | 2019 |
United States |  | $ | 173 |  |  | $ | (30 | ) |  | $ | 151 |
Foreign |  |  | 58 |  |  |  | (8 | ) |  |  | 27 |
Total income (loss) from continuing operations before income taxes |  | $ | 231 |  |  | $ | (38 | ) |  | $ | 178 |
The income tax expense (benefit) related to income (loss) from continuing operations consisted of the following:
(In millions) |  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 14 |  |  | $ | (7 | ) |  | $ | (57 | )
State |  |  | 8 |  |  |  | 17 |  |  |  | 4 |
Foreign |  |  | 5 |  |  |  | 4 |  |  |  | 7 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 13 |  |  |  | 19 |  |  |  | 84 |
State |  |  | 2 |  |  |  | (5 | ) |  |  | 10 |
Foreign |  |  | 2 |  |  |  | (3 | ) |  |  | 3 |
Total income tax expense |  | $ | 44 |  |  | $ | 25 |  |  | $ | 51 |
The following is a reconciliation of income taxes at the U.S. Federal statutory rate to the provision for income taxes:
(In millions) |  | 2021 |  |  | 2020 |  |  | 2019 |
Federal tax computed at the statutory rate |  | $ | 48 |  |  | $ | (8 | ) |  | $ | 37 |
State taxes, net of Federal benefit |  |  | 10 |  |  |  | 4 |  |  |  | 8 |
Foreign income taxed at rates other than Federal |  |  | (5 | ) |  |  | 4 |  |  |  | (2 | )
Increase (decrease) in valuation allowance |  |  | (3 | ) |  |  | (3 | ) |  |  | 8 |
Non-deductible Goodwill impairments |  |  | — |  |  |  | 24 |  |  |  | — |
Other non-deductible expenses and settlements |  |  | 5 |  |  |  | 4 |  |  |  | 3 |
Tax basis differences in investment in subsidiaries |  |  | — |  |  |  | — |  |  |  | — |
Non-taxable income and additional deductible expenses |  |  | (3 | ) |  |  | (3 | ) |  |  | (4 | )
Change in unrecognized tax benefits |  |  | — |  |  |  | — |  |  |  | 2 |
Impact of stock compensation shortfall |  |  | (6 | ) |  |  | 2 |  |  |  | — |
Other items, net |  |  | (2 | ) |  |  | 1 |  |  |  | (1 | )
Income tax expense |  | $ | 44 |  |  | $ | 25 |  |  | $ | 51 |
During 2021 and 2020, the mix of income and losses across jurisdictions, although still applicable, has become less of a factor in influencing the Company’s effective tax rates due to limited international operations and improved operating results. The Company’s effective tax rates were 19%, (66%) and 29% in 2021, 2020 and 2019, respectively. For the year 2021, the Company’s effective rate was primarily impacted by the recognition of a tax windfall associated with stock-based compensation awards and recognition of tax benefits due to an agreement reached with the IRS related to a prior tax position. These factors, along with the impact of state taxes and the mix of income and losses across U.S. and non-U.S. jurisdictions, caused the Company’s effective tax rate to differ from the statutory rate of 21%. The Company’s effective tax rate for prior periods has varied considerably primarily due to the impact of goodwill impairment, state taxes, excess tax deficiencies associated with stock-based compensation awards and certain nondeductible items and the mix of income and losses across U.S. and non-U.S. jurisdictions. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rates in future quarters. The Company continues to have a U.S. valuation allowance for certain U.S. Federal credits and state tax attributes, which relate to deferred tax assets that require either certain types of income or for income to be earned in certain jurisdictions in order to be realized. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods. The Company operates in several foreign jurisdictions with income tax rates that differ from the U.S. Federal statutory rate, which resulted in an expense for 2020 presented in the effective tax rate reconciliation. Significant foreign tax jurisdictions for which the Company realized such expense are Canada and Puerto Rico after the sale of the other international operations. The components of deferred income tax assets and liabilities consisted of the following:
|  | December 25, |  |  | December 26, |
(In millions) |  | 2021 |  |  | 2020 |
U.S. and foreign loss carryforwards |  | $ | 61 |  |  | $ | 71 |
Operating lease right-of-use assets |  |  | 273 |  |  |  | 327 |
Pension and other accrued compensation |  |  | 47 |  |  |  | 52 |
Basis difference in subsidiary held for sale |  |  | 23 |  |  |  | — |
Accruals for facility closings |  |  | 2 |  |  |  | 2 |
Inventory |  |  | 7 |  |  |  | 8 |
Self-insurance accruals |  |  | 14 |  |  |  | 15 |
Deferred revenue |  |  | 10 |  |  |  | 11 |
U.S. and foreign income tax credit carryforwards |  |  | 70 |  |  |  | 78 |
Allowance for bad debts |  |  | 5 |  |  |  | 5 |
Accrued expenses |  |  | 18 |  |  |  | 19 |
Basis difference in fixed assets |  |  | 36 |  |  |  | 36 |
Gross deferred tax assets |  |  | 566 |  |  |  | 624 |
Valuation allowance |  |  | (93 | ) |  |  | (99 | )
Deferred tax assets |  |  | 473 |  |  |  | 525 |
Internal software |  |  | 2 |  |  |  | 3 |
Operating lease liabilities |  |  | 251 |  |  |  | 297 |
Intangibles |  |  | 5 |  |  |  | 8 |
Undistributed foreign earnings |  |  | — |  |  |  | 2 |
Deferred tax liabilities |  |  | 258 |  |  |  | 310 |
Net deferred tax assets |  | $ | 215 |  |  | $ | 215 |
As of December 25, 2021, and December 26, 2020, deferred income tax liabilities amounting to $4 million and $4 million, respectively, are included in deferred income taxes and other long-term liabilities. As of December 25, 2021, the Company has utilized all of its U.S. Federal net operating loss (“NOL”) carryforwards. The Company has $238 million of foreign and $866 million of state NOL carryforwards. Of the state NOL carryforwards, $52 million will expire in 2022 and the remaining balance will expire between 2023 and 2040. The Company has no Federal capital loss carryover available to offset future capital gains generated as of year-end but has accrued for the anticipated tax loss that can be currently recognized related to the sale of CompuCom. Additionally, the Company has $56 million of U.S. Federal tax credit carryforwards, which expire between 2022 and 2024, and $14 million of state and foreign tax credit carryforwards, $2 million of which can be carried forward indefinitely, and the remainder of which will expire between 2023 and 2028. As of December 25, 2021, the Company has not triggered an “ownership change” as defined in Internal Revenue Code Section 382 or other similar provisions that would limit the use of NOL and tax credit carryforwards. However, the Company did acquire certain NOLs and other credit carryforwards that may be limited as a result of the purchase. Furthermore, if the Company were to experience an ownership change in future periods, its deferred tax assets and income tax expense may be negatively impacted. Deferred income taxes have been provided on all undistributed earnings of foreign subsidiaries. The following summarizes the activity related to valuation allowances for deferred tax assets:
(In millions) |  | 2021 |  |  | 2020 |  |  | 2019 |
Beginning balance |  | $ | 99 |  |  | $ | 100 |  |  | $ | 92 |
Additions, charged to expense |  |  | — |  |  |  | 2 |  |  |  | 8 |
Reductions |  |  | (6 | ) |  |  | (3 | ) |  |  | — |
Ending balance |  | $ | 93 |  |  | $ | 99 |  |  | $ | 100 |
The Company’s valuation allowance decreased during 2021 and 2020 due to the expiration of certain credits for which a valuation allowance had been established. During 2019, the Company released established valuation allowances on certain deferred tax assets related to certain credits and carryforwards that are not expected to be utilized prior to expiration. As of December 25, 2021, the Company continues to have a U.S. valuation allowance for certain U.S. Federal credits and certain state tax attributes, which relate to deferred tax assets that require either certain types of income or for income to be earned in certain jurisdictions in order to be realized. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. Changes in pretax income projections could impact this evaluation in future periods. The following table summarizes the activity related to unrecognized tax benefits:
(In millions) |  | 2021 |  |  | 2020 |  |  | 2019 |
Beginning balance |  | $ | 13 |  |  | $ | 13 |  |  | $ | 11 |
Increase related to current year tax positions |  |  | — |  |  |  | — |  |  |  | 2 |
Ending balance |  | $ | 13 |  |  | $ | 13 |  |  | $ | 13 |
Included in the balance of $13 million at December 25, 2021, is $6 million of unrecognized tax benefits that, if recognized, would impact the effective tax rate. The other $7 million primarily results from tax positions that, if sustained, would be offset by changes in deferred tax assets. It is anticipated that no material tax positions will be resolved within the next 12 months. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in the provision for income taxes. The Company recognized immaterial interest and penalty expense in 2021, 2020 and 2019. The Company had approximately $7 million accrued for the payment of interest and penalties as of December 25, 2021. The Company files a U.S. Federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal and state and local income tax examinations for years before 2019 and 2016, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. Federal income tax examination and with few exceptions, is no longer subject to U.S. state and local income tax examinations for years before 2016. The U.S. Federal income tax returns for 2020 are currently under review. Generally, the Company is subject to routine examination for years 2016 and forward in its international tax jurisdictions.

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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