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Income Taxes | 12 Months Ended
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Jan. 01, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Earnings (loss) before taxes and equity in net earnings (loss) of affiliate for the years 2022, 2021 and 2020 were taxed under the following jurisdictions:
| 2022 |  | 2021 |  | 2020
| (In millions of dollars)
Domestic | $ | (39.4) |  |  | $ | 27.5 |  |  | $ | (86.7) |
Foreign | (31.8) |  |  | 158.3 |  |  | (20.1) |
Total | $ | (71.2) |  |  | $ | 185.8 |  |  | $ | (106.8) |
The provision for income taxes was as follows:
| 2022 |  | 2021 |  | 2020
| (In millions of dollars)
Current tax expense: |  |  |  |  |
U.S. federal | $ | 1.3 |  |  | $ | 1.0 |  |  | $ | 6.6 |
U.S. state and local | 1.4 |  |  | 2.1 |  |  | 5.9 |
Foreign | 61.5 |  |  | 10.4 |  |  | 10.6 |
Total current | 64.2 |  |  | 13.5 |  |  | 23.1 |
Deferred tax (benefit) expense: |  |  |  |  |
U.S. federal | (2.5) |  |  | (11.9) |  |  | (35.8) |
U.S. state and local | 0.7 |  |  | (0.7) |  |  | (12.3) |
Foreign | (70.3) |  |  | 34.2 |  |  | (9.0) |
Total deferred | (72.1) |  |  | 21.6 |  |  | (57.1) |
Total provision | $ | (7.9) |  |  | $ | 35.1 |  |  | $ | (34.0) |
Deferred income taxes reflect the temporary differences between the asset and liability basis for financial reporting purposes and the amounts used for income tax purposes, at the relevant tax rate. The deferred tax assets and liabilities are comprised of the following:
| 2022 |  | 2021
| (In millions of dollars)
Fixed assets and right-of-use assets | $ | (21.8) |  |  | $ | (25.8) |
Intangible assets and goodwill | 20.7 |  |  | 16.3 |
Employee compensation and benefit plans | 62.0 |  |  | 70.4 |
Accrued payroll and related taxes | — |  |  | 22.1 |
Accrued workers’ compensation | 10.2 |  |  | 11.7 |
Investment in Persol Holdings | — |  |  | (70.9) |
Investment in equity affiliate | (0.7) |  |  | (13.3) |
Operating lease liabilities | 19.3 |  |  | 21.8 |
Loss carryforwards | 33.4 |  |  | 36.4 |
Credit carryforwards | 200.7 |  |  | 175.0 |
Other, net | 9.4 |  |  | 6.5 |
Valuation allowance | (34.0) |  |  | (19.0) |
Net deferred tax assets | $ | 299.2 |  |  | $ | 231.2 |
The deferred tax balance is classified in the consolidated balance sheet as:
| 2022 |  | 2021
| (In millions of dollars)
Deferred tax asset | $ | 299.7 |  |  | $ | 302.8 |
Other long-term liabilities | (0.5) |  |  | (71.6) |
| $ | 299.2 |  |  | $ | 231.2 |
The Company has U.S. general business credit carryforwards of $177.1 million which will expire from 2034 to 2042, foreign tax credit carryforwards of $23.6 million which will expire from 2023 to 2032 and minimal state carryforwards which will expire from 2026 to 2042. The net tax effect of state and foreign loss carryforwards at year-end 2022 totaled $33.4 million, $2.7 million of which expires between 2023 to 2042, and $30.7 million of which have no expiration. The Company has established a valuation allowance for loss carryforwards and future deductible items in certain foreign jurisdictions, and for U.S. foreign tax credit carryforwards. The increase in the valuation allowance in 2022 was primarily due to foreign tax credits generated from the sale of the Company's investment in Persol Holdings. The valuation allowance is determined in accordance with the provisions of ASC 740, "Income Taxes," which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The Company’s recent losses in these foreign jurisdictions, and its recent lack of adequate U.S. foreign source income to fully utilize foreign tax credit carryforwards, represented sufficient negative evidence to require a valuation allowance under ASC 740. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support realization of the foreign deferred tax assets. The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 21% in 2022, 2021, and 2020 are as follows:
| 2022 |  | 2021 |  | 2020
| (In millions of dollars)
Income tax based on statutory rate | $ | (14.9) |  |  | $ | 39.0 |  |  | $ | (22.4) |
State income taxes, net of federal benefit | 1.6 |  |  | 1.1 |  |  | (5.1) |
Foreign tax rate differential | 1.6 |  |  | 12.2 |  |  | 2.8 |
General business credits | (10.7) |  |  | (9.7) |  |  | (9.9) |
Life insurance cash surrender value | 7.8 |  |  | (5.2) |  |  | (4.6) |
Foreign items | 0.2 |  |  | 1.7 |  |  | (1.8) |
Sale of foreign subsidiaries | 3.9 |  |  | — |  |  | (6.6) |
Foreign business taxes | 1.8 |  |  | 2.1 |  |  | 3.0 |
Tax law change | — |  |  | (5.2) |  |  | (1.7) |
Non-deductible goodwill impairment | 2.7 |  |  | — |  |  | 11.9 |
Other | (1.9) |  |  | (0.9) |  |  | 0.4 |
Total | $ | (7.9) |  |  | $ | 35.1 |  |  | $ | (34.0) |
Our tax benefit or expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S. work opportunity credits and the change in cash surrender value of non-taxable investments in life insurance policies. It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes or changes in judgment regarding the realizability of deferred tax assets. Changes in the fair value of the Company’s investment in Persol Holdings were recognized in the consolidated statements of earnings. Gains and losses from this investment, which was sold in the first quarter of 2022, were treated as discrete since they could not be estimated. Several items have contributed to the variance in our income tax benefit or expense over the last three years. 2022 benefited from lower pretax earnings, benefits of $16.9 million from changes in the fair value of the Company's investment in Persol Holdings and $7.1 million from the impairment of tax deductible goodwill. These benefits were offset by a $7.8 million charge from tax exempt life insurance cash surrender value losses. Income tax expense for 2021 included charges of $37.3 million from changes in the fair value of the Company's investment in Persol Holdings and $4.8 million from the gain on insurance settlement, offset by benefits of $5.2 million from a change in tax rate in the United Kingdom and $5.2 million from tax exempt life insurance cash surrender value gains. The 2020 income tax benefited from lower pretax earnings and benefits of $5.1 million from the loss on our investment in Persol Holdings, $6.6 million from the sale of Brazil operations, $23 million from the impairment of tax deductible goodwill and $4.6 million from tax exempt life insurance cash surrender value gains. General business credits primarily represent U.S. work opportunity credits. Foreign items include foreign tax credits, foreign non-deductible expenses and non-taxable income. Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC 740. Provision has not been made for additional income taxes on an estimated $156.5 million of foreign subsidiary undistributed earnings which are indefinitely reinvested. If these earnings were to be repatriated, the Company could be subject to foreign withholding tax, federal and state income tax, net of federal benefit, and income taxes on foreign exchange gains or losses, of $9.8 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2022 |  | 2021 |  | 2020
| (In millions of dollars)
Balance at beginning of the year | $ | 0.6 |  |  | $ | 0.5 |  |  | $ | 0.9 |
Additions for prior years’ tax positions | — |  |  | 0.2 |  |  | — |
Reductions for prior years’ tax positions | — |  |  | — |  |  | — |
Additions for settlements | — |  |  | — |  |  | — |
Reductions for settlements | — |  |  | — |  |  | — |
Reductions for expiration of statutes | (0.1) |  |  | (0.1) |  |  | (0.4) |
Balance at end of the year | $ | 0.5 |  |  | $ | 0.6 |  |  | $ | 0.5 |
If the $0.5 million in 2022, $0.6 million in 2021 and $0.5 million in 2020 of unrecognized tax benefits were recognized, they would have a favorable effect of $0.4 million in 2022, $0.5 million in 2021 and $0.4 million in 2020 on income tax expense. The Company recognizes both interest and penalties as part of the income tax provision. The benefit recognized in 2022 was not significant. The Company recognized expense of $0.1 million in 2021 and a benefit of $0.1 million in 2020 for interest and penalties. Accrued interest and penalties were $0.1 million at year-end 2022 and $0.2 million at year-end 2021. The Company files income tax returns in the U.S. and in various states and foreign countries. The tax periods open to examination by the major taxing jurisdictions to which the Company is subject include the U.S. for fiscal years 2019 forward, Canada for fiscal years 2015 forward, France for fiscal years 2014 forward, Netherlands for fiscal years 2017 forward, Portugal for fiscal years 2019 forward, Puerto Rico for fiscal years 2018 forward and Switzerland for fiscal years 2013 forward. The Company and its subsidiaries have various income tax returns in the process of examination. The unrecognized tax benefit and related interest and penalty balances include approximately $0.2 million for 2022, related to tax positions which are reasonably possible to change within the next twelve months due to income tax audits, settlements and statute expirations.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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