Income Taxes

9 Months Ended

Oct. 03, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense was $11.1 million and benefit was $1.2 million for the third quarter of 2021 and 2020, respectively. Income tax expense was $19.0 million and income tax benefit was $36.5 million for September year to date 2021 and 2020, respectively. These amounts were impacted by changes in the fair value of the Company's investment in Persol Holdings, which resulted in a charge of $10.9 million for the third quarter of 2021 and $22.0 million for September year to date 2021, compared to a charge of $5.2 million for the third quarter of 2020 and a benefit of $9.6 million for September year to date 2020. The second quarter of 2021 benefited $5.2 million from a change in United Kingdom tax rates, while the second quarter of 2020 benefited $7.7 million from Brazil outside basis differences. September year to date 2020 includes a tax benefit of $23.0 million on the impairment of goodwill. The quarterly and year-to-date amounts are also impacted by changes in earnings from operations.

Our tax expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S. work opportunity credits and the change in cash surrender value of tax exempt investments in life insurance policies. It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes, changes in judgment regarding the realizability of deferred tax assets, the tax effects of stock compensation, and changes in the fair value of the Company's investment in Persol Holdings, which are treated as discrete since they cannot be estimated. The United Kingdom rate change benefit in the second quarter of 2021, impairment of goodwill in the first quarter of 2020 and the Brazil outside basis differences in the second quarter of 2020 were treated as discrete.

The Company provides valuation allowances against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. At this time, we have no valuation allowance against our Mexican deferred tax asset of $4.3 million, though it is possible this may change as we continue to assess the impacts of the new labor laws effective as of the third quarter of 2021 on our Mexican business operations throughout the remainder of the year.