Income Taxes

3 Months Ended

Mar. 26, 2021

Income Tax Disclosure [Abstract]

Income Tax Disclosure

4. Income Taxes

As further discussed in Note 1, the Company concluded that there is substantial doubt about its ability to continue as a going concern within one year from the date of issuance of the unaudited condensed consolidated financial statements. The Company considered this in determining that certain net deferred tax assets were no longer more likely than not realizable. As a result, as of March 26, 2021, all of the Company's net deferred tax assets in applicable tax jurisdictions are fully offset by a valuation allowance.

The Company recognized an income tax benefit of $16.4 million on a loss from continuing operations before income taxes of $160.6 million for the three months ended March 26, 2021, and an income tax benefit of $18.9 million on a loss from continuing operations before income taxes of $75.6 million for the three months ended March 27, 2020. This resulted in effective tax rates of 10.2% and 25.0% for the three months ended March 26, 2021 and March 27, 2020, respectively. The income tax benefit for the three months ended March 26, 2021 was comprised of $13.0 million of current tax benefit and $3.4 million of deferred tax benefit. The current tax benefit was predominantly related to an increase to prepaid taxes, partially offset by changes to uncertain tax positions. The deferred tax benefit was predominantly related to intangible asset amortization, partially offset by utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax benefit for the three months ended March 27, 2020 was comprised of $22.4 million of current tax benefit and $3.5 million of deferred tax expense. The deferred tax expense was predominantly comprised of deferred tax expense as a result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act partially offset by deferred tax benefit related to previously acquired intangibles.

The income tax benefit was $16.4 million for the three months ended March 26, 2021, compared with an income tax benefit of $18.9 million for the three months ended March 27, 2020. The $2.5 million net decrease in the tax benefit included a decrease of $11.0 million attributed to the CARES Act and a decrease of $8.0 million attributed to uncertain tax positions, partially offset by an increase of $15.4 million attributed to changes in the timing, amount and jurisdictional mix of income and an increase of $1.1 million attributed to separation costs, reorganization items, net and restructuring charges, net.

During the three months ended March 26, 2021, and fiscal 2020, the net cash payments for income taxes were $8.1 million and $39.9 million, respectively.

The Company's unrecognized tax benefits, excluding interest, totaled $356.2 million and $349.0 million as of March 26, 2021 and December 25, 2020, respectively. The net increase of $7.2 million primarily resulted from a net increase of prior period tax positions. If favorably settled, $80.9 million of unrecognized tax benefits as of March 26, 2021 would benefit the effective tax rate. The total amount of accrued interest and penalties related to these obligations was $19.8 million and $16.7 million as of March 26, 2021 and December 25, 2020, respectively.

It is reasonably possible that within the next twelve months the unrecognized tax benefits could decrease by up to $41.7 million and the amount of related interest and penalties could decrease by up to $9.8 million as a result of payments or releases due to the resolution of examinations, appeals and litigation and the expiration of various statutes of limitation.