Income Taxes

12 Months Ended

Dec. 28, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The 2017 Tax Cuts and Jobs Act (the "Tax Act"), among other things, imposed a one-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S. subsidiaries and included base broadening provisions commonly referred to as the global intangible low-taxed income provisions ("GILTI").

The Company elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act. The anticipated 2025 annual installment payment of this Toll Charge of $8.2 million, which represents the eighth and final required installment, is included in Accrued income taxes, on the Consolidated Balance Sheet as of December 28, 2024.

In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense.

Domestic and foreign income (loss) before income taxes is as follows:

 

(in thousands)	2024		2023		2022
Domestic	$	3,151	$	40,571	$	32,462
Foreign	148,712		288,027		410,582
Income before income taxes	$	151,863	$	328,598	$	443,044

Federal, state, and foreign income tax expense (benefit) consists of the following:

 

(in thousands)	2024		2023		2022
Current:
Federal	$	(5,881)	$	8,188	$	12,423
State	1,826		2,880		2,183
Foreign	58,551		57,999		77,551
Subtotal	$	54,496	$	69,067	$	92,157
Deferred:
Federal and State	$	4,091	$	1,751	$	(9,182)
Foreign	(6,914)		(1,705)		(13,237)
Subtotal	$	(2,823)	$	46	$	(22,419)
Provision for income taxes	$	51,673	$	69,113	$	69,738

A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below:

 

(in thousands)	2024		2023		2022
Tax expense at statutory rate of 21%	$	31,891	$	69,006	$	93,039
Non-U.S. income tax rate differential	(1,130)		(25,623)		(41,731)
Non-U.S. losses and expenses with no tax benefit	9,401		11,261		10,660
Tax on unremitted earnings	6,616		6,394		10,870
Tax impact of non-deductible goodwill impairment charge	5,810		—		—
Net impact associated with U.S. tax on non-U.S. income, including GILTI	5,809		4,739		2,546
State and local taxes, net of federal tax benefit	2,533		1,503		215
Certain changes in unrecognized tax benefits and related accrued interest	(8,692)		(172)		1,839
One-time tax deductions for stock of subsidiaries	—		—		(11,495)
Other, net	(565)		2,005		3,795
Provision for income taxes	$	51,673	$	69,113	$	69,738

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities. Significant components of the Company’s deferred tax assets and liabilities at December 28, 2024 and December 30, 2023, are as follows:

 

(in thousands)	2024		2023
Deferred tax assets:
Net operating loss carryforwards	$	46,263	$	36,941
Interest expense carryforwards	34,800		34,205
Accrued expenses and reserves	32,336		39,299
Capitalized expenses	18,939		16,872
Lease liabilities	13,016		—
U.S. foreign tax credit carryforwards	3,490		3,561
U.S. research and other general business tax credit carryforwards	1,252		1,468
Other	196		—
Deferred tax assets	150,292		132,346
Less: Valuation allowance	(55,468)		(41,542)
Total deferred tax assets	94,824		90,804
Deferred tax liabilities:
Excess of book basis over the tax basis for intangible assets and goodwill	133,701		148,659
Excess of book basis over the tax basis for property, plant, and equipment	24,238		22,570
Tax on unremitted earnings	14,612		18,621
Right of use lease assets	12,906		—
Unrealized foreign currency exchange gains	—		1,288
Total deferred tax liabilities	185,457		191,138
Net deferred tax liabilities	$	90,633	$	100,334

The deferred tax asset valuation allowance is mainly related to certain U.S. and non-U.S. net operating loss and non-U.S. interest expense carryforwards which are not more likely that not to be realized. The remaining U.S. and non-U.S. net operating loss and interest expense carryforwards either have no expiration date or are expected to be utilized prior to expiration (which begin expiring in 2025). No deferred tax asset nor valuation allowance has been recorded for certain U.S. and non-U.S. net operating loss carryforwards for which the possibility of usage has been determined to be remote.

The Company paid income taxes of $88.1 million, $81.1 million, and $96.8 million in 2024, 2023, and 2022, respectively, and received income tax refunds of $4.3 million, $7.2 million, and $3.2 million in 2024, 2023, and 2022, respectively.

Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those subsidiaries for which such excess is considered to be permanently reinvested in those operations. The Company believes the determination of the amount of such deferred income taxes is impractical as it would depend upon income tax laws and circumstances at the time of the hypothetical distributions or dispositions. As of December 28, 2024, unremitted earnings of the Company’s non-U.S. subsidiaries were approximately $1.5 billion. A distribution of such earnings will generally not be subject to U.S. federal income tax. The Company recognized deferred tax liabilities of $14.6 million as of December 28, 2024 and $18.6 million as of December 30, 2023, related to taxes on certain non-U.S. earnings which are not considered to be permanently reinvested.

The Company has two subsidiaries in China which benefit from lower tax rates due to “tax holidays” which apply for three-year periods. The tax holiday for one of the subsidiaries expired at the end of 2023, but was later extended for an additional three years, retroactive to include all of 2024, as well as 2025 and 2026, and for the other subsidiary the tax holiday will expire at the end of 2025. Together, the tax holidays contributed $5.0 million in tax benefits, or $0.20 per diluted share, during 2024. Future year tax benefits will depend upon the Company’s ability to obtain extensions, after the three-year periods expire. There can be no assurance that future extensions will be granted.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 28, 2024, December 30, 2023, and December 31, 2022 is as follows:

 

(in thousands)	Unrecognized Tax Benefits
Balance at December 31, 2022	$	30,374
Additions for tax positions related to pre-acquisition periods of acquired subsidiaries	1,975
Additions for tax positions taken in the current year	1,200
Decreases for tax positions taken in the prior year	(792)
Decreases for lapses in statute of limitations	(1,051)
Decreases for settlements	(215)
Other	(42)
Balance at December 30, 2023	$	31,449
Additions for tax positions taken in the current year	1,251
Additions for tax positions taken in the prior year	375
Decreases for lapses in statute of limitations	(7,650)
Other	574
Balance at December 28, 2024	$	25,999

The December 28, 2024 total in the table above represents the net amount of tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. Of this amount, approximately $6.3 million may be recognized in 2025 based upon the possible lapse in the statute of limitations. None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.

The Company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The Company recognized such interest benefit of $2.7 million (including a $4.1 million decrease due to a lapse in the statute of limitations), $0.5 million expense (net of a $1.7 million decrease due to a lapse in the statute of limitations) and $1.4 million expense (net of a $0.2 million decrease due to a lapse in the statute of limitations) in 2024, 2023, and 2022, respectively. Accrued interest for such matters included in Other long-term liabilities within the Consolidated Balance Sheets was $11.1 million and $14.4 million as of December 28, 2024 and December 30, 2023, respectively.

The U.S. federal statute of limitations remains open for the Company for the 2018 tax year and later years. Non-U.S. and U.S. state statutes of limitations generally range from three to seven years, although certain jurisdictions do not have a statute expiration. Tax examinations occur from time to time, including examinations currently in process in Italy, Germany, the Netherlands, Singapore, other non-U.S. jurisdictions and certain U.S. states. The Company does not expect to recognize a significant amount of additional tax expense as a result of concluding these examinations.