Income Taxes

3 Months Ended

Mar. 28, 2020

Income Tax Disclosure [Abstract]

Income taxes [Text Block]

Income Taxes

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate and, if our estimated annual tax rate changes, we make a cumulative adjustment. The estimated annual effective tax rate for the three months ended March 28, 2020 was 28.5%. Our annual effective tax rate for the three months ended March 30, 2019 was estimated at 28.3%. Our effective tax rate was 8.9% and 34.8% for the three months ended March 28, 2020 and March 30, 2019, respectively. The change in the effective tax rate from statutory tax rates is primarily due to the impact of state and local taxes which are partially offset by favorable discrete items.

On March 27, 2020, Congress approved and the President signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act into law. CARES Act is a tax-and-spending package intended to provide economic relief to address the impact of the COVID-19 Pandemic. The Company is currently evaluating several significant business tax provisions, such as net operating losses and employee retention credits to determine the impact on the Company.

As of March 28, 2020, we had unrecognized tax benefits of $1,869, of which $674 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $67. At December 31, 2019, we had unrecognized tax benefits of $1,850, of which $654 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $64. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for financial reporting purposes.

We recognize interest accrued related to unrecognized tax benefits in income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense.

The Company is routinely under audit by U.S. federal, state, local and Canadian authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. With the exception of U.S. state jurisdictions and Canada, the Company is no longer subject to examination by tax authorities for the years through 2016. As of March 28, 2020, we believe it is reasonably possible that the total amount of unrecognized tax benefits will not significantly increase or decrease.