Income Taxes

6 Months Ended

Jun. 29, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As of June 29, 2024 the Company had net deferred income tax assets of $4,744. As of December 30, 2023, the Company had net deferred income tax liabilities of $2,837. The change from net deferred income tax liabilities to net deferred income tax assets is primarily due to the capitalization of research and development costs under Section 174 of the Internal Revenue Code and the amortization of intangible assets.

The Company's effective income tax rate was (8.7%) and (6.7%) during the three and six months ended June 29, 2024, respectively, and 8.2% and 11.7% during the three and six months ended July 1, 2023, respectively. The difference between the effective income tax rate and the combined statutory federal and state income tax rate was primarily due to an increase in federal

tax credits and a decrease in the recognition of excess tax benefits from stock-based payments in the first half of fiscal 2024 as compared to the first half of fiscal 2023.

The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. Fiscal years 2012 through 2014 are considered open tax years in the State of California. Fiscal years 2020 through 2023 are considered open tax years in the U.S. federal jurisdiction, state jurisdictions, including the State of California, and foreign jurisdictions. It is not expected that there will be a significant change in the unrecognized tax benefits within the next 12 months.

In 2021, the Organization for Economic Co-operation and Development (“OECD”) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The United States has not yet enacted legislation implementing the Pillar Two rules, however, they have been enacted or substantively enacted in certain jurisdictions in which the Company operates. The Company is continuing to assess the Pillar Two rules, however, based on the legislation enacted at this stage, the impact of Pillar Two is not expected to be material.