Income Taxes

6 Months Ended

Jul. 02, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our effective income tax rate for the second quarter of fiscal 2021 was 14.5%, as compared to 30.5% in the corresponding period in fiscal 2020. The decrease was primarily due to a one-time tax charge related to increased valuation allowance arising from California tax legislation in the second quarter of fiscal 2020 and a one-time tax benefit from a foreign deferred tax asset in the second quarter of fiscal 2021. For the first two quarters of fiscal 2021, our effective income tax rate was 15.4%, as compared to 26.5% in the corresponding period in fiscal 2020 due to the same reasons above as well as a one-time tax benefit from foreign income tax refunds in the first quarter of fiscal 2021.

We and our subsidiaries are subject to U.S. federal, state, and foreign income taxes. Currently, we are in different stages of multiple year examinations by various state and foreign taxing authorities. While we believe our reserves are more likely than not to be adequate to cover final resolution of all open tax matters, it is reasonably possible that future obligations related to these matters could arise.

Unrecognized tax benefits of $48.1 million and $47.8 million as of the end of the second quarter of fiscal 2021 and fiscal year end 2020, if recognized, would favorably affect the effective income tax rate in future periods. As of the end of the second quarter of fiscal 2021 and fiscal year end 2020, we accrued interest and penalties of $10.6 million and $9.6 million. Although timing of the resolution and/or closure of audits is not certain, we do not believe that our gross unrecognized tax benefits would materially change in the next twelve months.