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Income Taxes
 12 Months Ended
Dec. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
The provision for income taxes consisted of the following (U.S. dollars in millions):
 
Year ended
December 30, 2022December 31, 2021January 1, 2021
Current:   
U.S. federal income tax$0.3 $(2.1)$(10.6)
State0.7 0.3 0.5 
Non-U.S.16.6 18.8 15.6 
 17.6 17.0 5.5 
Deferred:
U.S. federal income tax— (5.0)2.8 
State— (1.2)3.3 
Non-U.S.2.5 (8.8)(6.6)
 2.5 (15.0)(0.5)
 $20.1 $2.0 $5.0 

Income before income taxes consisted of the following (U.S. dollars in millions):

Year ended
December 30, 2022December 31, 2021January 1, 2021
U.S.$1.0 $(24.7)$1.0 
Non-U.S.116.8 106.6 50.3 
$117.8 $81.9 $51.3 
 
9. Income Taxes (continued)

The differences between the reported provision for income taxes and income taxes computed at the U.S. statutory federal income tax rate are explained in the following reconciliation (U.S. dollars in millions):

 
 Year ended
December 30, 2022December 31, 2021January 1, 2021
Income tax provision computed at the U.S. statutory federal rate$24.7 $17.2 $10.8 
Effect of tax rates on non-U.S. operations(71.7)(67.9)(54.6)
Provision for uncertain tax positions1.7 2.3 0.6 
Non-deductible interest0.7 0.6 2.5 
Foreign exchange2.8 (6.1)(10.1)
Non-deductible intercompany charges0.5 0.1 — 
Non-deductible differences0.9 2.0 1.6 
Non-taxable income/loss0.6 (4.8)0.1 
Non-deductible impairment charges— 1.1 0.2 
Adjustment to deferred balances— 0.1 0.5 
Other(3.2)2.1 3.1 
Other taxes in lieu of income5.5 4.5 3.8 
Change in deferred rate— 0.1 (10.1)
Benefit from net operating loss carryback provision (C.A.R.E.S. Act)
— (0.8)(4.6)
Increase in valuation allowance (1)
57.6 51.5 61.2 
Provision for income taxes$20.1 $2.0 $5.0 
  
_____________
(1) The increase in valuation allowance includes effects of foreign exchange and adjustments to deferred tax balances which were fully offset by valuation allowance.
9. Income Taxes (continued)

Deferred income tax assets and liabilities consisted of the following (U.S. dollars in millions):
  December 30,December 31,
Deferred tax liabilities:20222021
Allowances and other accrued liabilities$(0.1)$(1.0)
Inventories(17.1)(15.7)
 Property, plant and equipment(75.7)(73.6)
 Equity in earnings of unconsolidated companies(0.2)(0.1)
 Pension obligations(2.6)(4.6)
 Other noncurrent deferred tax liabilities(26.8)(20.5)
ROU assets(21.0)(24.4)
Total noncurrent deferred tax liabilities$(143.5)$(139.9)
Deferred tax assets:  
Allowances and other accrued assets$17.9 $15.7 
Inventories5.9 4.6 
 Pension obligations21.4 22.8 
 Property, plant and equipment1.0 2.1 
 Post-retirement benefits other than pension3.6 3.6 
 Net operating loss carryforwards434.2 415.7 
 Capital loss carryover2.1 2.4 
 Other noncurrent assets93.9 56.2 
Operating lease22.9 25.8 
 Total noncurrent deferred tax assets602.9 548.9 
 Valuation allowance(483.5)(424.8)
Total deferred tax assets, net$119.4 $124.1 
Net deferred tax liabilities$(24.1)$(15.8)
 

The valuation allowance increased by $58.7 million in 2022. The increase in 2022 relates primarily to valuation allowance on additional net operating loss carryforwards combined with the effect of a valuation allowance reversal in 2021 of $12.3 million, resulting from a change in judgment about our ability to realize deferred tax assets in future years, due to our current and foreseeable operations.

At December 30, 2022, we are no longer permanently reinvested on certain foreign earnings yet remain permanently reinvested on all other undistributed foreign earnings in the amount of $1,686.8 million. Accordingly, we have recognized a deferred tax liability of $1.1 million as of December 30, 2022 related to the foreign earnings which are not considered to be permanently reinvested. No taxes have been provided for the earnings that are considered to be either indefinitely reinvested, or the earnings that could be distributed tax free. To the extent the earnings are considered indefinitely reinvested, determination of the amount of the unrecognized deferred tax liability is not practicable due to the complexities associated with its hypothetical calculation.
9. Income Taxes (continued)

At December 30, 2022, we had approximately $1,673.8 million of federal and foreign tax operating loss carryforwards expiring as follows (U.S. dollars in millions):
 
Expires:
2022$19.0 
20236.2 
202410.5 
202522.8 
2026 and beyond44.4 
No expiration1,570.9 
$1,673.8 
 

A reconciliation of the beginning and ending amount of uncertain tax positions excluding interest and penalties is as follows (U.S. dollars in millions): 
December 30, 2022December 31, 2021January 1, 2021
Beginning balance$5.0 $3.5 $3.5 
Gross decreases - tax position in prior period— — (0.1)
Gross increases - current-period tax positions1.2 1.7 0.2 
Foreign exchange(0.1)(0.2)(0.1)
Ending balance$6.1 $5.0 $3.5 
 

We accrued $9.2 million in 2022 and $7.5 million in 2021, for uncertain tax positions, including interest and penalties that, if recognized would affect the effective income tax rate.
 
The tax years 2012-2022 remain subject to examination by taxing authorities throughout the world in major jurisdictions, such as Costa Rica, Luxembourg, Switzerland and the United States.

We classify interest and penalties on uncertain tax positions as a component of income tax expense in the Consolidated Statements of Operations.  Accrued interest and penalties related to uncertain tax positions are $3.0 million and $2.5 million for December 30, 2022 and December 31, 2021, respectively and are included in other noncurrent liabilities.

In connection with the examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $160.2 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit.

In one of the foreign jurisdictions, we are currently contesting tax assessments related to the 2012-2015 audit years and the 2016 audit year in both the administrative court and the judicial court. During 2019 and 2020, we filed actions contesting the tax assessment in the administrative office. Our initial challenge to each of these tax assessments was rejected, and we subsequently lost our appeals at the administrative court. We have subsequently filed actions to contest each of these tax assessments in the country’s judicial courts. In addition, we have filed a request for an injunction to the judicial court to stay the tax authorities' collection efforts for these two tax assessments, pending final judicial decisions. The court granted our injunction with respect to the 2016 audit year, however denied our injunction with respect to the 2012-2015 audit years. We timely appealed the denial of the injunction, and on August 10, 2022 the appellate court overturned the denial and granted our injunction for the 2012-2015 audit years. Pursuant to local law, we registered real estate collateral with an approximate fair market value of $6.0 million in connection with the grant of the 2016 audit year injunction. This real estate collateral has a net book value of $3.8 million as of the year ended December 30, 2022. In addition, in connection with the grant of the 2012-2015 audit year injunction, we registered real estate collateral with an approximate fair market value of $24.0 million, and a net book value of $4.6 million as of the year ended December 30, 2022. The registration of this real estate collateral does not affect our operations in the country.
9. Income Taxes (continued)

In the other foreign jurisdiction, the administrative court denied our appeal, and on March 4, 2020 we filed an action in the judicial court to contest the administrative court's decision. The case is still pending.

We will continue to vigorously contest the adjustments and to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.

We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. Accordingly, we have not accrued any additional amounts based upon the proposed adjustments. There can be no assurance that these matters will be resolved in our favor, and an adverse outcome of either matter, or any future tax examinations involving similar assertions, could have a material effect on our financial condition, results of operations and cash flows.