
	2020		2019		2018
	(In thousands)
U.S. federal income taxes	$	128,576	$	262,940	$	399,254
State and local income taxes	8,529		73,835		62,670
Foreign income taxes	(59,196)		(5,210)		63,534
Total	$	77,909	$	331,565	$	525,458

The deferred tax provisions result from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.


	Jun. 27, 2020		Jun. 29, 2019
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	379,620	$	274,231
Pension	184,616		157,670
Receivables	99,540		17,383
Deferred compensation	31,603		29,694
Share-based compensation	21,296		39,218
Inventory	17,069		12,139
Self-insured liabilities	3,409		16,496

Other	41,820		34,366
Deferred tax assets before valuation allowances	778,973		581,197
Valuation allowances	(137,862)		(127,807)
Total deferred tax assets	641,111		453,390
Deferred tax liabilities:
Goodwill and intangible assets	329,940		358,847
Excess tax depreciation and basis differences of assets	169,920		163,123

Other	33,737		22,892
Total deferred tax liabilities	533,597		544,862
Total net deferred tax assets (liabilities)	$	107,514	$	(91,472)

The company’s deferred tax asset for net operating loss carryforwards as of June 27, 2020 and June 29, 2019 consisted of state and foreign net operating tax loss carryforwards. The state net operating loss carryforwards outstanding as of June 27, 2020 expire in fiscal years 2021 through 2039. The foreign net operating loss carryforward periods vary by jurisdiction, from 17 years to unlimited.

The company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. As a result of the company’s analysis, it was concluded that, as of June 27, 2020, a valuation allowance of $137.9 million should be established against the portion of the deferred tax asset attributable to certain foreign and United States (U.S.) state losses. The company will continue to monitor facts and circumstances in the reassessment of the likelihood that net operating loss carryforwards will be realized.


	2020		2019		2018
U.S. statutory federal income tax rate	21.00	%	21.00	%	28.00	%
State and local income taxes, net of any applicable federal income tax benefit	5.69		3.35		2.48
Foreign income taxes	(2.46)		(1.42)		0.07
Uncertain tax position	(1.44)		(0.31)		(0.22)
Tax benefit of equity-based compensation	(9.77)		(2.07)		(2.66)
Nondeductible impairment charges	17.65		—		—


Impact of U.S. Tax Reform	—		(4.64)		0.13
Other	(4.12)		0.62		(0.95)
Effective income tax rate	26.55	%	16.53	%	26.85	%

The effective tax rate of 26.55% for fiscal 2020 was impacted by the tax benefits attributable to equity compensation exercises. Our foreign operations are subject to their earnings being taxed at rates different than our domestic tax rate, as well as credits, local permanent differences and other minimum taxes which resulted in a net decrease in the effective tax rate. Nondeductible asset impairment charges have an unfavorable impact. Included within “Other” is the effect of certain non-deductible expenses in the U.S. jurisdiction as well as the impact of U.S. tax credits, return to accrual adjustments and U.S. taxes on foreign earnings.

The effective tax rate of 16.53% for fiscal 2019 was favorably impacted by the reduction of the statutory rate in the U.S. and certain foreign jurisdictions, the excess tax benefits attributable to equity compensation exercises and the favorable impact of $95.1 million of foreign tax credits included within Impacts of U.S. Tax Reform. These credits fully offset our transition tax liability, as well as a reduction of the statutory tax rate in the U.S. and certain foreign jurisdictions. Foreign earnings taxed at rates different than our domestic tax rate had the impact of decreasing the effective tax rate.

The effective tax rate of 26.85% for fiscal 2018 was favorably impacted by the adoption of Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), as well as a reduction of the statutory tax rate in the U.S. and certain foreign jurisdictions. Foreign earnings taxed at rates different than our domestic tax rate had the impact of increasing the effective tax rate.


	2020		2019
	(In thousands)
Unrecognized tax benefits at beginning of year	$	26,109	$	12,195
Additions for tax positions related to prior years	—		20,508
Reductions for tax positions related to prior years	(2,974)		(6,086)


Reductions due to settlements with taxing authorities	—		(508)

Unrecognized tax benefits at end of year	$	23,135	$	26,109

As of June 27, 2020, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $4.1 million. As of June 29, 2019, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $4.6 million. The expense recorded for interest and penalties related to unrecognized tax benefits was not material in any year presented. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months. At this time, an estimate of the range of the reasonably possible change cannot be made.

If Sysco were to recognize all unrecognized tax benefits recorded as of June 27, 2020, approximately $22.4 million of the $23.1 million reserve would reduce the effective tax rate. If Sysco were to recognize all unrecognized tax benefits recorded as of June 29, 2019, approximately $24.8 million of the $26.1 million reserve would reduce the effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the company’s unrecognized tax

positions will increase or decrease in the next twelve months either because Sysco’s positions are sustained on audit or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax benefits primarily include the consideration of various filing requirements in various jurisdictions and the allocation of income and expense between tax jurisdictions. In addition, the amount of unrecognized tax benefits recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years in various jurisdictions; however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring. Sysco anticipates an immaterial decrease to the reserve within twelve months as a result of lapse of statutes.

Sysco’s federal tax returns for 2018 and subsequent tax years have statutes of limitations that remain open for audit. As of June 27, 2020, Sysco’s tax returns in the majority of the state and local and material foreign jurisdictions are no longer subject to audit for the years before 2012.

Sysco intends to indefinitely reinvest income of its foreign operations, and, as a result, no accruals have been made with respect to the tax effects of unremitted earnings, including impacts of outside basis differences, withholding taxes any distributions may be subject to or residual U.S. income taxes, if any. As a result of the U.S. Tax Cuts and Jobs Act, unremitted earnings prior to the effective date of the act have been subject to U.S. income tax. Any residual tax effects are immaterial to the financial statements.

The determination of the company’s provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Tax law changes, increases or decreases in permanent book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.