Income Taxes

9 Months Ended

Sep. 30, 2023

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 nine months ended September 30, 2023 was 27.4%. Our actual effective tax rate was 28.9% and 26.3% for the three months ended September 30, 2023 and October 1, 2022, respectively. Our actual effective tax rate was 27.1% and 26.2% for the nine months ended September 30, 2023 and October 1, 2022, respectively. The change in the effective tax rate from statutory tax rates was primarily due to the impact of favorable discrete items which are a set amount and therefore have a larger impact on the rate based on our net income before tax in the first nine months compared to the impact they will have on the rate for the full year.

As of September 30, 2023, we had unrecognized tax benefits of $699, of which $371 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $56. At December 31, 2022, we had unrecognized tax benefits of $638, of which $311 would affect our effective rate if recognized, and accrued interest expense related to unrecognized benefits of $53. 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 and local authorities 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 2018. As of September 30, 2023, we believe it is reasonably possible that the total amount of unrecognized tax benefits will not significantly increase or decrease.