Income Taxes (Notes)

9 Months Ended

Sep. 28, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment; accordingly, the consolidated effective tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. Additionally, small movements in tax rates due to a change in tax law or a change in tax rates that causes us to revalue our deferred tax balances produces volatility in our effective tax rate. Our quarterly income tax provision is determined based on our estimated full year effective tax rate, adjusted for tax attributable to infrequent or unusual items, which are recognized on a discrete period basis in the income tax provision for the period in which they occur.

Our effective tax rate was 22.6% for the three months ended September 28, 2019 compared to 24.6% for the three months ended September 29, 2018. The decrease in our effective tax rate was primarily driven by a decrease in unfavorable net discrete items. Current year unfavorable impacts from net discrete items were primarily related to tax impacts for divestitures, specifically related to the Canada Natural Cheese Transaction, the impact of which was partially offset by the reversal of certain deferred withholding tax liabilities resulting from the ratification of the U.S. tax treaty with Spain. In the prior year, we had unfavorable impacts from net discrete items primarily related to the revaluation of our deferred tax balances due to changes in state tax laws, non-deductible currency devaluation losses, and non-deductible goodwill impairments, which were partially offset by the favorable impact of reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2017 U.S. income and deductions.

Our effective tax rate was 25.0% for the nine months ended September 28, 2019 compared to 24.7% for the nine months ended September 29, 2018. The increase in our effective tax rate was primarily driven by the less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions, partially offset by a decrease in unfavorable net discrete items. Current year unfavorable impacts from net discrete items primarily related to non-deductible goodwill impairment and the tax impacts from the Heinz India and Canada Natural Cheese Transactions, the impacts of which were partially offset by the reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2018 U.S. income and deductions. In the prior year, we had an unfavorable impact from net discrete items, primarily related to the revaluation of our deferred tax balances due to changes in state tax laws, non-deductible currency devaluation losses, and non-deductible goodwill impairments, which were partially offset by the reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2017 U.S. income and deductions.