Income Taxes

3 Months Ended

Jan. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our effective tax rate was 20.2% and 23.4% for the first quarter of fiscal 2022 and 2021, respectively. The effective tax rate for the first quarter of fiscal 2022 includes the impact of state taxes, offset by a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter, and various other tax benefits. The effective tax rate for the first quarter of fiscal 2021 was higher than the federal statutory tax rate primarily due to state taxes, partially offset by various tax benefits.

Unrecognized tax benefits were $152 million at January 1, 2022 and October 2, 2021. We do not expect material changes to our unrecognized tax benefits during the next twelve months.

In December 2021, we received an assessment from the Mexican tax authorities related to the 2015 sale of our direct and indirect equity interests in subsidiaries which held our Mexico operations. The assessment totaled approximately $380 million (7.8 billion Mexican pesos), which includes tax, inflation adjustment, interest and penalties. We believe the assertions made in the assessment letter have no merit and will defend our positions through the Mexican administrative appeal process and litigation, if necessary. Based on our analysis of this assessment in accordance with FASB guidance related to unrecognized tax benefits, we have not recorded a liability related to the issue.