Income Taxes

3 Months Ended

Mar. 28, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate for the first quarter of 2020 was 5.4 percent compared with 28.9 percent for 2019. The decrease in the rate was primarily attributable to the overall decline in profitability for the quarter ended March 28, 2020 as compared to the same period last year and lower cash tax costs driven by lower profits.

As of March 28, 2020 and December 28, 2019, the Company's accrual for uncertain tax positions was $13.5 million. The Company estimates that as of March 28, 2020, approximately $13.2 million of the unrecognized tax benefits, if recognized, will impact the effective tax rate. Interest and penalties related to uncertain tax positions in the Company's global operations are recorded as a component of the provision for income taxes. Accrued interest and penalties were $0.7 million and $4.0 million as of the periods ended March 28, 2020 and December 28, 2019, respectively.

In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is currently under examination or contesting proposed adjustments by various state and international tax authorities for fiscal years ranging from 2004 through 2018. It is reasonably possible that there could be a significant decrease or increase to the unrecognized tax benefit balance during the course of the next twelve months as these examinations continue, other tax examinations commence or various statutes of limitations expire. While the Company does not currently expect material changes, it is possible that the amount of unrecognized benefit with respect to the uncertain tax positions will significantly increase or decrease related to audits in various foreign jurisdictions that may conclude during that period or new developments that could also, in turn, impact the Company's assessment relative to the establishment of valuation allowances against certain existing deferred tax assets. An estimate of the range of possible changes cannot be made for remaining unrecognized tax benefits because of the significant number of jurisdictions in which the Company does business and the number of open tax periods.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by the President of the U.S. on March 27th, 2020.  This legislation is aimed at providing relief for individuals and businesses impacted by the Coronavirus outbreak. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOL) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years, suspend the excess business loss rules, accelerate refunds of previously generated corporate Alternative Minimum Tax credits, loosen the business interest limitation under section 163(j) from 30 percent to 50 percent, allow for deferral of payroll taxes and establish an employer retention credit. While the enactment period impacts to the Company are expected to be minimal to none to income taxes, the Company continues to assess other aspects of the CARES Act, such as employee retention credits, payroll tax deferrals and the alternative minimum tax acceleration, for applicability.