12.	Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial tax system, a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 30, 2017 and the acceleration of depreciation for certain assets placed into service after September 27, 2017.

The Company recognized the income tax effects of the 2017 Tax Act in its fiscal 2017 financial statements in accordance with the guidance issued by the staff of the U.S. Securities and Exchange Commission, which provides for the application of income taxes in the reporting period in which the 2017 Tax Act was signed into law. As such, the Company’s financial results reflect the income tax effects of the 2017 Tax Act for which the accounting under the guidance is complete and the provisional amounts for those specific income tax effects of the 2017 Tax Act for which the accounting under the guidance is not final but a reasonable estimate could be determined. The Company did not identify items for which the income tax effects of the 2017 Tax Act have not been completed and a reasonable estimate could not be determined as of December 30, 2017.

The Company recorded a $56,560 tax benefit in the fourth quarter of fiscal 2017, its best estimate based on the Company’s understanding of the 2017 Tax Act and the guidance available as of the date of this filing. The tax benefit of $56,560 was comprised of the following items:

Reduction of the U.S. Corporate Income Tax Rate

The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a $68,654 provisional income tax benefit for the fiscal year ended December 30, 2017 and a corresponding $68,654 provisional decrease in net deferred tax liabilities as of December 30, 2017. The Company’s estimate is based upon its best interpretation of the 2017 Tax Act and may change as additional guidance becomes available and further analysis is performed.

Valuation Allowance on Foreign Tax Credit Carryforwards

As of December 30, 2017, the Company's federal foreign tax credit carryforwards for tax return purposes were $8,964. The federal foreign tax credit carryovers expire through 2026. However, as a result of the new tax law changing the U.S. from a worldwide system of taxation to a territorial system, the Company has determined there is not sufficient future foreign source income projected to utilize these credits. Accordingly, in the fourth quarter of fiscal 2017, the Company recorded a full valuation allowance against its foreign tax credit carryforward. The estimate of future foreign source income incorporates assumptions made based upon the best available interpretation of the 2017 Tax Act and may change as the Company receives additional clarification and implementation guidance.

Other items

In the fourth quarter of fiscal 2017 the Company also recorded a net charge of $3,130 from other items, including $742 related to the transition tax on foreign earnings. The provisional estimate of the transition tax requires further analysis regarding the amount and composition of the Company’s historical foreign earnings.

The following tables summarize the Company’s consolidated provision for U.S. federal, state and foreign taxes on income:

	December 30,			December 31,			January 2,
	2017			2016			2016
Current:
U.S.federal	$	9,224		$	(15,254	)	$	(6,862	)
State		1,993			604			1,859
Foreign		18,762			20,191			15,740
	$	29,979		$	5,541		$	10,737
Deferred:
U.S. federal	$	(51,788	)	$	10,980		$	10,756
State		481			1,877			1,890
Foreign		3,091			(1,764	)		(548	)
	$	(48,216	)	$	11,093		$	12,098
Total tax provision	$	(18,237	)	$	16,634		$	22,835

The components of the Company’s consolidated income before income taxes consist of the following:

	December 30,		December 31,		January 2,
	2017		2016		2016
Domestic	$	53,045	$	26,367	$	6,299
Foreign		92,035		57,760		49,315
	$	145,080	$	84,127	$	55,614

The effective tax rates for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016 were (12.6%), 19.8% and 41.1%, respectively. The difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate is as follows:

The Company’s effective tax rate for the fiscal year ended December 30, 2017 was impacted by The 2017 Tax Act which benefited its tax expense by $56,560 and was comprised of the following items: (i) a $68,654 tax benefit related to the revaluation of deferred tax liabilities to reflect the decrease in the corporate tax rate from 35% to 21% (ii) a $8,964 charge to record a valuation allowance against foreign tax credit carryforwards that as a result of the 2017 Tax Act are no longer expected to be realized, and (iii) a net charge of $3,130 related to other 2017 Tax Act items, which includes the transition tax on foreign earnings. In addition, the effective tax rate for fiscal 2017 was impacted by the following one-time discrete items (i) an $11,633 tax benefit related to the cessation of operations of the Company’s Spanish subsidiary; (ii) a $3,735 tax benefit due to a change in estimate related to the availability of certain foreign tax credits and (iii) a $2,255 tax benefit related to the reversal of tax reserves resulting from an updated transfer pricing study.

The Company’s effective tax rate for fiscal year ended December 31, 2016 was affected by a net tax benefit arising from a research and development tax credit and a Section 199 deduction for the tax years 2012 through 2016 and the reversal of a valuation allowance related to tax benefits for foreign losses that are now expected to be realized. These benefits were partially offset by income tax expenses recorded for out-of-period adjustments.

	December 30,			December 31,			January 2,
	2017			2016			2016
U.S. federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes (net of federal benefit)		2.5	%		2.0	%		3.8	%
Cessation of Spanish operations		(8.0	%)		0.0	%		0.0	%
Research and development credit		(1.3	%)		(19.5	%)		0.0	%
Tax (windfall) shortfall on share-based awards		(1.1	%)		0.0	%		0.0	%
Reserves for uncertain tax positions		(0.2	%)		2.9	%		3.5	%
Tax Rate Changes		(49.6	%)		0.0	%		0.0	%
Valuation adjustment related to foreign tax credits		3.5	%		(2.3	%)		(2.2	%)
Increase in valuation allowance due to net operating loss		3.0	%		0.0	%		0.0	%
Impairment		3.2	%		0.0	%		0.0	%
Impact of Foreign Ops		(0.7	%)		0.0	%		0.0	%
Out-of-period adjustments		0.0	%		2.6	%		4.5	%
Other		1.1	%		(0.9	%)		(3.5	%)
Effective Tax Rate		(12.6	%)		19.8	%		41.1	%

The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as follows:

	December 30,			December 31,
	2017			2016
Provision for estimated expenses	$	2,307		$	4,269
Depreciation		1,005			2,230
Operating loss carryforwards		17,424			24,560
Salaries and wages		1,579			2,832
Share-based compensation		8,016			13,374
Foreign tax credit carryforwards		8,964			4,075
Other		8,991			12,154
Other comprehensive income		4,797			18,001
Less: valuation allowance		(22,760	)		(18,270	)
Total deferred tax assets	$	30,323		$	63,225
Other	$	(1,025	)	$	(1,209	)
Amortization		(166,257	)		(229,559	)
Total deferred tax liabilities	$	(167,282	)	$	(230,768	)
Net deferred tax liabilities	$	(136,959	)	$	(167,543	)

Certain foreign operations of the Company have generated net operating loss carryforwards. If it has been determined that it is more-likely-than-not that the deferred tax assets associated with these net operating loss carryforwards will not be utilized, a valuation allowance has been recorded. As of December 30, 2017 and December 31, 2016, various foreign subsidiaries had net operating loss carryforwards of approximately $69,359 and $98,546, respectively, most of which can be carried forward indefinitely.

As a result of the 2017 Tax Act changing the U.S. to a territorial tax system, the Company will no longer assert that any of its undistributed foreign earnings are permanently reinvested. We have considered whether there would be any potential future costs of not asserting indefinite reinvestment and found none.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	December 30,			December 31,			January 2,
	2017			2016			2016
Balance at beginning of year	$	8,979		$	7,698		$	6,268
Additions based on tax positions related to the current year		2,539			4,580			2,106
Reductions for tax positions of prior years		(2,877	)		(3,299	)		(676	)
Balance at end of year	$	8,641		$	8,979		$	7,698

At December 30, 2017, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $8,675. As of December 30, 2017, given the nature of the Company’s uncertain tax positions, it is reasonably possible that there will not be a significant change in the Company’s uncertain tax benefits within the next twelve months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $515 and $452 of accrued interest and penalties at December 30, 2017 and December 31, 2016, respectively. The Company recognized $63, $(777), and $(266) in interest and penalties during the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. At December 30, 2017, with few exceptions, the Company was no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years prior to 2014, or non-U.S. income tax examinations by tax authorities for years prior to 2012.