XML 62 R28.htm IDEA: XBRL DOCUMENT v3.24.0.1
INCOME TAXES
 12 Months Ended
Dec. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Significant components of the Company’s deferred tax assets and liabilities from continuing operations, excluding 2023 amounts classified as held for sale, at the end of each fiscal year were as follows:
(Millions of Dollars)20232022
Deferred tax liabilities:
Depreciation$114.6 $160.1 
Intangible assets817.7 907.5 
Liability on undistributed foreign earnings14.8 45.4 
Lease right-of-use asset126.5 108.2 
Inventory32.6 59.4 
Other44.2 46.7 
Total deferred tax liabilities$1,150.4 $1,327.3 
Deferred tax assets:
Employee benefit plans$154.8 $130.9 
Basis differences in liabilities100.8 104.0 
Operating loss, capital loss and tax credit carryforwards826.5 817.4 
Lease liability 129.1 110.4 
Intangible assets681.3 556.8 
Basis difference in debt obligations
249.1 268.0 
Capitalized research and development costs194.6 134.7 
Interest expense carryforward 152.7 27.7 
Other159.1 176.6 
Total deferred tax assets$2,648.0 $2,326.5 
Net Deferred Tax Asset before Valuation Allowance$1,497.6 $999.2 
Valuation Allowance$(1,046.9)$(1,032.5)
Net Deferred Tax Asset/ (Liability) after Valuation Allowance$450.7 $(33.3)
The increase in intangible deferred tax assets relates to an intra-entity asset transfer of certain intangible assets from a wholly-owned, non-U.S. subsidiary to another wholly-owned, non-U.S. subsidiary located in the United Kingdom in order to better align with current and future business operations. The transfer resulted in a step-up in tax basis driven by the fair value of the transferred intellectual property (“IP”), which was determined using an income approach taking into consideration future revenue projections, royalty rates and discount rates. The Company expects to realize the deferred tax asset recorded as a result of the IP transfer and will periodically assess such realizability. The tax-deductible amortization related to the transferred IP will be recognized over a 20-year period.
A valuation allowance is recorded on certain deferred tax assets if it has been determined it is more likely than not that all or a portion of these assets will not be realized. The Company recorded a valuation allowance of $1,046.9 million and $1,032.5 million on deferred tax assets existing as of December 30, 2023 and December 31, 2022, respectively. The valuation allowances in 2023 and 2022 are primarily attributable to foreign and state net operating loss carryforwards, certain intangible assets unrelated to the IP transfer discussed above, foreign capital loss carryforwards, and state tax credits.
As of December 30, 2023, the Company has approximately $4.6 billion of unremitted foreign earnings and profits. Of the total amount, the Company has provided for deferred taxes of $14.8 million on approximately $1.0 billion, which is not indefinitely reinvested primarily due to the changes brought about by the Tax Cuts and Jobs Act. The Company otherwise continues to consider the remaining undistributed earnings of its foreign subsidiaries to be permanently reinvested based on its current plans for use outside of the U.S. and accordingly no taxes have been provided on such earnings. The cash held by the Company’s non-U.S. subsidiaries for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. The income taxes applicable to such earnings and other outside basis differences are not readily determinable or practicable to calculate.
As of December 30, 2023, the Company has approximately $1.5 billion and $3.1 billion of net operating loss carryforwards available to reduce future tax obligations in certain U.S. state and foreign jurisdictions, respectively. The Company’s foreign net operating loss carryforwards primarily relate to its subsidiaries’ operations in Luxembourg ($2.4 billion), France ($202.5 million), Germany ($168.4 million), Brazil ($106.1 million), and other foreign jurisdictions ($218.4 million). The net operating loss carryforwards have various expiration dates beginning in 2024 with certain jurisdictions having indefinite carryforward periods. The foreign capital loss carryforwards of $40.3 million as of December 30, 2023 have indefinite carryforward periods.
U.S. foreign tax credit carryforward balance as of December 30, 2023 totaled $1.6 million with various expiration dates beginning in 2033. State tax credit carryforward balance as of December 30, 2023 totaled $19.3 million. The carryforward balance is made up of various credit types spanning multiple state taxing jurisdictions and various expiration dates beginning in 2024.
The components of (loss) earnings from continuing operations before income taxes and equity interest consisted of the following:
(Millions of Dollars)202320222021
United States$(1,385.0)$(1,233.8)$(77.7)
Foreign1,009.3 1,271.7 1,664.6 
(Loss) earnings before income taxes and equity interest$(375.7)$37.9 $1,586.9 
Income taxes on continuing operations consisted of the following:
(Millions of Dollars)202320222021
Current:
Federal$5.8 $(79.0)$0.3 
Foreign307.4 248.6 388.0 
State17.1 (16.7)31.8 
Total current$330.3 $152.9 $420.1 
Deferred:
Federal$(158.2)$(61.2)$(124.7)
Foreign(218.3)(222.5)(210.1)
State(47.8)(1.6)(30.2)
Total deferred(424.3)(285.3)(365.0)
Income taxes$(94.0)$(132.4)$55.1 
Net income taxes paid for continuing operations during 2023, 2022 and 2021 were $415.2 million, $482.6 million and $441.8 million, respectively. The 2023, 2022 and 2021 amounts include refunds of $25.3 million, $41.8 million and $50.1 million, respectively.
The reconciliation of the U.S. federal statutory income tax provision to Income taxes on continuing operations in the Consolidated Statements of Operations is as follows:
(Millions of Dollars)202320222021
Tax at statutory rate$(78.9)$8.0 $333.2 
State income taxes, net of federal benefits(23.6)(19.3)1.4 
Foreign tax rate differential(48.0)(28.8)(63.5)
Uncertain tax benefits30.5 26.3 49.6 
Change in valuation allowance33.5 (25.1)(11.9)
Change in deferred tax liabilities on undistributed foreign earnings— 12.8 23.1 
Stock-based compensation8.2 7.3 (6.3)
Change in tax rates0.2 (5.5)(31.1)
Tax credits(13.8)(8.8)(6.7)
U.S. federal tax expense (benefit) on foreign earnings61.1 55.7 (118.1)
Intra-entity asset transfer of intellectual property(131.3)(153.3)(114.2)
Withholding taxes38.9 5.4 12.0 
Impairment on assets held for sale30.4 — — 
Other(1.2)(7.1)(12.4)
Income taxes $(94.0)$(132.4)$55.1 
The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course, the Company is subject to examinations by taxing authorities throughout the world. The Internal Revenue Service is currently examining the Company's consolidated U.S. income tax returns for the 2017 through 2019 tax years. With few exceptions, as of December 30, 2023, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2012.
The Company’s liabilities for unrecognized tax benefits relate to U.S. and various foreign jurisdictions. The following table summarizes the activity related to the unrecognized tax benefits from continuing operations:
(Millions of Dollars)202320222021
Balance at beginning of year$502.7 $487.7 $428.3 
Additions based on tax positions related to current year20.9 27.2 33.6 
Additions based on tax positions related to prior years20.4 41.1 53.5 
Reductions based on tax positions related to prior years(8.2)(37.8)(17.2)
Settlements(16.2)(7.0)(1.3)
Statute of limitations expirations(16.8)(8.5)(9.2)
Reclassification to long-term liabilities held for sale(21.5)— — 
Balance at end of year$481.3 $502.7 $487.7 

The gross unrecognized tax benefits from continuing operations at December 30, 2023 and December 31, 2022 include $475.7 million and $496.0 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. The liability for potential penalties and interest related to unrecognized tax benefits from continuing operations, excluding 2023 amounts reclassified to liabilities held for sale, increased by $15.5 million in 2023, decreased by $11.2 million in 2022 and increased by $9.6 million in 2021. The liability for potential penalties and interest totaled $64.3 million as of December 30, 2023, $48.8 million as of December 31, 2022, and $60.0 million as of January 1, 2022. The Company classifies all tax-related interest and penalties as income tax expense.

The Company considers many factors when evaluating and estimating its tax positions and the impact on income tax expense, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next twelve months. However, based on the uncertainties associated with finalizing audits with the relevant tax authorities including formal legal proceedings, it is not possible to reasonably estimate the impact of any such change.