Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

In the quarter ended September 30, 2023, income tax expense was $23,041 resulting in an effective income tax rate of (146.2)% and in the quarter ended October 1, 2022, income tax expense was $16,410 resulting in an effective income tax rate of 17.0%. In the nine months ended September 30, 2023, income tax expense was $51,541 resulting in an effective income tax rate of (116.8)% and in the nine months ended October 1, 2022, income tax expense was $58,775 resulting in an effective income tax rate of 17.0%. The Company's effective tax rate for the quarter and nine months ended September 30, 2023 primarily differs from the U.S. statutory rate due to valuation allowances against certain net deferred tax assets. Additionally, the Company had favorable discrete items of $3,355 and unfavorable discrete items of $3,860 for the quarter and nine months ended September 30, 2023, respectively, and unfavorable discrete items of $3,174 and $9,217 for the quarter and nine months ended October 1, 2022, respectively.

The Organization for Economic Co-operation and Development (the “OECD”), an international association of 38 countries including the U.S., has proposed changes to numerous long-standing tax principles, including a global minimum tax initiative. On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar 2 global corporate minimum tax rate of 15% on companies with revenues of at least $790,000, which would go into effect in 2024. Currently, South Korea, Japan, Mauritius and the United Kingdom are the only countries to enact legislation consistent with the rules, while other countries including Switzerland, Canada and Australia are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. The Company will continue to monitor the developing laws.

In August 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IR Act”), which, among other things, introduces a 15% minimum tax based on adjusted financial statement income of certain large corporations with a three year average adjusted financial statement income in excess of $1,000,000, a 1% excise tax on the fair market stock repurchases by covered corporations and several tax incentives to promote clean energy. The Company is continuing to evaluate the IR Act and its potential impact on future periods, and at this time the Company does not expect the IR Act to have a material impact on its consolidated financial statements.