The Company accounts for income taxes under an asset and liability approach where deferred income taxes are based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.


	Fiscal Years
(In millions)	2020		2019		2018

Current provision:
Federal	$	4.7	$	39.0	$	188.3
State and local	(0.5)		5.2		8.0
Foreign	57.5		69.3		47.9
Total current	61.7		113.5		244.2
Deferred provision (benefit):
Federal	18.2		4.0		43.7
State and local	0.6		2.8		(3.3)
Foreign	8.4		8.3		17.2
Total deferred	27.2		15.1		57.6
Taxes on earnings	$	88.9	$	128.6	$	301.8


	Fiscal Years
	2020		2019		2018
Federal statutory income tax rate	21.0	%	21.0	%	24.6	%
Impact of U.S. Tax Reform	0.6	%	2.1	%	46.3	%
State and local taxes, net of federal tax benefit	1.3	%	2.6	%	0.5	%
Non-U.S. income taxed at different rates, net	4.5	%	1.5	%	(0.6)	%
Foreign-derived intangible income deduction	(1.1)	%	(1.4)	%	—	%
Resolution of tax contingencies due to expiration of statutes of limitation	(2.3)	%	(1.8)	%	(2.5)	%
Excess stock deduction	(2.1)	%	(1.6)	%	(1.5)	%
Goodwill impairment	—	%	2.5	%	—	%
Change in acquirer's deferred taxes related to purchase accounting	—	%	0.7	%	(1.8)	%
In-process R&D expense	—	%	1.1	%	—	%
U.S. minimum tax	2.0	%	0.4	%	—	%
Other	0.9	%	3.5	%	1.8	%
Effective tax rate	24.8	%	30.6	%	66.8	%

During fiscal year 2020, the Company's effective tax rate was higher than the U.S. federal statutory rate primarily due to the geographic mix of earnings. During fiscal year 2019, the Company’s effective tax rate was higher than the U.S, federal statutory rate primarily due to a goodwill impairment charge and in-process R&D expenses, neither of which generated a tax benefit for the Company. During fiscal year 2018, the tax rate was higher than the U.S. federal statutory rate primarily because it included the tax effect of a change in law due to the enactment of Tax Cuts and Jobs Act (“the Act”).

As a result of finalizing the impact of the Act, the Company recognized a tax expense of $5.4 million in fiscal year ended October 2, 2020. The Company recognized a total tax expense related to the Act of $214.0 million as of September 27, 2019.

In February 2018, the FASB amended its guidance to allow companies to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Act to retained earnings. In the first quarter of fiscal year 2020, the Company adopted that guidance. The impact of adopting this amendment on the Company's consolidated financial statements was not material.


	October 2,		September 27,
(In millions)	2020		2019
Deferred Tax Assets:
Deferred revenues	$	12.5	$	21.1
Deferred compensation	24.7		33.9
Product warranty	4.8		5.5
Inventory adjustments	5.4		6.0
Share-based compensation	9.6		12.4

Accruals and reserves	18.9		11.8
Net operating loss carryforwards	157.2		120.7

Lease liability	12.6		—
Other	53.1		38.9
	298.8		250.3
Valuation allowance	(137.9)		(99.7)
Total deferred tax assets	160.9		150.6
Deferred Tax Liabilities:
Tax-deductible goodwill	(23.6)		(20.7)
Intangibles	(52.2)		(61.7)
Property, plant and equipment	(8.3)		(7.1)
Unremitted earnings of foreign subsidiaries	(58.8)		(34.1)
Leased asset	(11.0)		—
Other	(26.7)		(17.6)
Total deferred tax liabilities	(180.6)		(141.2)
Net deferred tax assets	$	(19.7)	$	9.4
Reported As:

Deferred tax assets	$	81.5	$	84.7
Deferred tax liabilities	(101.2)		(75.3)

Net deferred tax assets	$	(19.7)	$	9.4

The Company has federal net operating loss carryforwards of approximately $28.2 million, with $15.6 million expiring between 2021 and 2038. The remaining $12.6 million will be carried forward indefinitely. The federal net operating loss carryforwards are subject to an annual limitation of $0.8 million per year. The Company has state net operating loss carryforwards of $10.3 million expiring between 2021 and 2039. The Company has foreign net operating loss carryforwards of $508.1 million, of which $445.8 million are net operating losses with an indefinite life. Of this amount, $23.6 million is unavailable to the Company under local loss utilization rules.

The valuation allowance relates primarily to net operating losses in certain foreign jurisdictions where, based on the weight of available evidence, it is more likely than not that the tax benefit of the net operating losses will not be realized. The valuation allowance decreased by $1.9 million, and $4.2 million in fiscal years 2019 and 2018, respectively, and increased by $38.2 million in fiscal year 2020.


	Fiscal Years
(In millions)	2020		2019		2018

Federal income taxes paid, net	$	37.5	$	50.5	$	10.6
State, income taxes paid, net	(0.1)		11.9		7.2
Foreign income taxes paid, net	59.7		66.1		68.2
Total income taxes paid, net	$	97.1	$	128.5	$	86.0

The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available

evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.


	Fiscal Years
(In millions)	2020		2019		2018

Unrecognized tax benefits balance–beginning of fiscal year	$	49.8	$	43.5	$	42.7
Additions based on tax positions related to a prior year	6.5		0.2		1.1
Reductions based on tax positions related to a prior year	(10.8)		(0.8)		(3.0)
Additions based on tax positions related to the current year	6.1		13.2		14.8
Settlements	(2.2)		—		(2.8)
Reductions resulting from the expiration of the applicable statute of limitations	(6.5)		(6.3)		(9.3)
Unrecognized tax benefits balance–end of fiscal year	$	42.9	$	49.8	$	43.5

As of October 2, 2020, the total amount of gross unrecognized tax benefits was $42.9 million. Of this amount, $32.0 million would affect the effective tax rate if recognized. The difference would be offset by changes to deferred tax assets and liabilities.

The Company includes interest and penalties related to income taxes within taxes on earnings on the Consolidated Statements of Earnings. As of October 2, 2020, the Company had accrued $6.8 million for the payment of interest and penalties related to unrecognized tax benefits. During fiscal year 2020, a net charge of $0.7 million related to interest and penalties was included in taxes on earnings in the Consolidated Statements of Earnings. As of September 27, 2019, the Company had accrued $7.5 million for the payment of interest and penalties related to unrecognized tax benefits. During fiscal year 2019, a net charge of $0.9 million related to interest and penalties was included in taxes on earnings in the Consolidated Statements of Earnings.

The Company files U.S. federal, U.S. state, and foreign tax returns. The Company’s U.S. federal tax returns are generally no longer subject to tax examinations for years prior to 2016. During the third quarter of fiscal year 2020, the Company was notified that the IRS intends to commence an examination of its fiscal year 2018. The audit has not yet started, and the Company believes that it has adequately provided for any exposures as a result of the audit. The Company has significant operations in Switzerland. The Company’s Swiss tax returns are generally no longer subject to tax examinations for years prior to 2017. For U.S. states and other foreign tax returns, the Company is generally no longer subject to tax examinations for years prior to 2008.