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Income Taxes | 6 Months Ended
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Dec. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 12. Income Taxes The provision (benefit) for income taxes was as follows:
|  | For the Three Months Ended |  |  | For the Six Months Ended |
|  | December 30, 2018 |  |  | December 24, 2017 |  |  | December 30, 2018 |  |  | December 24, 2017 |
(Benefit) provision for income taxes |  | $ | (2,288 | ) |  | $ | (4,826 | ) |  | $ | 536 |  |  | $ | (1,630 | )
Effective tax rate |  |  | 204.8 | % |  |  | (69.2 | )% |  |  | 15.2 | % |  |  | (8.5 | )%
U.S. Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation H.R. 1, formerly known as the Tax Cuts and Jobs Act. H.R. 1 includes significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, full expensing for investments in new and used qualified property, additional limitations on the deduction of compensation paid to specified executive officers, and the transition of the U.S. international tax system from a worldwide tax to a territorial tax system. As a fiscal-year taxpayer, certain provisions of H.R. 1 impacted UNIFI in fiscal 2018, including the change in the U.S. federal corporate income tax rate and the one-time transition tax (“toll charge”), while other provisions became effective for UNIFI at the beginning of fiscal 2019. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of GAAP in situations where a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of H.R. 1. SAB 118 provides that when reasonable estimates can be made, the provisional accounting should be based on such estimates, and when reasonable estimates cannot be made, the provisional accounting may be based on the law in effect before H.R. 1. UNIFI has applied the guidance in SAB 118 when accounting for the enactment-date effects of H.R. 1. Accordingly, in fiscal 2018 UNIFI re-measured U.S. deferred tax assets and liabilities based on the income tax rates at which the deferred tax assets and liabilities are expected to reverse in the future, resulting in $4,297 of tax benefit for the year ended June 24, 2018. UNIFI also recorded $3,901 of tax expense related to the toll charge, net of foreign tax credits. For a description of the impact of H.R. 1 for the year ended June 24, 2018, reference is made to Note 14, “Income Taxes,” in UNIFI’s 2018 Annual Report on Form 10-K. The SAB 118 measurement period for UNIFI ended on December 22, 2018. UNIFI did not make any final measurement period adjustments to the tax benefit recorded in the year ended June 24, 2018 to re-measure U.S. deferred tax assets and liabilities. During the three months ended December 30, 2018, UNIFI recorded a final measurement period adjustment of $(1,734) to decrease the amount of the toll charge, net of foreign tax credits, from $3,901 to $2,167, a rate impact of 155.2%. Although UNIFI no longer considers these amounts to be provisional, the income tax effects of H.R. 1 may change following future legislation or further interpretation of H.R. 1 based on the publication of guidance from the U.S. Internal Revenue Service (the “IRS”) and state tax authorities. The Global Intangible Low-Taxed Income (“GILTI”) provisions included in H.R. 1 require that certain income earned by foreign subsidiaries must be currently included in the gross income of the U.S. shareholder. These provisions are effective for UNIFI in fiscal 2019. The GILTI provisions are complex and subject to continuing regulatory interpretation by the IRS. UNIFI is required to make an accounting policy election to either treat taxes resulting from GILTI as a current-period expense when they are incurred or factor such amounts into the measurement of deferred taxes. UNIFI has elected to recognize GILTI as a current-period expense. Under this policy, UNIFI has not provided deferred taxes related to temporary differences that, upon their reversal, will affect the amount of income subject to GILTI in the period. Income Tax Expense UNIFI’s provision for income taxes for the six months ended December 30, 2018 and December 24, 2017 has been calculated by applying an estimate of the annual effective tax rate for the full fiscal year to year-to-date income or loss. Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur. The effective tax rate for the three months ended December 30, 2018 was higher than the U.S. federal statutory rate primarily due to the benefits of tax credits related to prior years which exceed the loss before income taxes. These benefits were partially offset by earnings taxed at higher rates in foreign jurisdictions, losses in tax jurisdictions for which no tax benefit could be recognized, the effects of the GILTI provisions enacted in H.R. 1, and non-deductible executive compensation. The effective tax rate for the six months ended December 30, 2018 was lower than the U.S. federal statutory rate primarily due to the benefits of tax credits related to prior years. These benefits were partially offset by earnings taxed at higher rates in foreign jurisdictions, losses in tax jurisdictions for which no tax benefit could be recognized, the effects of the GILTI provisions enacted in H.R. 1, and non-deductible executive compensation. The effective tax rate for the three and six months ended December 24, 2017 was lower than the U.S. federal statutory rate primarily due to the one-time tax benefit resulting from the revaluation of UNIFI’s domestic deferred tax balances for the lower U.S. statutory tax rate, the release of a valuation allowance on certain historical net operating losses (“NOLs”), and foreign income being taxed at lower rates. These benefits were partially offset by a provisional amount for the toll charge, net of foreign tax credits, and losses in tax jurisdictions for which no tax benefit could be recognized. UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including NOLs, which could potentially be revised upon examination. Valuation Allowance UNIFI regularly assesses whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. UNIFI considers the scheduled reversal of taxable temporary differences, taxable income in carryback years, projected future taxable income and tax planning strategies in making this assessment. Since UNIFI operates in multiple jurisdictions, the assessment is made on a jurisdiction-by-jurisdiction basis, taking into account the effects of local tax law. The components of UNIFI’s deferred tax valuation allowance are as follows:
|  | December 30, 2018 |  |  | June 24, 2018 |
Investment in a former domestic unconsolidated affiliate |  | $ | (3,942 | ) |  | $ | (3,942 | )
Equity-method investment in PAL |  |  | (1,470 | ) |  |  | (1,580 | )
Certain losses carried forward (1) |  |  | (1,562 | ) |  |  | (1,562 | )
State NOLs |  |  | (166 | ) |  |  | (169 | )
Other foreign NOLs |  |  | (1,903 | ) |  |  | (2,460 | )
Foreign tax credits |  |  | (13,713 | ) |  |  | (5,430 | )
Total deferred tax valuation allowance |  | $ | (22,756 | ) |  | $ | (15,143 | )
(1) | Certain U.S. NOLs and capital losses outside the U.S. consolidated tax filing group.

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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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