Income Taxes

12 Months Ended

Jan. 03, 2025

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 13: INCOME TAXES

Income before taxes and the provision (benefit) for taxes consisted of the following:

	2024			2023			2022
(In millions)
Income before taxes:
United States	$	216.4		$	26.9		$	117.7
Foreign	1,789.5			330.1			451.4
Total	$	2,005.9		$	357.0		$	569.1
Provision (benefit) for taxes:
U.S. Federal:
Current	$	94.1		$	57.1		$	98.4
Deferred	(71.2)			(92.5)			(97.7)
	22.9			(35.4)			0.7
U.S. State:
Current	15.6			12.8			12.6
Deferred	2.1			(6.6)			(5.0)
	17.7			6.2			7.6
Foreign:
Current	364.8			80.4			48.4
Deferred	96.1			(5.5)			62.7
	460.9			74.9			111.1
Income tax provision	$	501.5		$	45.7		$	119.4
Effective tax rate	25.0		%	12.8		%	21.0		%

The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income before taxes (“effective tax rate”) was as follows:

	2024		2023		2022
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
Increase (reduction) in tax rate resulting from:
Foreign income taxed at different rates	3.4	%	0.8	%	4.4	%
U.S. State income taxes	0.8	%	1.0	%	1.0	%
Stock-based compensation	0.9	%	4.8	%	1.2	%
Other U.S. taxes on foreign operations	(2.8)	%	(4.4)	%	(3.1)	%
Foreign-derived intangible income	—	%	(3.9)	%	(0.4)	%
U.S. Federal research and development credits	(0.8)	%	(5.4)	%	(2.2)	%
Tax reserve releases	(1.0)	%	(2.5)	%	(1.8)	%
Tax on Ag divestiture	2.1	%	—	%	—	%
Other	1.4	%	1.4	%	0.9	%
Effective tax rate	25.0	%	12.8	%	21.0	%

The increase in 2024 tax rate was primarily due to gains from the Ag divestiture, which impacted the foreign and domestic items in the table above.

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of deferred tax assets and liabilities were as follows:

At the End of Year	2024		2023
(In millions)
Deferred tax liabilities:
Purchased intangibles	$	311.3	$	373.6
Global intangible low-taxed income	17.6		105.8
Operating lease right-of-use assets	29.7		30.2
Other	26.9		19.7
Total deferred tax liabilities	$	385.5	$	529.3
Deferred tax assets:
Depreciation and amortization	$	217.6	$	368.2
Capitalized research and development	118.2		98.4
Operating lease liabilities	34.7		36.2
U.S. tax credit carryforwards	23.1		23.5
Expenses not currently deductible	26.3		26.5
Net operating loss carryforwards	24.3		17.9
Stock-based compensation	17.2		16.7
Intercompany prepayments	—		36.6
Other	74.6		60.8
Total deferred tax assets	536.0		684.8
Valuation allowance	(56.0)		(31.0)
Total deferred tax assets	480.0		653.8
Total net deferred tax assets	$	94.5	$	124.5
Reported as:
Non-current deferred income tax assets	$	294.4	$	412.3
Non-current deferred income tax liabilities	(199.9)		(287.8)
Net deferred tax assets	$	94.5	$	124.5

At the end of 2024, we have U.S. federal net operating loss carryforwards, or federal NOLs, of approximately $18.9 million, which will begin to expire in 2036. At the end of 2024, we have foreign net operating and capital loss carryforwards, or foreign losses, of approximately $106.3 million, which generally have no expiration. Utilization of our U.S. federal NOLs is subject to annual limitations in accordance with the applicable tax code. We have determined that it is more likely than not that a portion of the foreign losses will not be realized and, accordingly, a valuation allowance has been established for such amount.

We have California research and development credit carryforwards of approximately $35.2 million, which have an indefinite carryforward period. We believe that it is more likely than not that a significant portion of the California research and development credit carryforwards will not be realized and, accordingly, a valuation allowance has been established for such amount.

We have net deferred tax assets of $14.4 million relating to our investment in PTx Trimble. We believe that it is more likely than not that a significant portion of the net deferred tax assets will not be realized and, accordingly, a valuation allowance has been established for such amount.

As a result of the Tax Act, we can repatriate foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences. We reinvested a large portion of our undistributed foreign earnings in acquisitions and other investments and intend to bring back a portion of foreign cash that was subject to the transition tax and the global intangible low-taxed income tax. During 2024, we repatriated $232.7 million cash from foreign earnings to the U.S.

The total amount of unrecognized tax benefits at the end of 2024 was $78.2 million. A reconciliation of gross unrecognized tax benefits was as follows: 

	2024		2023		2022
(In millions)
Beginning balance	$	88.3	$	76.5	$	64.2
Increase related to current year tax positions	11.3		12.4		23.0
(Decrease) increase related to prior years’ tax positions	(1.5)		7.6		(0.7)
Lapse of statute of limitations	(19.9)		(8.2)		(10.0)
Ending balance	$	78.2	$	88.3	$	76.5

Total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $45.8 million and $59.5 million at the end of 2024 and 2023.

We and our subsidiaries are subject to U.S. federal, state, and foreign income taxes. We are currently under a U.S. federal income tax audit for our tax year 2021 and have not yet received any assessment. Our tax years before 2021 are closed for U.S. federal income tax audit purposes. Our tax years are substantially closed for all state income taxes for audit purposes through 2015. Non-U.S. income tax matters have been concluded for years through 2008. We are currently in various stages of multiple year examinations from state and foreign (multiple jurisdictions) taxing authorities. While we generally believe it is more likely than not that our tax positions will be sustained, it is reasonably possible that future obligations related to these matters could arise. We believe that our reserves are adequate to cover any potential assessments that may result from the examinations and negotiations.

Although the 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.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Our liability for unrecognized tax benefits including interest and penalties was recorded in Other non-current liabilities on our Consolidated Balance Sheets. At the end of 2024 and 2023, we accrued $8.8 million and $9.9 million for interest and penalties.