Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements as of December 31, 2017. As the Company collected and prepared necessary data, and interpreted the additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, the Company made adjustments, over the course of 2018, to the provisional amounts including additional tax expense of $40,650, primarily related to adjustments to the transition tax. The accounting for the tax effects of the Tax Act was completed as of December 30, 2018.


	2020		2019	2018
Current
United States	$	22,279	41,355	12,805
State and local	6,080		5,528	5,644
International	37,946		41,829	42,613
	66,305		88,712	61,062
Deferred
United States	27,171		(20,139)	(4,937)
State and local	(10,847)		(1,438)	(471)
International	13,992		6,621	(5,686)
	30,316		(14,956)	(11,094)
Total income taxes	$	96,621	73,756	49,968


	2020		2019		2018
Statutory income tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net	2.2		0.5		1.5
Tax on international earnings	(6.2)		(4.6)		(11.4)
Change in unrecognized tax benefits	4.1		0.6		(7.9)
Change in valuation allowance	4.5		—		—
Share-based compensation	(0.4)		(0.8)		(4.0)
Tax Cuts and Jobs Act of 2017	—		—		15.0
Research and development tax credits	(1.6)		(0.7)		(1.9)
Non-deductible goodwill impairment	—		—		2.0
Deferred tax rate change	3.6		—		—
Gains on integrated hedging instruments	—		(4.0)		—
Officers' compensation	1.4		—		—
Other, net	1.4		0.4		4.2
	30.0	%	12.4	%	18.5	%

The components of deferred income tax expense (benefit) arise from various temporary differences and relate to items included in the consolidated statements of operations as well as items recognized in other comprehensive earnings. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 27, 2020 and December 29, 2019 are:


	2020		2019
Deferred tax assets:
Accounts receivable	$	32,688	26,973
Inventories	14,038		10,020
Loss and credit carryforwards	221,598		35,509
Operating leases	23,147		15,378
Operating expenses	32,912		23,124
Pension	7,905		6,206
Other compensation	33,718		27,633
Postretirement benefits	7,932		7,053
Interest rate hedge	4,996		5,202
Tax sharing agreement	2,219		3,096
Deferred revenue	8,298		5,591
Other	11,992		10,637
Gross deferred tax assets	401,443		176,422
Deferred tax liabilities:
Depreciation and amortization of long-lived assets	181,227		13,361
Equity method investment	21,328		17,674
Operating leases	20,056		11,936
Foreign exchange	7,280		58
Prepaid expenses	3,565		2,597
Other	10,993		7,741
Gross deferred tax liabilities	244,449		53,367
Valuation allowance	(174,185)		(33,260)
Net deferred income taxes	$	(17,191)	89,795

The most significant amount of the loss and credit carryforwards relate to tax attributes of the acquired eOne entities that historically operated at losses in certain jurisdictions. At December 27, 2020, the Company has loss and credit carryforwards of $221,598, which is an increase of $186,089 from $35,509 at December 29, 2019. Loss and credit carryforwards as of December 27, 2020 relate primarily to the US and Canada. The Canadian loss carryforwards expire at various dates from 2031 to 2040. Some US federal and state loss and credit carryforwards expire at various dates beginning in 2021 while others have an indefinite carryforward period.

The recoverability of these future tax deductions and credits is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is generally established. To the extent that a valuation allowance was established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the change in the valuation allowance is recognized in the consolidated statements of income.

The Company has a valuation allowance for certain net deferred tax assets at December 27, 2020 of $174,185, which is an increase of $140,925 from $33,260 at December 29, 2019. The valuation allowance pertains to certain U.S. state and international loss and credit carryforwards, some of which have no expiration and others

that would expire beginning in 2021, and other net deferred tax assets. The significant increase in the valuation allowance is due to historical losses and other net deferred tax assets within eOne entities that are not expected to be utilized, offset by a release of historical attributes that will now be utilized by the combined Company.

We previously considered the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. However, the Tax Act gave the Company more flexibility to manage cash globally. The Company still has significant cash needs outside the United States and continues to consistently monitor and analyze its global working capital and cash requirements. However, we intend to repatriate substantially all of our accumulated foreign earnings when appropriate. As such, we have recorded $1,163 of foreign withholding and U.S. state income taxes as part of the provisional repatriation tax amount, which will be incurred due to certain future cash distributions. The Company has not finalized the timing of any actual cash distributions or the specific amounts and therefore we could still be subject to some additional foreign withholding taxes and U.S. state taxes. We will record these additional tax effects, if any, in the period that we complete our analysis and are able to make a reasonable estimate.


	2020		2019	2018
Balance at beginning of year	$	36,651	46,074	84,244
Gross increases in prior period tax positions	12,659		2,031	4,449
Gross increase from acquisition	13,717		—	—
Gross decreases in prior period tax positions	—		—	(55,752)
Gross increases in current period tax positions	11,758		4,152	16,987
Decreases related to settlements with tax authorities	—		(12,037)	(1,102)
Decreases from the expiration of statute of limitations	(6,962)		(3,569)	(2,752)
Balance at end of year	$	67,823	36,651	46,074

Unrecognized tax benefits as of December 27, 2020, December 29, 2019 and December 30, 2018, were $67,823, $36,651, and $46,074, respectively, and are recorded within other liabilities, prepaid expenses and other current assets, and other assets in the Company's consolidated balance sheets. If recognized, these tax benefits would have affected our income tax provision for fiscal years 2020, 2019, and 2018, by approximately $57,000, $36,000, and $45,000, respectively.

During 2020, 2019, and 2018, the Company recognized $3,652, $1,766, and $3,101, respectively, of potential interest and penalties, which are included as a component of income taxes in the accompanying consolidated statements of operations. At December 27, 2020, December 29, 2019, and December 30, 2018, the Company had accrued potential interest and penalties of $11,596, $5,547, and $4,200, respectively.

The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local and international tax authorities in various tax jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 2012. With few exceptions, the Company is no longer subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2014.

were effective on January 1, 2020. Changes in tax reform include the abolishment of preferential tax regimes for holding companies, domicile companies and mixed companies at the cantonal level. The enacted changes in Swiss federal tax were not material to the Company’s financial statements. Swiss cantonal tax was enacted in December 2019. The Company is still assessing the transitional provision options it may elect; however, the legislation is not expected to have a material effect on the Company’s financial statements.

The Company believes it is reasonably possible that a decrease of approximately $5,000 - $13,000 in gross unrecognized tax benefits may be necessary within the coming year as a result of expected tax return settlements and lapse of statute of limitations.