Income Taxes

9 Months Ended

Feb. 26, 2022

Income Tax Disclosure [Abstract]

Income Taxes

5.  INCOME TAXES

We recorded an income tax provision of $1.3 million and $0.2 million for the first nine months of fiscal 2022 and the first nine months of fiscal 2021, respectively. The increase in the tax provision from fiscal 2021 reflects higher foreign taxes, geographical distribution of income (loss) and state income tax provision due to temporary suspension of net operating loss utilization in Illinois and California.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Generally, years prior to fiscal 2015 are closed for examination under the statute of limitation for U.S. federal, U.S. state and local or non-U.S. tax jurisdictions. We are currently under examination in Thailand (fiscal 2008 through 2011) and Germany (fiscal 2015 through 2018). Our primary foreign tax jurisdictions are Germany and the Netherlands. We have tax years open in Germany beginning in fiscal 2015 and the Netherlands beginning in fiscal 2018.

We have historically determined that certain undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. We have provided a deferred tax liability of less than $0.1 million as of both February 26, 2022 and as of May 29, 2021.

As of February 26, 2022 and as of May 29, 2021, our worldwide liability for uncertain tax positions related to continuing operations was $0.1 million, excluding interest and penalties. We record penalties and interest related to uncertain tax positions in the income tax expense line item within the consolidated statements of comprehensive income.

The valuation allowance against the net deferred tax assets that will more likely than not be realized was $9.6 million as of February 26, 2022. The valuation allowance against the net deferred tax assets was $12.2 million as of May 29, 2021 and the Company is utilizing prior losses in the first three quarters of fiscal 2022 against its income. A full valuation allowance on the U.S. and state deferred tax assets will be maintained until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.