Income Taxes

9 Months Ended

Sep. 25, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company had income tax expense of $14.2 million and $39.2 million in the third quarter and first nine months of 2022, respectively. The Company had income tax expense of $20.3 million and $48.0 million in the third quarter and first nine months of 2021, respectively. The Company’s effective tax rates from continuing operations were 28.0% and 27.5% for the third quarter and first nine months of 2022, respectively. The Company’s effective tax rates from continuing operations were 27.1% and 24.2% for the third quarter and first nine months of 2021, respectively. The decrease in income tax expense in the third quarter of 2022 was primarily due to lower income from continuing operations in the third quarter of 2022. The decrease in income tax expense in the first nine months of 2022 was primarily due to lower income from continuing operations in the first nine months of 2022. The increase in the effective tax rate in the first nine months of 2022 was primarily due to a lower benefit in the first nine months of 2022 from stock price appreciation on stock-based awards that settled in the respective nine-month periods.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures immediately in the year incurred and instead requires taxpayers to capitalize and amortize such expenditures over five years. Although it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that Congress will take any action with respect to this provision. If the 2022 effective date remains in place, our initial assessment is that our cash from operations will be negatively impacted by approximately $50 million in 2022 and our net deferred tax assets will increase by a similar amount. The actual impact on fiscal 2022 cash from operations will depend on the amount of research and development costs we incur, on whether Congress modifies or repeals this provision, and on whether new guidance and interpretive rules are issued by the U.S. Treasury, among other factors.

On August 16, 2022, the President signed the Inflation Reduction Act of 2022 (the “IRA”) into law. We do not expect the tax-related provisions of the IRA to have a material impact on our consolidated financial statements.