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Income Taxes | 12 Months Ended
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Dec. 29, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 19. Income Taxes Earnings (loss) before taxes and equity in net earnings of affiliate for the years 2024, 2023 and 2022 were taxed under the following jurisdictions (in millions of dollars):
| 2024 |  | 2023 |  | 2022
Domestic | $ | (33.2) |  |  | $ | 29.9 |  |  | $ | (39.4) |
Foreign | 11.3 |  |  | (5.0) |  |  | (31.8) |
Total | $ | (21.9) |  |  | $ | 24.9 |  |  | $ | (71.2) |
The provision for income taxes was as follows (in millions of dollars):
| 2024 |  | 2023 |  | 2022
Current tax expense: |  |  |  |  |
U.S. federal | $ | (0.7) |  |  | $ | 1.0 |  |  | $ | 1.3 |
U.S. state and local | (0.8) |  |  | 2.5 |  |  | 1.4 |
Foreign | 8.0 |  |  | 9.9 |  |  | 61.5 |
Total current | 6.5 |  |  | 13.4 |  |  | 64.2 |
Deferred tax (benefit) expense: |  |  |  |  |
U.S. federal | (24.9) |  |  | (36.8) |  |  | (2.5) |
U.S. state and local | (2.6) |  |  | (3.6) |  |  | 0.7 |
Foreign | (0.3) |  |  | 15.5 |  |  | (70.3) |
Total deferred | (27.8) |  |  | (24.9) |  |  | (72.1) |
Total provision | $ | (21.3) |  |  | $ | (11.5) |  |  | $ | (7.9) |
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 (in millions of dollars):
| 2024 |  | 2023
Fixed assets and right-of-use assets | $ | (15.2) |  |  | $ | (19.0) |
Intangible assets and goodwill | 0.1 |  |  | 19.0 |
Employee compensation and benefit plans | 77.0 |  |  | 71.5 |
Outside basis difference on held for sale assets | — |  |  | 34.7 |
Operating lease liabilities | 17.7 |  |  | 18.3 |
Net operating loss carryforwards | 10.9 |  |  | 36.7 |
Capital loss carryforward | 19.6 |  |  | — |
Credit carryforwards | 230.6 |  |  | 208.7 |
Other, net | 23.6 |  |  | 15.4 |
Valuation allowance | (34.2) |  |  | (60.5) |
Net deferred tax assets | $ | 330.1 |  |  | $ | 324.8 |
As of year-end 2024, the net deferred tax asset balance totaled $330.1 million which is fully recorded in deferred taxes in the consolidated balance sheet. As of year-end 2023, the net deferred tax asset balance totaled $324.8 million with $321.1 million in deferred taxes, $4.1 million in assets held for sale (see Acquisitions and Dispositions footnote), and $0.4 million in other long-term liabilities in the consolidated balance sheet. The Company has U.S. general business credit carryforwards of $197.3 million which will expire from 2034 to 2044, foreign tax credit carryforwards of $33.2 million which will expire from 2026 to 2034 and minimal state and foreign credit carryforwards which are either indefinite or will expire from 2025 to 2043. The net tax effect of federal, state and foreign loss carryforwards at year-end 2024 totaled $30.5 million, comprised of $19.6 million of capital loss carryforwards that expire in 2029, and $10.9 million of net operating loss carryforwards of which $9.1 million have no expiration and $1.8 million expire between 2025 and 2044. The Company has established a valuation allowance for certain loss carryforwards, future deductible items, outside basis differences, and for a portion of its U.S. foreign tax credit carryforwards. The decrease in valuation allowance during 2024 was primarily due to the Company’s sale of its EMEA staffing operations which included companies with $24.4 million of valuation allowances. The outside basis difference included in the 2023 deferred balance was for held for sale assets at the end of 2023 which were sold during the first quarter of 2024 when the Company completed the sale of its EMEA staffing operations. This transaction generated a capital loss, $19.6 million of which is carried forward. A valuation allowance of $21.4 million was recorded against the outside basis difference at year-end 2023, and $19.2 million against the capital loss carryforward at year-end 2024. The foreign tax credit valuation allowance is $15.0 million at year-end 2024 and $14.5 million at year-end 2023 and will continue to be monitored. 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 uncertainty in the ability to create future capital gains, 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 deferred tax assets The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 21% in 2024, 2023, and 2022 are as follows (in millions of dollars):
| 2024 |  | 2023 |  | 2022
Income tax based on statutory rate | $ | (4.6) |  |  | $ | 5.2 |  |  | $ | (14.9) |
State income taxes, net of federal benefit | (2.7) |  |  | (0.9) |  |  | 1.6 |
Foreign tax rate differential | 0.9 |  |  | 4.6 |  |  | 1.6 |
U.S. work opportunity credits | (7.8) |  |  | (8.5) |  |  | (10.7) |
Life insurance cash surrender value | (6.2) |  |  | (6.5) |  |  | 7.8 |
Foreign items | 0.3 |  |  | 3.0 |  |  | 0.1 |
Foreign-derived intangible income deduction | (3.0) |  |  | (2.3) |  |  | (2.3) |
Sale of foreign subsidiaries | 0.4 |  |  | — |  |  | 3.9 |
Foreign business taxes | — |  |  | 1.1 |  |  | 1.8 |
Change in deferred tax realizability | (0.4) |  |  | 4.4 |  |  | — |
Non-deductible expenses | 2.1 |  |  | 0.7 |  |  | — |
Uncertain tax positions | — |  |  | (0.3) |  |  | 0.1 |
Stock compensation | 0.4 |  |  | 0.7 |  |  | 0.6 |
Outside basis difference on held for sale assets | — |  |  | (13.1) |  |  | — |
MRP earnout liability revaluation | (0.7) |  |  | — |  |  | — |
Non-deductible goodwill impairment | — |  |  | — |  |  | 2.7 |
Other | — |  |  | 0.4 |  |  | (0.2) |
Total | $ | (21.3) |  |  | $ | (11.5) |  |  | $ | (7.9) |
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. Several items have contributed to the variance in our income tax benefit over the last three years. 2024 benefited from lower pretax earnings, which included an $18.5 million benefit from the impairment of tax-deductible goodwill and a $6.2 million benefit from tax-exempt life insurance cash surrender value gains. 2023 benefited from recording a $15.0 million federal and state benefit on the outside basis difference in held for sale assets, and a $6.5 million benefit from tax-exempt life insurance cash surrender value gains. 2022 benefited from lower pretax earnings, which included 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. 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 $65.6 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 $4.7 million. The new Organization for Economic Cooperation and Development ("OECD") Pillar Two global minimum tax rules became effective in 2024 in several jurisdictions in which the Company does business. This did not have a material impact to the Company in 2024. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions of dollars):
| 2024 |  | 2023 |  | 2022
Balance at beginning of the year | $ | 0.6 |  |  | $ | 0.5 |  |  | $ | 0.6 |
Additions for prior years’ tax positions | — |  |  | 0.3 |  |  | — |
Reductions for prior years’ tax positions | — |  |  | — |  |  | — |
Additions for settlements | — |  |  | — |  |  | — |
Reductions for settlements | — |  |  | — |  |  | — |
Reductions for expiration of statutes | (0.1) |  |  | (0.2) |  |  | (0.1) |
Balance at end of the year | $ | 0.5 |  |  | $ | 0.6 |  |  | $ | 0.5 |
If the $0.5 million in 2024, $0.6 million in 2023 and $0.5 million in 2022 of unrecognized tax benefits were recognized, they would have a favorable effect of $0.4 million in 2024, $0.5 million in 2023 and $0.4 million in 2022 on income tax expense. The Company recognizes both interest and penalties as part of the income tax provision. The Company recognized an insignificant benefit in 2024 and $0.1 million of expense in 2023, for interest and penalties. The benefit recognized in 2022 was not significant. Accrued interest and penalties were $0.2 million at year-end 2024 and $0.2 million at year-end 2023. 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 2021 forward, Canada for fiscal years 2017 forward, Puerto Rico for fiscal years 2020 forward and Mexico for fiscal years 2019 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 an insignificant amount for 2024, 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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