Note 7 - Income Taxes

3 Months Ended

Mar. 28, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

7. Income Taxes

Ordinarily, interim tax provisions are calculated using the estimated effective tax rate (“ETR”) expected to be applicable for the full fiscal year. However, when a reliable estimate of the annual ETR cannot be made, the actual ETR for the year-to-date period

may

be the best estimate of the annual ETR. For the

three

months ended

March 28, 2020,

we used the actual year-to-date ETR in computing our tax provision, as a reliable estimate of the

2020

annual ETR cannot be made, since relatively small changes in our projected income produce a significant variation in our ETR. The ETR on loss from continuing operations for the

three

months ended

March 28, 2020

and

March 30, 2019

was

5.4%

and

0.9%,

respectively. The tax benefit on loss from continuing operations in

2020

and

2019

differs from the U.S. federal statutory rate primarily due to the lack of a tax benefit on our domestic losses as a result of our valuation allowance on deferred tax assets, foreign income taxed at different rates, taxes on unremitted earnings and changes to unrecognized tax benefits.

Our German subsidiaries income tax returns for

2012

to

2016

are currently under routine examination by tax authorities in Germany. We believe our financial statement accruals for income taxes are appropriate.

During the

three

-month period ended

March 28, 2020,

our unrecognized tax benefits decreased by

$0.2

 million due to expiration of the statute of limitations, foreign currency exchange rate changes, offset by accrued interest. Other than for foreign currency exchange rate changes, there was

no

material change to our unrecognized tax benefits and related accrued interest and penalties during the

three

-month period ended

March 30, 2019.

In response to the COVID-

19

pandemic, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in

March 2020.

The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of

2017

(

2017

Tax Act). Corporate taxpayers

may

carryback net operating losses (NOLs) originating during

2018

through

2020

for up to

five

years, which was

not

previously allowed under the

2017

Tax Act. The CARES Act also eliminates the

80%

of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in

2018,

2019

or

2020.

Taxpayers

may

generally deduct interest up to the sum of

50%

of adjusted taxable income plus business interest income (

30%

limit under the

2017

Tax Act) for tax years beginning

January 1, 2019

and

2020.

The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in

2020

for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the

2017

Tax Act.

In addition, the CARES Act raises the corporate charitable deduction limit to

25%

of taxable income and makes qualified improvement property generally eligible for

15

-year cost-recovery and

100%

bonus depreciation. The enactment of the CARES Act did

not

result in any material adjustments to our income tax provision for the

three

months ended

March 28, 2020,

or to our net deferred tax assets as of

March 28, 2020.