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Income Taxes | 12 Months Ended
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Dec. 28, 2019
Income Taxes [Abstract] |
Income Taxes | NOTE E—INCOME TAXES Consolidated earnings before income taxes consists of the following for 2019, 2018, and 2017:
|  | Year ended
|  | 2019 |  | 2018 |  | 2017
U.S. |  | $ | 111 |  | $ | 1,475 |  | $ | (25,167)
Foreign |  |  | 150,385 |  |  | 190,035 |  |  | 159,807
Total earnings before income taxes |  | $ | 150,496 |  | $ | 191,510 |  | $ | 134,640
NOTE E—INCOME TAXES - CONTINUED Income tax expense (benefit) included in income from continuing operations consists of the following:
|  | Year ended
|  | 2019 |  | 2018 |  | 2017
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | - |  | $ | - |  | $ | (171)
State |  |  | 303 |  |  | 337 |  |  | (368)
Foreign |  |  | 53,281 |  |  | 64,342 |  |  | 52,167
Total Current |  |  | 53,584 |  |  | 64,679 |  |  | 51,628
Deferred |  |  |  |  |  |  |  |  |
Federal |  |  | (3,120) |  |  | (613) |  |  | 23,609
State |  |  | (42) |  |  | 24 |  |  | 132
Foreign |  |  | (452) |  |  | 1,196 |  |  | (3,264)
Total Deferred |  |  | (3,614) |  |  | 607 |  |  | 20,477
|  | $ | 49,970 |  | $ | 65,286 |  | $ | 72,105
The effective tax rate for 2019, 2018, and 2017 reconciled to the statutory U.S. Federal tax rate is as follows:
|  | Year ended
|  |  | 2019 |  | 2018 |  | 2017
Statutory U.S. federal income tax rate |  |  | 21.0 | % |  | 21.0 | % |  | 35.0 | %
State income taxes, net of federal tax benefit |  |  | 0.3 |  |  | 0.3 |  |  | (0.2) |
Excess tax benefits on equity awards |  |  | - |  |  | - |  |  | (3.4) |
Permanent tax differences |  |  | - |  |  | 0.4 |  |  | 0.3 |
Excess foreign tax credits |  |  | (13.0) |  |  | (14.7) |  |  | - |
Net increase in valuation allowance |  |  | 11.7 |  |  | 15.8 |  |  | - |
Foreign income tax rate differences |  |  | 4.3 |  |  | 4.2 |  |  | (0.2) |
Foreign withholding taxes |  |  | 8.6 |  |  | 8.1 |  |  | 9.3 |
U.S. tax reform |  |  | - |  |  | - |  |  | 13.1 |
All other, net |  |  | 0.3 |  |  | (1.0) |  |  | (0.3) |
|  |  | 33.2 | % |  | 34.1 | % |  | 53.6 | %
NOTE E—INCOME TAXES – CONTINUED The significant categories of deferred taxes are as follows:
|  | December 28, |  | December 29,
|  | 2019 |  | 2018
Deferred tax assets |  |  |  |  |  |
Inventory differences |  | $ | 3,281 |  | $ | 2,580
Accruals not currently deductible |  |  | 4,315 |  |  | 4,769
Equity-based compensation expense |  |  | 5,811 |  |  | 4,319
Property and equipment |  |  | 1,088 |  |  | 809
Intangible assets |  |  | 7,454 |  |  | 7,951
Foreign currency translation |  |  | 537 |  |  | 1,141
Tax credit carry forwards |  |  | 60,697 |  |  | 41,034
Net operating losses |  |  | 1,551 |  |  | 1,462
Other |  |  | 4,358 |  |  | 3,874
Gross deferred tax assets |  |  | 89,092 |  |  | 67,939
Valuation allowance |  |  | (64,285) |  |  | (44,199)
Net deferred tax assets |  |  | 24,807 |  |  | 23,740
Deferred tax liabilities |  |  |  |  |  |
Property and equipment |  |  | (5,006) |  |  | (4,983)
Prepaid expenses |  |  | (1,722) |  |  | (1,828)
Intangible assets |  |  | (7,454) |  |  | (7,951)
Withholding tax on unremitted earnings |  |  | (12,914) |  |  | (14,608)
Other |  |  | (4,903) |  |  | (4,389)
Gross deferred tax liabilities |  |  | (31,999) |  |  | (33,759)
Net deferred taxes |  | $ | (7,192) |  | $ | (10,019)
The Components of net deferred taxes on a jurisdiction basis are as follows:
|  | December 28, |  | December 29,
|  | 2019 |  | 2018
Net deferred tax assets |  | $ | 3,090 |  | $ | 3,348
Net deferred tax liabilities |  |  | (10,282) |  |  | (13,367)
Net deferred taxes |  | $ | (7,192) |  | $ | (10,019)
As of December 28, 2019, the Company had foreign tax credit carryforwards of approximately $57,749. If unused, these carryforwards will expire between 2026 and 2029. Because the U.S. tax rate is lower than most of the foreign tax rates where the Company has operations, the Company expects to continue generating excess foreign tax credits in future years. As of December 28, 2019 and December 29, 2018, the Company has placed a full valuation allowance on its foreign tax credit carryforwards. Valuation allowances are determined using a more-likely-than-not realization criteria and are based upon all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. The U.S. jurisdiction has experienced overall cumulative domestic losses over the previous three years, which is a significant piece of negative evidence for the future utilization of foreign tax credit carryforwards. If in future periods, domestic source income becomes significant, the Company will evaluate this source of future taxable income for purposes of the determining a change in this valuation allowance. NOTE E—INCOME TAXES – CONTINUED The Company recorded a $1,863 valuation allowance on mirrored deferred tax assets recorded in the U.S. to offset deferred tax liabilities of foreign disregarded entities, which will generate additional U.S. foreign tax credits in the future. This valuation allowance is necessary because the Company is limited in its ability to utilize future U.S. foreign tax credits due to the decrease in the U.S. corporate tax rate. The Company also has $1,135 of Utah research credit carryforwards, $772 of Philippines minimum income tax credit carryforwards, and $1,041 of Federal research credit carryforwards as of December 28, 2019. If unused, the Utah research credit carryforwards expire between 2027 and 2033, the Philippines’ minimum income tax credit carryforwards expire between 2020 and 2021, and the Federal research credits expire between 2036 and 2039. Utah research credits are limited to Utah tax due, which has declined because of overall domestic losses. The Philippines’ minimum income tax credit carryforwards can be used against Philippines regular tax. Although minimum income tax credits were used in 2019 in the Philippines, there is not sufficient positive evidence available yet that the Philippines will be able to use additional minimum income tax credits in the future. Federal research credit carryforwards can only be used in a year when U.S. taxes are owed after foreign tax credits have been applied. Due to the lack of sufficient evidence to the contrary, the Company has placed a full valuation allowance on these credit carryforwards as well. In addition, the Company has $4,896 of foreign operating loss carry forwards, $4,831 of which have an unlimited carryforward period. The deferred tax asset associated with these losses is $1,466 and a valuation allowance of $1,466 has been applied against this deferred tax asset. The 2019 deferred tax asset for state-tax-loss carryforwards is $85. If unused, some of the state-tax-loss carryforwards will expire between 2030 and 2038 and others can be carried forward indefinitely. The valuation allowance primarily represents amounts for tax credit carryforwards and foreign operating loss carryforwards. However, valuation allowances on other foreign deferred tax assets were $259 for a combined valuation allowance of $64,285 as of December 28, 2019. The 2019 valuation allowance represents a $20,086 net increase from 2018. If the Company determines that there is sufficient evidence to remove the valuation allowances addressed above, the valuation allowance will be released and the provision for income taxes will be reduced. As of December 28, 2019, the Company has continued its position to return all foreign earnings to the U.S. parent company and has recorded deferred tax liabilities of $12,914 for foreign withholding taxes associated with foreign retained earnings and cross-border payments. The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not to be sustained on audit, based on the technical merits of the position. As of December 28, 2019 and December 29, 2018, the Company had no significant unrecognized tax benefits. From time to time, the Company is subject to federal, state, and foreign tax authority income tax examinations. The Company remains subject to income tax examinations for each of its open tax years, which extend back to 2016 under most circumstances. Certain taxing jurisdictions may provide for additional open years depending upon their statutes or if an audit is ongoing. ‎

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