Income Taxes

6 Months Ended

Jul. 03, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which the Company operates. However, losses in certain jurisdictions and discrete items, such as the resolution of uncertain tax positions, are treated separately.

The Company’s effective income tax rate for the second quarter and first six months of 2022 was 22.7% and 9.6%, respectively. The Company's effective income tax rate for the second quarter and first six months of 2021 was 29.8% and 22.8%, respectively. The second quarter of 2022 includes net discrete income tax benefits of $1.0 million compared with net discrete income tax expense of $4.1 million. The first six months of 2022 includes net discrete income tax benefits of $57.5 million compared with net discrete income tax benefits of $2.2 million. The second quarter and first six months of 2022 net discrete income tax amounts include $1.8 million and $8.5 million, respectively, related to share-based accounting. The second quarter and first six months of 2022 also includes non-cash income tax expense of $0.6 million and non-cash income tax benefits of $49.4 million primarily related to the resolution of certain FLIR tax reserves. The second quarter and first six months of 2021 net discrete income tax amounts include $2.1 million and $6.9 million, respectively, related to share-based accounting. The second quarter and six months of 2021 net discrete income tax amounts also include $11.5 million expense related to foreign tax rate changes and a $5.3 million income tax benefit related to the release of a valuation allowance. The foreign tax rate changes are a result of the United Kingdom Parliament enacting legislation to increase the corporate tax rate to 25% effective April 2023. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for the second quarter of 2022 and 25.3% for the second quarter of 2021.

See Note 2 to these Notes to Condensed Consolidated Financial Statements for information regarding FLIR historical tax matters that existed at the date of the acquisition, including the STA’s reassessment of tax for the year ending December 31, 2012 related to one of FLIR’s non-operating subsidiaries in Sweden.