Income Taxes

6 Months Ended

Jul. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

For the second quarter, our effective income tax rate was 24.2%, as compared to 14.5% in the prior year. For the first two quarters, our effective income tax rate was 22.7%, as compared to 15.4% in the prior year. The increases were primarily associated with current quarter divestiture gains and a prior year rate decrease due to a one-time tax benefit from a foreign deferred tax asset.

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 $51.8 million and $42.3 million at the end of the second quarter of 2022 and at the end of 2021, if recognized, would favorably affect the effective income tax rate in future periods. At the end of the second quarter of 2022 and at the end of 2021, we accrued interest and penalties of $10.2 million and $9.2 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.