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Income Taxes
 12 Months Ended
Jan. 01, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes and the provision for income taxes are as follows (in millions):
Fiscal Years Ended
January 1, 2023January 2, 2022December 27, 2020
Income before income taxes:
Domestic
$352.0 $364.4 $233.9 
Foreign
9.4 23.6 23.1 
Total
$361.4 $388.0 $257.0 
Income tax expense (benefit):
Current:
Federal
$61.3 $73.2 $45.0 
Foreign
6.3 6.1 5.1 
State
7.2 15.0 10.1 
Total current provision
74.8 94.3 60.2 
Deferred:
Federal
(2.4)0.2 2.1 
Foreign
(2.3)(0.1)0.2 
State
(1.1)(0.8)(0.3)
Total deferred (benefit) provision(5.8)(0.7)2.0 
Income tax expense
$69.0 $93.6 $62.2 
The provision for income taxes was different from the U.S. federal statutory rate applied to income before taxes and is reconciled as follows:
Fiscal Years Ended
January 1, 2023January 2, 2022December 27, 2020
Statutory rate
21.0 %21.0 %21.0 %
State and local income taxes, net
2.6 %3.0 %3.2 %
Reserves for tax exposures
0.2 %0.4 %0.2 %
International operations
0.6 %0.2 %0.6 %
FDII, GILTI(4.4)%(0.2)%(0.1)%
Non deductible executive compensation0.1 %0.3 %0.1 %
Stock-based compensation
0.1 %(0.1)%(0.2)%
Impact of law and rate change
(0.4)%(0.2)%— %
Other, net
(0.7)%(0.3)%(0.6)%
Effective rate
19.1 %24.1 %24.2 %

The effective tax rate for fiscal 2022 was favorably impacted by a $15.1 million adjustment for Foreign Derived Intangible Income (“FDII”), of which $9.4 million was recorded discretely, which was partially offset by the net Global Intangible Low-Taxed Income (“GILTI”).

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets.
The Company offsets all deferred tax assets and liabilities by jurisdiction, as well as any related valuation allowance, and presents them as a single non-current deferred income tax liability. Deferred tax assets and deferred tax liabilities are comprised of the following: (in millions):
January 1, 2023January 2, 2022
Gross deferred tax assets:
Right-of-use liabilities
$312.6 $271.5 
Allowances for accounts receivable
2.1 2.0 
Accruals and liabilities
7.2 10.0 
Employee benefits and compensation
4.1 4.6 
Losses carried forward0.7 0.1 
Other
3.4 3.9 
Total gross deferred tax assets330.1 292.1 
Deferred tax asset valuation allowance
(0.2)(0.1)
Net deferred tax assets329.9 292.0 
Gross deferred tax liabilities:
Right-of-use assets
(296.1)(256.7)
Property and equipment
(17.4)(22.4)
Goodwill and intangible assets
(68.1)(72.9)
Other
(15.2)(14.8)
Total
(396.8)(366.8)
Net deferred tax liabilities
$(66.9)$(74.8)
Permanently reinvested undistributed earnings of the Company’s foreign subsidiaries were approximately $144.7 million for the year ended January 1, 2023. Because these amounts have been or are expected to be permanently reinvested in properties and working capital, the Company has not recorded the deferred taxes associated with these earnings. If the undistributed earnings of foreign subsidiaries were to be remitted, state and local income tax expense and withholding tax expense would need to be recognized, net of any applicable foreign tax credits. It is not practical for the Company to determine the additional tax that would be incurred upon remittance of these earnings.
Tax payments for fiscal years ended January 1, 2023, January 2, 2022, and December 27, 2020, were $84.6 million, $90.0 million, and $59.7 million, respectively.
The Company applies the provisions of ASC 740, Income Taxes. ASC 740 clarifies the accounting and reporting for uncertainty in income taxes recognized in an enterprise’s financial statements. These provisions prescribe a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken on income tax returns.
A reconciliation of the beginning and ending amount of unrecognized tax benefits from uncertain tax positions is as follows (in millions):
January 1, 2023January 2, 2022
Balance at beginning of period$6.0 $4.1 
Increase in prior year tax positions— 0.6 
Decrease in prior year tax positions(0.2)— 
Increase in current year tax positions2.4 1.9 
Decrease in current year tax positions(0.3)— 
Lapse in statute of limitations(1.0)(0.6)
Balance at end of period$6.9 $6.0 
The total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $5.9 million and $5.1 million at January 1, 2023, and January 2, 2022, respectively.
The Company records interest and penalties associated with the uncertain tax positions within the Company’s provision for income taxes on the consolidated statements of income. The Company had reserves totaling $0.2 million at each of January 1, 2023 and January 2, 2022 associated with interest and penalties, net of tax.
The provision for income taxes involves management judgment regarding the interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income, and tax planning could change the effective tax rate and tax balances recorded by us. In addition, U.S. and non-U.S. tax authorities periodically review income tax returns filed by us and can raise issues regarding the Company’s filing positions, timing and amount of income or deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. In the normal course of business, the Company is subject to examination by taxing authorities in the U.S., Canada, and the United Kingdom. In general, the examination of our material tax returns is complete for the years prior to 2019.
Based on the potential outcome of the Company’s tax examinations and the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the currently remaining unrecognized tax benefits will change within the next 12 months. The associated net tax impact on the reserve balance is estimated to be in the range of a $1.0 million to $1.5 million decrease.