19. Income Taxes

The income tax benefit differs from the amount that would have resulted from applying the combined Canadian federal and provincial statutory income tax rate to loss from continuing operations before income taxes due to the following:

	January 1, 2022		January 2, 2021		December 28, 2019
	$		$		$
Loss from continuing operations	(7,510	)	(50,042	)	(16,181	)
Canadian statutory rate	26.5%		26.5%		26.5%
Income tax benefit at statutory rate	(1,990	)	(13,261	)	(4,288	)
Stock-based compensation	2,166		3,169		1,975
Change in valuation allowance	975		560		(113	)
Disallowed executive compensation	138		2,801		-
Foreign tax rate differential	(31	)	(105	)	126
Change in enacted tax rates	(442	)	250		(549	)
CARES Act	-		2,472		-
Other	(4,182	)	1,374		(252	)
Income tax benefit	(3,366	)	(2,740	)	(3,101	)

The components of earnings (loss) from continuing operations before income taxes are shown below:

	January 1, 2022		January 2, 2021		December 28, 2019
	$		$		$
Canada	(10,797	)	(14,700	)	(11,295	)
U.S.	3,945		(34,521	)	(5,548	)
Other	(658	)	(821	)	662
Loss from continuing operations before income taxes	(7,510	)	(50,042	)	(16,181	)

The components of income tax expense (benefit) are shown below:

	January 1, 2022		January 2, 2021		December 28, 2019
	$		$		$
Current income tax expense (benefit):
Canada	(9	)	(154	)	(1,023	)
U.S.	(75	)	(14,148	)	(3,424	)
Other	(359	)	589		532
	(443	)	(13,713	)	(3,915	)

Deferred income tax expense (benefit):
Canada	299		(291	)	33
U.S.	(3,067	)	10,442		731
Other	(155	)	822		50
	(2,923	)	10,973		814
Income tax benefit	(3,366	)	(2,740	)	(3,101	)

Deferred income taxes of the Company are comprised of the following:

	January 1, 2022		January 2, 2021
	$		$
Differences in property, plant and equipment and intangible assets	(54,761	)	(55,105	)
Capital and non-capital losses	21,540		14,388
Interest expense limitation (163j)	10,521		11,069
Tax benefit of scientific research expenditures	2,744		2,699
Inventory basis differences	1,148		1,303
Other accrued reserves	1,590		4,522
	(17,218	)	(21,124	)
Less: valuation allowance	5,267		4,284
Deferred income tax liability	(22,485	)	(25,408	)

The components of the deferred income tax liability are shown below:

	January 1, 2022		January 2, 2021
	$		$
Canada	(325	)	(26	)
U.S.	(22,083	)	(25,150	)
Other	(77	)	(232	)
Deferred income tax liability	(22,485	)	(25,408	)

The components of the deferred income tax valuation allowance are as follows:

	January 1, 2022	January 2, 2021
	$	$
Balance, beginning of year	4,284	6,219
Increase (decrease) in valuation allowance	983	(1,935	)
Balance, end of year	5,267	4,284

As at January 1, 2022, the Company had approximately $1.6 million (January 2, 2021 - $1.5 million) in U.S. federal scientific research investment tax credits and $0.9 million (January 2, 2021 - $0.9 million) in U.S. state research and development tax credits, which will expire in varying amounts between 2022 and 2029.

As at January 1, 2022, the Company had U.S. federal non-capital loss carryforwards of approximately $64.8 million (January 2, 2021 - $37.1 million). In addition, the Company had state loss carryforwards of approximately $3.3 million as at January 1, 2022 (January 2, 2021 - $8.7 million). These amounts are available to reduce future federal and state income taxes.

As at January 1, 2022, the Company had Canadian capital losses of approximately $27.8 million (January 2, 2021 - $27.9 million) for which a full valuation allowance exists. These amounts are available to reduce future capital gains and do not expire. In addition, the Company had Canadian non-capital loss carryforwards of approximately $6.0 million (January 2, 2021 - $2.8 million). These amounts are available to reduce future taxable income and do not begin to expire until 2040.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determinations, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on this evaluation, as at January 1, 2022, a valuation allowance of $5.3 million (January 2, 2021 - $4.3 million) had been recorded against certain assets to reduce the net benefit recorded in the consolidated financial statements.

As the undistributed earnings of the Company's non-Canadian affiliates and associated companies are considered to be indefinitely reinvested, no provision for deferred taxes has been provided thereon.

For the years ended January 1, 2022, January 2, 2021 and December 28, 2019, the Company did not identify any material uncertain tax positions or recognize any related tax benefits. The Company believes it has adequately examined its tax positions taken or expected to be taken in a tax return; however, amounts asserted by taxing authorities could differ from the Company's positions. Accordingly, additional provisions on federal, provincial, state, and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Consistent with its historical financial reporting, the Company has classified interest and penalties related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations, and with the related liability on the consolidated balance sheets.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions are the U.S. (including multiple states) and Canada (Ontario). The Company's 2018 through 2020 tax years (and any tax year for which available non-capital loss carryforwards were generated up to the amount of non-capital loss carryforward) remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes, and tax years 2014 through 2020 remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing audits in various other jurisdictions that are not considered material to the Company's consolidated financial statements.