INCOME TAX

Income tax expense differs from the expected amounts based on the statutory federal tax rates for the three and six months ended June 30, 2018 and July 1, 2017 as follows:



	Three months ended						Six months ended
(In thousands)	June 30, 2018			July 1, 2017			June 30, 2018			July 1, 2017
Expected federal income tax expense at statutory rate	$	13,467		$	17,861		$	28,400		$	32,430
State income taxes before valuation allowance, net of federal tax effect	203			159			698			209
Effect of foreign source income	(4,142		)	(7,273		)	(2,346		)	(10,645		)
Tax contingencies	45			406			813			535
Valuation allowance	(188		)	756			453			1,237
U.S. federal research credit	(674		)	(549		)	(1,574		)	(1,148		)
Equity compensation	(228		)	(497		)	(5,792		)	(2,792		)
Global intangible low tax income	835			—			1,949			—
Other items, net	464			179			727			327
Income tax expense	$	9,782		$	11,042		$	23,328		$	20,153

The Company’s year-to-date effective tax rate was 17.2% in 2018, compared to an effective tax rate of 21.7% during the same period in 2017. This variance reflects the benefit from the reduction in the corporate tax rate from 35% to 21% which was offset by the global intangible low tax income inclusion and various discrete items. The effective tax rate in 2017 reflects a greater concentration in the Company's geographic composition of income toward jurisdictions with lower tax rates.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the "Tax Cuts and Jobs Act") which makes broad and complex changes to the U.S. tax code. The Company calculated its best estimate of the impact of the Tax Cuts and Jobs Act in its 2017 year-end income tax provision in accordance with its understanding of the Tax Cuts and Jobs Act and guidance available as of the date of the filing. During the fourth quarter of fiscal 2017, the Company recorded a provisional net charge using reasonable estimates based on analysis and information available to date for the tax effects related to the remeasurement of deferred taxes, the deemed repatriation transition tax, accelerated depreciation, and the deductibility of certain executive compensation. This provisional net charge is subject to revisions as the Company completes its analysis of the Tax Cuts and Jobs Act, collects and prepares necessary data, and interprets any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service, Financial Accounting Standards Board, and other standard setting and regulatory bodies. Adjustments may materially impact the provision for income taxes and effective tax rate in the period in which the adjustments are made. As of June 30, 2018, the Company has not finalized its accounting for the tax effects of these items. The Company expects to complete its analysis of these provisional items when the necessary information becomes available to accurately analyze and compute in reasonable detail under ASC Topic 740. The Company estimates such analysis will be completed in the second half of 2018.

The Tax Cuts and Jobs Act also has provisions that impact the Company’s 2018 results, most notably a reduction in the corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The U.S. tax law changes also (1) repeals the deduction for domestic production activities, (2) establishes a global intangible low tax income (GILTI) regime, (3) creates a base erosion anti-avoidance tax (BEAT), (4) establishes new limitations on deductible interest expense and certain executive compensation, (5) eliminates the corporate alternative minimum tax, (6) generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries and (7) changes the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

Global Intangible Low Taxed Income

The U.S. tax law changes created new rules that allow the Company to make an accounting policy election to treat taxes due on GILTI inclusions in taxable income as either a current period expense or reflect such inclusions related to temporary basis differences in the Company’s measurement of deferred taxes. The Company has elected to treat the GILTI inclusion as a current period expense. The Company recorded tax expense related to GILTI of $0.8 million and $1.9 million in the three and six months ended June 30, 2018, respectively.