INCOME TAXES	6 Months Ended
Jul. 01, 2017
INCOME TAXES	NOTE 5. INCOME TAXES The Company’s effective tax rates were 40% and 39% for the second quarter and first half of 2017, respectively, compared to 9% for the second quarter and first half of 2016. The effective tax rate for the second quarter and first half of 2017 was primarily impacted by the effect of state taxes and nondeductible expenses while the effective tax rate for the second quarter and first half of 2016 was primarily impacted by the effects of the valuation allowance on the U.S. deferred tax assets. The impact of the valuation allowance for the second quarter and first half of 2016 was to reduce the amount of U.S. tax expense recognized, which reduced the overall effective tax rate in those periods. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters. During the third quarter of 2016, the Company concluded that it was more likely than not that a benefit from a substantial portion of its U.S. federal and state deferred tax assets would be realized. This conclusion was based on a detailed evaluation of all available positive and negative evidence and the weight of such evidence, the current financial position and results of operations for the current and preceding years, and the expectation of continued earnings. The Company determined that approximately $400 million of its U.S. federal and state valuation allowance should be reversed in 2016, with approximately $240 million in the third quarter as a discrete non-cash income tax benefit and the remainder as an adjustment to the estimated annual effective tax rate. The Company continues to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. It is reasonably possible that the remaining valuation allowance of $140 million could be reduced by approximately $25 million, possibly within the current year, based upon achieving certain levels of profitability. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods. The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state and local income tax examinations for years before 2016 and 2009, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal and state and local income tax examinations for years before 2013 and 2006, respectively. The Company’s U.S. federal income tax return for 2016 is currently under review. Generally, the Company is subject to routine examination for years 2008 and forward in its international tax jurisdictions. It is not reasonably possible that certain tax positions will be resolved within the next 12 months. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.

NOTE 5. INCOME TAXES

The Company’s effective tax rates were 40% and 39% for the second quarter and first half of 2017, respectively, compared to 9% for the second quarter and first half of 2016. The effective tax rate for the second quarter and first half of 2017 was primarily impacted by the effect of state taxes and nondeductible expenses while the effective tax rate for the second quarter and first half of 2016 was primarily impacted by the effects of the valuation allowance on the U.S. deferred tax assets. The impact of the valuation allowance for the second quarter and first half of 2016 was to reduce the amount of U.S. tax expense recognized, which reduced the overall effective tax rate in those periods. Changes in pretax income projections and the mix of income across jurisdictions could impact the effective tax rate in future quarters.

During the third quarter of 2016, the Company concluded that it was more likely than not that a benefit from a substantial portion of its U.S. federal and state deferred tax assets would be realized. This conclusion was based on a detailed evaluation of all available positive and negative evidence and the weight of such evidence, the current financial position and results of operations for the current and preceding years, and the expectation of continued earnings. The Company determined that approximately $400 million of its U.S. federal and state valuation allowance should be reversed in 2016, with approximately $240 million in the third quarter as a discrete non-cash income tax benefit and the remainder as an adjustment to the estimated annual effective tax rate.

The Company continues to have a U.S. valuation allowance for certain U.S. federal credits and state tax attributes, which relate to deferred tax assets that require certain types of income or for income to be earned in certain jurisdictions in order to be realized. It is reasonably possible that the remaining valuation allowance of $140 million could be reduced by approximately $25 million, possibly within the current year, based upon achieving certain levels of profitability. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions in future periods.

The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state and local income tax examinations for years before 2016 and 2009, respectively. The acquired OfficeMax U.S. consolidated group is no longer subject to U.S. federal and state and local income tax examinations for years before 2013 and 2006, respectively. The Company’s U.S. federal income tax return for 2016 is currently under review. Generally, the Company is subject to routine examination for years 2008 and forward in its international tax jurisdictions.

It is not reasonably possible that certain tax positions will be resolved within the next 12 months. Additionally, the Company anticipates that it is reasonably possible that new issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such changes cannot be reasonably made.