Income Taxes

9 Months Ended

Jun. 26, 2020


The Company’s effective tax rates from continuing operations for the three months ended June 26, 2020 and June 28, 2019 were 22.3% and (2.1)%, respectively. The Company’s effective tax rates from continuing operations for the nine months ended June 26, 2020 and June 28, 2019 were 19.7% and 4.3%, respectively. The comparatively higher quarterly tax rate was primarily due to a $21.7 million tax benefit in the three months ended June 28, 2019, which related to the release of a valuation allowance on previously fully valued foreign tax credits. For the three months ended June 26, 2020, the effective tax rate was impacted by a $4.1 million benefit for the release of uncertain tax positions due to the statute of limitations expiring and a $12.6 million benefit for the release of a valuation allowance in the UK, with offsetting unfavorable impacts from other discrete items. The Company’s effective tax rate from continuing operations for the nine months ended June 26, 2020 was higher primarily due to $62.6 million in discrete benefits in the nine months ended June 28, 2019, predominantly comprised of $37.4 million for a remeasurement of the Company's deferred tax liability for unremitted earnings to account for the change in expected manner of recovery and an additional benefit of $21.7 million as a result of a valuation allowance release on foreign tax credits that were previously fully reserved. Comparatively, in the nine months ended June 26, 2020, the Company had a $12.6 million benefit for the release of a valuation allowance in the UK, a $6.9 million of benefit from the application of the Internal Revenue Code section 179D, a $3.7 million favorable settlement with the Indian Revenue Services, an amended tax return generating $5.8 million of foreign tax credits and research and development, and a $4.1 million benefit for an India tax rate change, with offsetting unfavorable impacts from other discrete items.

See Note 7- Sale of Energy, Chemicals and Resources ("ECR") Business for further information on the Company's discontinued operations reporting for the sale of the ECR business.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States and significantly revised the U.S. corporate income tax laws. Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allowed registrants to record provisional amounts during a one year “measurement period” like that used when accounting for business combinations. As of December 22, 2018, we completed our accounting for the tax effects of the enactment of the Act. For the deferred tax balances, we remeasured the U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The Company’s revised remeasurement resulted in cumulative charges to income tax expense of $144.4 million for the measurement period. The Act called for a one-time tax on deemed repatriation of foreign earnings. This one-time transition tax was based on our total post-1986 earnings and profits (E&P) of certain of our foreign subsidiaries. We recorded $14.3 million in cumulative transition taxes during the measurement period, although the transition tax was expected to be offset by foreign tax credits in the future, resulting in no additional cash tax liability. In addition, the Company recorded $104.2 million in cumulative valuation expense charges during the measurement period with respect to certain foreign tax credit deferred tax assets as a result of the Act and CH2M integration.

The amount of income taxes the Company pays is subject to ongoing audits by tax jurisdictions around the world. In the normal course of business, the Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Australia, Canada, India, the Netherlands, the United Kingdom and the United States. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts, and circumstances existing at the time. The Company believes that it has adequately provided for reasonably foreseeable outcomes related to these matters. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details