Income Taxes

9 Months Ended

Oct. 01, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's effective tax rate was 30% and 16% for the three-month and nine-month periods ended October 1, 2023, respectively, and 14% and 16% for the three-month and nine-month periods ended October 2, 2022, respectively.

The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea, and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and 22% in Korea compared to the U.S. federal statutory corporate tax rate of 21%. These foreign tax rate differences resulted in a net decrease to the effective tax rate for both the three-month and nine-month periods ended October 1, 2023 and October 2, 2022.

The Company recorded a net discrete tax expense totaling $4,035,000 and $840,000 for the three-month and nine-month periods ended October 1, 2023, respectively and a net discrete tax benefit totaling $2,000 and a net discrete tax expense totaling $3,984,000 for the same periods in 2022.

Discrete tax items for the nine-month period ended October 1, 2023 included (1) a net decrease in tax expense of $3,043,000 due primarily to the release of tax reserves on state tax credits and foreign audit settlements; (2) a decrease in tax expense of $2,198,000 for adjustments to certain deferred tax assets; (3) an increase in tax expense of $2,178,000 for an adjustment related to deferred state taxes due to a reduction in the Company's blended state rate; (4) a net increase in tax expense of $2,134,000 for return-to-provision adjustments; and (5) an increase in tax expense of $1,769,000 related to stock-based compensation.

Discrete tax items for the nine-month period ended October 2, 2022 included (1) a net increase in tax expense of $3,822,000 primarily for return-to-provision adjustments; (2) a net decrease in tax expense of $2,461,000 arising primarily from audit settlements and releases of reserves; (3) an increase in tax expense of $2,316,000 to establish a reserve against certain deferred tax assets; and (4) an increase in tax expense of $307,000 related to stock-based compensation;

The Company’s reserve for income taxes, including gross interest and penalties, was $19,450,000 as of October 1, 2023, which was classified as a non-current liability. 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.

Within the United States, the tax years 2019 through 2022 remain open to examination by the IRS, and 2018 through 2022 remain open to examination by various state tax authorities. The tax years 2017 through 2022 remain open to examination by various international taxing authorities in other jurisdictions in which the Company operates.