Income Taxes

6 Months Ended

Jul. 02, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 7. Income Taxes

The Company recorded tax expense of $37 million and $71 million for the three and six months ended July 2, 2022, respectively. The Company recorded tax expense of $23 million and $47 million for the three and six months ended July 3, 2021, respectively.

For interim periods, income tax is equal to the total of (1) year-to-date pretax income multiplied by the Company’s forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where the Company expects to report losses for which the Company does not expect to receive tax benefits, the Company applies separate forecasted effective tax rates to those jurisdictions rather than including them in the consolidated forecasted effective tax rate.

For the three months ended July 2, 2022, the net tax expense of $37 million consists primarily of interim period tax expense based on year-to-date pretax income multiplied by the Company’s forecasted effective tax rate. In addition to items specific to the period, the Company’s income tax rate is impacted by the mix of earnings across the jurisdictions in which the Company operates, non-deductible expenses, and U.S. taxation of foreign earnings.

For the six months ended July 2, 2022, the net tax expense of $71 million consists primarily of interim period tax expense based on year-to-date pretax income multiplied by the Company’s forecasted effective tax rate. In addition to items specific to the period, the Company’s income tax rate is impacted by the mix of earnings across the jurisdictions in which the Company operates, non-deductible expenses, and U.S. taxation of foreign earnings.