Income Taxes

3 Months Ended

Mar. 29, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

        During the three months ended March 29, 2020, our income tax provision of $1.9 million on a loss before income taxes and equity in earnings of unconsolidated investees of $0.5 million was primarily due to projected tax expense in foreign jurisdictions that were profitable, offset by a tax benefit related to a release of tax reserves in foreign jurisdictions due to a lapse of statute of limitations. Our income tax provision of $5.8 million in the three months ended March 31, 2019 on a loss before income taxes and equity in earnings of unconsolidated investees of $100.4 million was primarily due to tax expense in foreign jurisdictions that were profitable and a net change in valuation allowance from a foreign jurisdiction.

        During the three months ended March 29, 2020, in accordance with FASB guidance for interim reporting of income tax, we have computed our provision for income taxes based on a projected annual effective tax rate while excluding loss jurisdictions which cannot be benefited. Our projected effective tax rate is based on forecasted annualized results which may fluctuate significantly in future periods, in particular due to the uncertainty in our annual forecasts resulting from the unpredictable duration and severity of the COVID-19 pandemic on our operating results.

        Total liabilities associated with uncertain tax positions were $18.8 million and $20.1 million as of March 29, 2020 and December 29, 2019, respectively. The decrease of $1.3 million was primarily related to the release of tax reserves in various foreign jurisdictions due to lapse of statute of limitations.

        In June 2019, the U.S. Court of Appeals for the Ninth Circuit overturned the 2015 U.S. tax court decision in Altera Co v. Commissioner, regarding the inclusion of stock-based compensation costs under cost sharing agreements. In July 2019, Altera Corporation, a subsidiary of Intel Inc., requested en banc review of the decision from the Ninth Circuit panel and the request was denied in November 2019. In February 2020, Altera Corporation petitioned the U.S. Supreme Court for review. While a final decision remains outstanding, we quantified and recorded the impact of including such compensation costs, as described in the Ninth Circuit decision, of $5.8 million in the fourth quarter of fiscal 2019, as a reduction to deferred tax asset, fully offset by a reduction to valuation allowance of the same amount, without any income tax expense impact. If the Altera Ninth Circuit opinion is reversed by the U.S. Supreme Court, we would anticipate unwinding the reduction to both deferred tax asset and valuation allowance as aforementioned. There was no further update in the first quarter of fiscal 2020 and we will continue to monitor the effects of the case’s outcome on our tax provision and related disclosures once more information becomes available.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Furthermore, the CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. We are still evaluating the tax impact of the CARES Act, but at present, do not expect that the NOL carryback provision and Section 163(j) modification of the CARES Act would result in a material tax benefit due to the net operating loss position.