Income Taxes

12 Months Ended

Dec. 29, 2019

Reconciliations between the effective tax rate on income from continuing operations before income taxes and the federal statutory rate are presented below.



	December 29, 2019					December 30, 2018					December 31, 2017
(In thousands)	Amount			% of Pre-tax		Amount			% of Pre-tax		Amount			% of Pre-tax
Tax at federal statutory rate	$	34,537		21.0		$	36,979		21.0		$	38,928		35.0
State and local taxes, net	5,303			3.2		12,335			7.0		4,800			4.3
Effect of enacted changes in tax laws	—			—		(1,872		)	(1.0	)	68,747			61.8
(Decrease)/increase in uncertain tax positions	(2,427		)	(1.5	)	2,288			1.3		(2,277		)	(2.0	)
(Gain)/loss on company-owned life insurance	(1,662		)	(1.0	)	449			0.2		(1,916		)	(1.7	)
Nondeductible expense	1,938			1.2		1,808			1.0		912			0.8
Nondeductible executive compensation	(355		)	(0.2	)	2,135			1.2		1,360			1.2
Stock-based awards benefit	(6,184		)	(3.8	)	(1,795		)	(1.0	)	(517		)	(0.4	)
Deduction for foreign-derived intangible income	(2,625		)	(1.6	)	—			—		—			—
Research and experimentation credit	(5,672		)	(3.4	)	—			—		—			—
Other, net	1,641			1.0		(3,696		)	(2.1	)	(6,081		)	(5.5	)
Income tax expense	$	24,494		14.9		$	48,631		27.6		$	103,956		93.5

The components of income tax expense as shown in our Consolidated Statements of Operations were as follows:



(In thousands)	December 29, 2019			December 30, 2018		December 31, 2017
Current tax expense/(benefit)
Federal	$	16,283		$	31,719	$	(252	)
Foreign	823			705		458
State and local	3,146			10,172		350
Total current tax expense	20,252			42,596		556
Deferred tax expense/(benefit)
Federal	5,588			913		105,905
State and local	(1,346		)	5,122		(2,505		)
Total deferred tax expense	4,242			6,035		103,400
Income tax expense	$	24,494		$	48,631	$	103,956

State tax operating loss carryforwards totaled $1.6 million as of December 29, 2019 and $2 million as of December 30, 2018. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives up to 18 years.

On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes included, but were not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, a one-time transition tax on the mandatory deemed repatriation of foreign earnings and numerous domestic and international-related provisions effective in 2018.

On December 22, 2017, SAB 118 was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, we determined that the $68.7 million of additional income tax expense recorded in the fourth quarter of 2017 in connection with the remeasurement of certain deferred tax assets and liabilities, the one-time transition tax on the mandatory deemed repatriation of foreign earnings, and deferred tax assets related to executive compensation deductions was a provisional amount and a reasonable estimate at December 31, 2017. Provisional estimates were also made with regard to the Company’s deductions under the Tax Act’s new expensing provisions and state and local income taxes related to foreign earnings subject to the one-time transition tax. The ultimate impact of the Tax Act was expected to differ from the provisional amount recognized due to, among other things, changes in estimates resulting from the receipt or calculation of final data, changes in interpretations of the Tax Act, and additional regulatory guidance that would be issued. In the fourth quarter of 2018, in accordance with SAB 118, we completed the accounting for the impact of the Tax Act and recognized a $1.9 million tax benefit related to 2017, primarily attributable to the remeasurement of certain deferred tax assets and liabilities and the repatriation of foreign earnings.

The components of the net deferred tax assets and liabilities recognized in our Consolidated Balance Sheets were as follows:



(In thousands)	December 29, 2019		December 30, 2018
Deferred tax assets
Retirement, postemployment and deferred compensation plans	$	113,306	$	128,926
Accruals for other employee benefits, compensation, insurance and other	25,543		22,722
Net operating losses	1,289		1,598
Operating lease liabilities	16,746		—
Other	27,042		23,400
Gross deferred tax assets	$	183,926	$	176,646
Deferred tax liabilities
Property, plant and equipment	$	39,494	$	38,268
Intangible assets	7,596		7,225
Operating lease right-of-use assets	14,309		—
Other	7,298		2,722
Gross deferred tax liabilities	$	68,697	$	48,215
Net deferred tax asset	$	115,229	$	128,431

We assess whether a valuation allowance should be established against deferred tax assets based on the consideration of both positive and negative evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We evaluated our deferred tax assets for recoverability using a consistent approach that considers our three years historical cumulative income/(loss), including an assessment of the degree to which any such losses were due to items that are unusual in nature (i.e., impairments of nondeductible goodwill and intangible assets).

We had an income tax receivable of $12.6 million as of December 29, 2019, compared with an income tax receivable of $3.7 million as of December 30, 2018.

Income tax benefits related to the exercise or vesting of equity awards reduced current taxes payable by $11.9 million, $4.8 million and $13.7 million in 2019, 2018 and 2017, respectively.

As of December 29, 2019 and December 30, 2018, Accumulated other comprehensive loss, net of income taxes in our Consolidated Balance Sheets and for the years then ended in our Consolidated Statements of Changes in Stockholders’ Equity was net of deferred tax assets of approximately $188 million and $194 million, respectively.

A reconciliation of unrecognized tax benefits is as follows:



(In thousands)	December 29, 2019			December 30, 2018			December 31, 2017
Balance at beginning of year	$	11,629		$	17,086		$	10,028
Gross additions to tax positions taken during the current year	1,184			680			9,009
Gross additions to tax positions taken during the prior year	711			3,019			103
Gross reductions to tax positions taken during the prior year	(76		)	(8,607		)	(372		)
Reductions from settlements with taxing authorities	(2,637		)	—			—
Reductions from lapse of applicable statutes of limitations	(502		)	(549		)	(1,682		)
Balance at end of year	$	10,309		$	11,629		$	17,086

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $9 million and $10 million as of December 29, 2019, and December 30, 2018, respectively.

In 2019 and 2018, we recorded $3.8 million and $0.5 million income tax benefit, respectively, due to a reduction in the Company’s reserve for uncertain tax positions.

We also recognize accrued interest expense and penalties related to the unrecognized tax benefits within income tax expense or benefit. The total amount of accrued interest and penalties was approximately $2 million and $3 million as of December 29, 2019, and December 30, 2018, respectively. The total amount of accrued interest and penalties was a net charge of $0.6 million in 2019, a net benefit of $0.7 million in 2018 and a net benefit of $0.1 million in 2017.

With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2012. Management believes that our accrual for tax liabilities is adequate for all open audit years. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.

It is reasonably possible that certain income tax examinations may be concluded, or statutes of limitation may lapse, during the next 12 months, which could result in a decrease in unrecognized tax benefits of $3.6 million that would, if recognized, impact the effective tax rate.