Income Taxes

9 Months Ended

Oct. 01, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our effective income tax rate for the third quarter of 2021 was 20.9%, as compared to 12.0% in the corresponding period in 2020. The increase was primarily due to a tax benefit from reserve releases related to the expiration of the U.S. federal statute of limitations in the third quarter of 2020. For the first three quarters of 2021, our effective income tax rate was 17.3%, as compared to 21.3% in the corresponding period in 2020. The decrease was primarily due to one-time tax benefits from a foreign deferred tax asset and income tax refund, as well as an increased tax benefit from stock-based compensation deductions.

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 $46.8 million and $47.8 million at the end of the third quarter of 2021 and at the end of 2020, if recognized, would favorably affect the effective income tax rate in future periods. At the end of the third quarter of 2021 and at the end of 2020, we accrued interest and penalties of $10.3 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.