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Income Taxes
6 Months Ended
Mar. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
11. Income Taxes
The Company’s income tax provision and the resulting effective tax rate for interim periods is generally determined based upon its estimated annual effective tax rate ("AETR"), adjusted for the effect of discrete items arising in that quarter. The impact of such inclusions could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the AETR, and if the estimated AETR changes, a cumulative adjustment is made in that quarter.
The Company recorded a benefit from income taxes of $0.7 million and $26.4 million for the three months ended March 30, 2024 and April 1, 2023, respectively, related to U.S. and non-U.S. income taxes.
The Company recorded a provision for income taxes of $11.2 million and $10.1 million for the six months ended March 30, 2024 and April 1, 2023, respectively, related to U.S. and non-U.S. income taxes.
For the three and six months ended March 30, 2024, the Company calculated its U.S. income tax provision using the discrete method as though the interim year-to-date period was an annual period. The application of the AETR method generally required by ASC 740, Income Taxes, was impractical for the U.S. interim income tax provision given that normal deviations in the projected pre-tax net income (loss) in the U.S. could have resulted in a disproportionate and unreliable effective tax rate under the AETR method.
For the three and six months ended March 30, 2024, the Company's U.S. income tax provision was adversely impacted by the requirement to capitalize and amortize research and development expenses under Section 174 of the U.S. Internal Revenue Code ("Section 174") as the Company recorded a current U.S. tax expense with no corresponding deferred tax benefit due to the valuation allowance maintained against its U.S. deferred tax assets.
For the three and six months ended April 1, 2023, the Company calculated its U.S. income tax provision using the discrete method as though the interim year-to-date period was an annual period. The Company's U.S. income tax provision was adversely impacted by the requirement to capitalize and amortize research and development expenses under Section 174 as the Company recorded a current U.S. income tax provision with no corresponding deferred tax benefit due to the valuation allowance maintained against its U.S. deferred tax assets.
For the six months ended March 30, 2024, the Company concluded that a full valuation allowance on its deferred tax assets in the U.S. continued to be appropriate considering cumulative pre-tax losses in recent years and uncertainty with respect to future taxable income. It is possible that within the next 12 months there may be sufficient positive evidence to release a portion or all of the remaining valuation allowance. Release of the valuation allowance in the U.S. would result in a benefit to the income tax provision in the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in the U.S.