Taxes Based on Income

6 Months Ended

Jul. 03, 2021

Note 8. Taxes Based on Income

The following table summarizes our income before taxes, provision for (benefit from) income taxes, and effective tax rate:


	Three Months Ended						Six Months Ended
(Dollars in millions)	July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
Income before taxes	$	255.3		$	103.3		$	524.2		$	284.2
Provision for (benefit from) income taxes		70.4			22.2			128.5			68.5
Effective tax rate		27.6	%		21.5	%		24.5	%		24.1	%

Our provision for (benefit from) income taxes for the three months and six months

ended July 3, 2021 included $

million and $14 million, respectively, of net tax charge related to the tax on global intangible low-taxed income (“GILTI”) of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from foreign-derived intangible income (“FDII”).

Our provision for (benefit from) income taxes for the three months and six months ended July 3, 2021 also reflected $

3.5

million of net discrete tax charge related to tax effects on outcomes of certain legal proceedings and $

3.6 million of net discrete tax benefit primarily from decreases in certain tax reserves, including associated interest and penalties, as a result of closing tax years. Additionally, our provision for (benefit from) income taxes for the six months ended July 3, 2021 reflected a

14.1

million return-to-provision benefit related to a GILTI exclusion election made on our amended 2018 U.S. tax return.

ur provision for (benefit from) income taxes for the three and six months ended June 27, 2020 included

3.3

million and $10.5

million, respectively, of net tax charge related to the tax on GILTI of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from FDII. Our provision for (benefit from) income taxes for the three and six months ended June 27, 2020 also reflected

11.8

million of net discrete tax benefit primarily from decreases in certain tax reserves, including associated interest and penalties, as a result of closing tax years and the effective settlement of certain foreign tax audits.

In fiscal year 2020, the U.S. Department of Treasury issued final regulations that provide certain U.S. taxpayers with an annual election to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. This annual election included an option for retroactive application to tax years 2018 through 2020. We determined to make the election for tax years 2018 and 2019 and recognized related tax benefits in the first quarter of 2021 and the fourth quarter of 2020, respectively. We have not yet determined whether to make the election for tax years 2020 and 2021. We continue to evaluate the impact of these regulations and currently anticipate to recognize a benefit from making this election in connection with the completion of our 2020 U.S. tax return in the third quarter of 2021.

The amount of income taxes we pay is subject to ongoing audits by taxing jurisdictions around the world. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts, and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. The final determination of tax audits and any related legal proceedings could materially differ from the amounts currently reflected in our tax provision and the related liabilities. To date, we and our U.S. subsidiaries have completed the Internal Revenue Service’s Compliance Assurance Process Program through 2017. With limited exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2010.

It is reasonably possible that, during the next 12 months, we may realize a net decrease in our uncertain tax positions, including interest and penalties, of approximately $9 million, primarily as a result of closing tax years.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details