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Income Taxes
3 Months Ended
Dec. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
On December 22, 2017, the U.S. Tax Cuts & Jobs Act was enacted ("Tax Reform"). Due to the complexities in implementing Tax Reform, the SEC issued Staff Accounting Bulletin 118, which allows the Company to record a provisional tax expense when uncertainty or other factors may impact the final outcome. In accordance with U.S. GAAP, which requires the Company to recognize the effects of Tax Reform in the period of enactment, $124.5 million of tax expense was recorded during the three months ended December 30, 2017 due to Tax Reform. The $124.5 million includes $101.8 million of U.S. federal and state taxes on the deemed repatriation of undistributed foreign earnings, which are payable over an eight year period beginning in fiscal 2019, and $22.7 million of foreign withholding taxes due to a change in the Company's permanently reinvested assertion on certain foreign earnings that are payable upon repatriation to the U.S. The Company believes this is a reasonable estimate of tax expense related to Tax Reform using all analyses, interpretations and guidance available at this time. The Company continues to assess the impact of Tax Reform, and the final impact may differ from this estimate, perhaps materially, due to, among other things, changes in interpretations, assumptions, and/or guidance that may be issued in the near future or actions the Company may take as a result.
Of the $124.5 million of income tax expense, $99.9 million is recorded in "Long-term accrued income taxes payable," $21.9 million is recorded in "Deferred income tax liabilities" and $2.7 million is recorded in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
Income tax expense for the three months ended December 30, 2017 was $127.5 million, which included $124.5 million due to the impact of Tax Reform. Income tax expense for the three months ended December 31, 2016 was $2.8 million.
The effective tax rates for the three months ended December 30, 2017 and December 31, 2016 were 439.2% and 9.2%, respectively. The effective tax rate for the three months ended December 30, 2017 increased from the effective tax rate for the three months ended December 31, 2016, due to a 428.8 percentage point impact related to Tax Reform and an overall decrease in pretax earnings and decreased earnings in jurisdictions where the Company maintains valuation allowances.
There were no material additions to the amount of unrecognized tax benefits recorded for uncertain tax positions as of December 30, 2017, as compared to September 30, 2017. The Company recognizes accrued interest and penalties on uncertain tax positions as a component of income tax expense. The amount of interest and penalties recorded for the three months ended December 30, 2017 and December 31, 2016 were not material.
One or more uncertain tax positions may be settled within the next 12 months. Settlement of these matters is not expected to have a material effect on the Company's consolidated results of operations, financial position and cash flows. The Company is not currently under examination by taxing authorities in the U.S. or any foreign jurisdictions in which the Company operates.
The Company maintains valuation allowances when it is more likely than not that all or a portion of a net deferred tax asset will not be realized. During the three months ended December 30, 2017, the Company continued to record a full valuation allowance against its net deferred tax assets in certain jurisdictions within the AMER and EMEA segments, as it was more likely than not that these assets would not be fully realized based primarily on historical performance. The Company will continue to provide a valuation allowance against its net deferred tax assets in each of the applicable jurisdictions going forward until it determines it is more likely than not that the deferred tax assets will be realized.