Income Taxes

9 Months Ended

Mar. 29, 2020

Income Tax Disclosure [Abstract]

Income Taxes

13.  Income Taxes

The provision for income taxes and effective tax rate were as follows:

	For the Three Months Ended						For the Nine Months Ended
	March 29, 2020			March 31, 2019			March 29, 2020			March 31, 2019
Provision for income taxes	$	1,530		$	3,070		$	2,758		$	3,606
Effective tax rate		(3.9	)%		199.2	%		(8.1	)%		71.3	%

Income Tax Expense

UNIFI’s provision for income taxes for the nine months ended March 29, 2020 and March 31, 2019 was calculated by applying an estimate of the annual effective tax rate for the full fiscal year to year-to-date income from ordinary activity.  Tax effects of significant and unusual, or infrequently occurring, items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

The effective tax rate for the three months and nine months ended March 29, 2020 was lower than the U.S. federal statutory rate primarily due to an increase in the valuation allowance for UNIFI’s investment in PAL as a result of the impairment charge, for which UNIFI does not expect to realize a future tax benefit.

The effective tax rate for the three months ended March 31, 2019 was higher than the U.S. federal statutory rate primarily due to U.S. tax on Global Intangible Low-Tax Income (“GILTI”), adjustments to enactment date tax reform impacts, losses in tax jurisdictions for which no tax benefit could be recognized, and foreign withholding taxes. The effective tax rate for the nine months ended March 31, 2019 was higher than the U.S. federal statutory rate primarily due to U.S. tax on GILTI, losses in tax jurisdictions for which no tax benefit could be recognized, earnings taxed at higher rates in foreign jurisdictions, and foreign withholding taxes. These rate detriments were partially offset by adjustments to enactment date tax reform impacts. 

UNIFI regularly assesses the outcomes of both completed and ongoing examinations to ensure that its provision for income taxes is sufficient. Certain returns that remain open to examination have utilized carryforward tax attributes generated in prior tax years, including net operating losses, which could potentially be revised upon examination.