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Income Taxes
 12 Months Ended
Jan. 01, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Earnings before taxes is summarized as follows (in thousands):
 
 202120202019
Domestic$453,357 $178,813 $336,688 
Foreign166,147 89,244 125,931 
Total$619,504 $268,057 $462,619 
 
The provision for income taxes is summarized as follows (in thousands):
 
 202120202019
Federal$84,689 $36,908 $69,074 
State and local24,363 8,815 16,203 
Foreign21,960 15,040 25,102 
Total$131,012 $60,763 $110,379 
Current$124,149 $44,342 $88,167 
Deferred6,863 16,421 22,212 
Total$131,012 $60,763 $110,379 
 
Reconciliation of the differences between income taxes computed at the federal statutory rate to the effective rate are as follows:
 202120202019
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit3.1 3.2 3.2 
Permanent differences0.5 (0.4)0.6 
Foreign income tax rate at rates other than U.S. statutory0.2 0.5 0.2 
Deferred tax changes(2.2)(0.7)— 
Tax refunds(0.7)— — 
Change in valuation allowances (1)
0.4 (0.1)0.1 
Tax on unremitted earnings0.4 1.2 0.3 
Other(1.6)(2.0)(1.5)
Consolidated effective tax21.1 %22.7 %23.9 %
(1) Net of changes in related tax attributes.

The company’s effective tax rate for 2021 was 21.1% as compared to 22.7% in 2020. The effective tax rate for 2021 reflects favorable tax adjustments for deferred tax rate changes, tax refunds and adjustments for the finalization of 2020 tax returns. The effective tax rate is higher than the federal tax rate of 21.0% primarily due to state taxes and foreign tax rate differentials.
At January 1, 2022 and January 2, 2021, the company had recorded the following deferred tax assets and liabilities (in thousands):
 
 20212020
Deferred tax assets:  
Compensation related$21,543 $12,328 
Pension and post-retirement benefits49,072 88,709 
Inventory reserves14,453 14,732 
Accrued liabilities and reserves17,088 22,049 
Warranty reserves19,286 17,890 
Operating lease liability18,643 16,180 
Interest rate swaps4,573 12,997 
Convertible debt37,034 — 
Net operating loss carryforwards17,083 20,747 
Other12,695 17,187 
Gross deferred tax assets211,470 222,819 
Valuation allowance(10,222)(11,731)
Deferred tax assets$201,248 $211,088 
Deferred tax liabilities:  
Intangible assets$(273,974)$(226,598)
Depreciable assets(26,996)(26,916)
Basis difference on affiliates(18,795)— 
Operating lease right-of-use assets(18,029)(15,921)
Other(17,195)(12,825)
Deferred tax liabilities$(354,989)$(282,260)
Net deferred tax assets (liabilities)$(153,741)$(71,172)
Long-term deferred asset33,194 76,052 
Long-term deferred liability(186,935)(147,224)
Net deferred tax assets (liabilities)$(153,741)$(71,172)
 
The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $9.7 million and $7.5 million at January 1, 2022 and January 2, 2021, respectively. No further provisions were made for income taxes that may result from future remittances of undistributed earnings of foreign subsidiaries that are determined to be permanently reinvested, which were $538.0 million on January 1, 2022. Determination of the total amount of unrecognized deferred income taxes on undistributed earnings net of foreign subsidiaries is not practicable.
 
The company has a deferred tax asset on net operating loss carryforwards totaling $17.1 million as of January 1, 2022. These net operating losses are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States federal loss carryforwards total $29.0 million of which $5.6 million will expire through 2036 and $23.4 million have no expiration date. State loss carryforwards total $34.2 million and expire through 2040 and international loss carryforwards total $44.7 million and expire through 2038; however, some have no expiration date. Of these carryforwards, $33.4 million are subject to full valuation allowance.
As of January 1, 2022, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $36.2 million (of which $36.2 million would impact the effective tax rate if recognized) plus approximately $7.1 million of accrued interest and $6.0 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2021, 2020 and 2019 was $0.9 million, $0.8 million and $0.4 million, respectively. Penalties recognized in fiscal years 2021, 2020 and 2019 was $(1.0) million, $(0.2) million and $(0.9) million, respectively.
    
Although the company believes its tax returns are correct, the final determination of tax examinations may be different than what was reported on the tax returns. In the opinion of management, adequate tax provisions have been made for the years subject to examination.
 
The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended December 28, 2019, January 2, 2021 and January 1, 2022 (in thousands):
  
Balance at December 28, 2019$31,559 
  
Increases to current year tax positions3,657 
Increase to prior year tax positions183 
Decrease to prior year tax positions(53)
Settlements(533)
Lapse of statute of limitations(4,484)
  
Balance at January 2, 2021$30,329 
  
Increases to current year tax positions1,760 
Increase to prior year tax positions6,796 
Decrease to prior year tax positions(576)
Settlements(1,180)
Lapse of statute of limitations(920)
Balance as of January 1, 2022$36,209 

It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that $3.8 million of its remaining unrecognized tax benefits may be recognized by the end of 2022 as a result of settlements with taxing authorities or lapses of statutes of limitations.
In the normal course of business, income tax authorities in various income tax jurisdictions both in the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2017 through the current year for the United States federal jurisdiction. Income tax years open for our other major jurisdictions range from 2016 through the current year.