Taxes

3 Months Ended

Mar. 29, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Taxes

A reconciliation of the United States federal statutory corporate tax rate to the Company’s income tax expense, or effective tax rate, was as follows:

	Three-months Ended
	March 29, 2020		March 31, 2019
Income tax expense at U.S. federal statutory corporate tax rate	21	%	21	%
State income taxes, net of federal benefit	1	%	1	%
Foreign tax rate differential	(6	)%	(9	)%
Tax credit	(1	)%	—	%
Discrete tax benefit related to stock options	(7	)%	(8	)%
Other discrete tax events	1	%	—	%
Other	2	%	2	%
Income tax expense	11	%	7	%

The Company is tax resident in numerous jurisdictions around the world and has identified its major tax jurisdictions as the United States, Ireland, and China. The statutory tax rate is 12.5% in Ireland and 25% in China, compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in a decrease in the effective tax rate by 6 and 9 percentage points for the three-month periods ended March 29, 2020 and March 31, 2019, respectively. Management has determined that earnings from its legal entity in China will be indefinitely reinvested to provide local funding for growth, and that earnings from all other jurisdictions will not be indefinitely reinvested.

The excess tax benefit arising from the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes from stock option exercises resulted in a decrease in the effective tax rate by 7 and 8 percentage points for the three-month periods ended March 29, 2020 and March 31, 2019, respectively.

During the three-month period ended March 29, 2020, the Company recorded a $306,000 increase in reserves for income taxes, net of deferred tax benefit. Estimated interest and penalties included in these amounts totaled $155,000 for the three-month period ended March 29, 2020.

The Company’s reserve for income taxes, including gross interest and penalties, was $12,919,000 as of March 29, 2020, which included $11,891,000 classified as a non-current liability and $1,028,000 recorded as an increase to a non-current deferred tax liability. The amount of gross interest and penalties included in these balances was $1,109,000. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period. As a result of the expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $1,300,000 to $1,400,000 over the next twelve months.

The Company has defined its major tax jurisdictions as the United States, Ireland, and China, and within the United States, Massachusetts. Within the United States, the tax years 2016 through 2019 remain open to examination by the Internal Revenue Service and various state tax authorities. The tax years 2015 through 2019 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates.