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Income Taxes
6 Months Ended
Sep. 29, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

 

The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to state or foreign income tax examinations by tax authorities for years ending before April 2, 2005. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before March 29, 2015. A U.S. federal tax examination by the Internal Revenue Service for the year ended March 30, 2013 was effectively settled in fiscal 2016.

 

The effective income tax rates for the three-month periods ended September 29, 2018 and September 30, 2017, were 11.7% and 36.4%, respectively. The reduction in the effective income tax rate for the three months ended September 29, 2018 as compared with the prior year period reflects the net benefits of the Tax Cut and Jobs Act (TCJA or “the Act”), which reduced the U.S. statutory rate for corporations from 35% to 21% for tax years beginning in 2018 and made other changes to the U.S. federal income tax laws affecting both domestic and foreign income. The reduction in the effective income tax rate also reflects the impact of increased benefit associated with share-based compensation during the three months ended September 29, 2018.

 

The TCJA was signed into law on December 22, 2017 revising the U.S. corporate income tax. Changes included, but are not limited to, the reduction of the U.S. federal corporate rate from 35% to 21%, the elimination of certain deductions and imposing a one-time net charge related to the taxation of undistributed foreign earnings. Also on December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. 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 the Act. In accordance with SAB 118, the accounting for the tax effects of the TCJA is not complete as of September 29, 2018; however, reasonable estimates have been made.

 

Provisional estimates of $9,166 for the one-time net charge related to the taxation of undistributed foreign earnings and $9,318 tax benefit related to the remeasurement of U.S. deferred tax balances to reflect the new U.S. corporate income tax rate were recognized as components of income tax expense as of March 31, 2018. No changes have been made to these provisional estimates during the three months ended September 29, 2018. Additional information and analysis of the Act is still needed to prepare a more detailed analysis of the Company’s deferred tax assets and liabilities, as well as historical foreign earnings and profits and potential correlative adjustments. Any subsequent adjustments to the Company’s provisional estimates will be recorded to current tax expense in the quarter of fiscal year 2019 when further analysis is complete.

 

No additional income tax provision has been made on any remaining undistributed foreign earnings not subject to the one-time net charge related to the taxation of unremitted foreign earnings or any additional outside basis difference as these amounts continue to be indefinitely reinvested in foreign operations.

 

One of the international tax law changes provided for with the TCJA relates to the taxation of a corporation’s global intangible low-taxed income (GILTI) for tax years beginning after December 31, 2017. The Company has evaluated this provision of the TCJA and the application of ASC 740, and does not believe that GILTI will have a significant impact.

 

In addition to discrete items, the effective income tax rates for these periods are different from the U.S. statutory rates due to a special U.S. manufacturing deduction and the U.S. credit for increasing research activities, which decrease the rate, and state income taxes, which increases the rate.

 

The effective income tax rate for the three-month period ended September 29, 2018 of 11.7% includes $3,176 of tax benefits associated with share-based compensation. The effective income tax rate without this benefit and other items for the three-month period ended September 29, 2018 would have been 20.9%. The effective income tax rate for the three-month period ended September 30, 2017 of 36.4% includes discrete items of $917 benefit associated with restructuring and integration activities, $405 benefit associated with shared-based compensation and $134 benefit associated with state tax filing positions. The effective income tax rate without discrete items for the three-month period ended September 30, 2017 would have been 42.6%. The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled within the next twelve months due to the closing of audits and the statute of limitations expiring in varying jurisdictions. The decrease in the Company’s unrecognized tax positions, pertaining primarily to items associated with the consolidation and restructuring of the company’s U.K. manufacturing facility and to credits and state tax, is estimated to be approximately $1,734.