Income Taxes

6 Months Ended

Jul. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The following table summarizes the Company’s effective tax rate:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Effective tax rate	18.8	%	16.8	%	18.3	%	17.6	%

The Company operates globally, including in certain jurisdictions with lower tax rates than the United States (“U.S.”) federal statutory rate. Therefore, the impact of operating in such jurisdictions reduces the effective tax rate compared to the U.S. federal statutory tax rate.

The effective tax rate for the three-month period ended July 1, 2022 differs from the U.S. federal statutory rate of 21.0% principally due the geographic mix of earnings described above and net discrete benefits of $8 million related primarily to changes in estimates associated with prior period uncertain tax positions and excess tax benefits from stock-based compensation. The net discrete benefits reduced the effective tax rate by 0.4% for the three-month period ended July 1, 2022.

The effective tax rate for the six-month period ended July 1, 2022 differs from the U.S. federal statutory rate of 21.0% principally due to the geographic mix of earnings described above and net discrete benefits of $49 million related primarily to excess tax benefits from stock-based compensation and changes in estimates associated with prior period uncertain tax positions. The net discrete benefits reduced the effective tax rate by 1.2% for the six-month period ended July 1, 2022.

The effective tax rate for the three-month period ended July 2, 2021 differs from the U.S. federal statutory rate of 21.0% principally due to net discrete benefits of $76 million related primarily to the release of reserves for uncertain tax positions due to the expiration of statutes of limitation, audit settlements and excess tax benefits from stock-based compensation, net of changes in estimates associated with prior period uncertain tax positions. These factors reduced the effective tax rate by 3.7% for the three-month period ended July 2, 2021.

The effective tax rate for the six-month period ended July 2, 2021 differs from the U.S. federal statutory rate of 21.0% principally due to net discrete benefits of $120 million related primarily to release of reserves for uncertain tax positions due to the expiration of statutes of limitation, audit settlements and excess tax benefits from stock-based compensation, net of changes in estimates associated with prior period uncertain tax positions. These factors reduced the effective tax rate by 2.9% for the six-month period ended July 2, 2021.

For a description of the Company’s significant tax matters, reference is made to the financial statements as of and for the year ended December 31, 2021 and Note 7 thereto included in the Company’s 2021 Annual Report.