On December 22, 2017, the U.S. enacted legislation referred to as the "Tax Act". Among other things, the Tax Act reduced the U.S. corporate federal income tax rate from 35% to 21%, added base broadening provisions which limit deductions and address excessive international tax planning, imposed a Toll Charge on accumulated earnings of certain non-U.S. subsidiaries and enabled repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax.

In the fourth quarter of 2018, within the measurement period outlined in SEC SAB No. 118, the Company finalized its estimates of the impact of the Tax Act and recorded a charge of $3.2 million, including $2.3 million for the Toll Charge and $0.9 million for the net impact of other items. In addition, the Company recorded $7.0 million for the Toll Charge associated with IXYS as part of the IXYS acquisition purchase price allocation. This was reflected in the opening balance sheet as an increase to goodwill and other long-term liabilities.

The Company elected to pay the 2017 Littelfuse Toll Charge over the eight-year period prescribed by the Tax Act. The long-term portion of this Toll Charge which remains payable as of December 26, 2020, totaling $20.8 million, is recorded in Other long-term liabilities, and the anticipated 2021 annual installment payment of $3.0 million is included in Accrued income taxes, on the Consolidated Balance Sheet as of December 26, 2020. The Company did not elect to pay the 2018 IXYS Toll Charge over the eight year period provided by the Tax Act and therefore there is no 2018 IXYS Toll Charge which remains payable as of December 26, 2020.

One of the base broadening provisions of the Tax Act is commonly referred to as the “GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense.


(in thousands)	2020		2019		2018
Current:
Federal	$	437	$	(3,495)	$	(3,193)
State	203		834		119
Foreign	33,841		30,610		48,130
Subtotal	34,481		27,949		45,056
Deferred:
Federal and State	(5,354)		1,839		(3,896)
Foreign	2,140		(2,986)		(783)
Subtotal	(3,214)		(1,147)		(4,679)
Provision for income taxes	$	31,267	$	26,802	$	40,377


(in thousands)	2020		2019		2018
Tax expense at statutory rate of 21%	$	33,863	$	34,836	$	43,038
Non-U.S. income tax rate differential	(19,730)		(22,457)		(20,472)
Tax impact of non-deductible goodwill impairment charge	5,642		—		—
Tax on unremitted earnings	3,955		2,136		4,660
Net impact associated with the GILTI tax provisions	3,731		6,469		5,075
Non-U.S. losses and expenses with no tax benefit	2,774		6,570		3,107
Certain changes in unrecognized tax benefits and related accrued interest	2,160		(1,468)		208
State and local taxes, net of federal tax benefit	(584)		1,080		(1,238)
Nondeductible professional fees	236		195		1,001
2017 Toll Charge (2018 adjustment)	—		—		2,278
Provisional Tax Act impact other than Toll Charge (2018 adjustment)	—		—		966
Other, net	(780)		(559)		1,754
Provision for income taxes	$	31,267	$	26,802	$	40,377

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at December 26, 2020 and December 28, 2019, are as follows:


(in thousands)	2020		2019
Deferred tax assets:
Accrued expenses and reserves	$	31,123	$	28,294
Domestic and non-U.S. net operating loss carryforwards	24,763		10,511
Non-U.S. interest expense carryforwards	10,352		5,324
U.S. research credit carryforwards	3,724		2,581
Capitalized expenses	4,178		2,400
U.S. foreign tax credit carryforwards	772		1,320
Other	117		1,261
Gross deferred tax assets	75,029		51,691
Less: Valuation allowance	(13,131)		(5,957)
Total deferred tax assets	61,898		45,734

Deferred tax liabilities:
Excess of book basis over the tax basis for intangible assets and goodwill	76,472		71,229
Tax on unremitted earnings	14,223		12,968
Unrealized foreign currency exchange gains	5,719		—
Excess of book basis over the tax basis for property, plant, and equipment	4,394		3,231
Total deferred tax liabilities	100,808		87,428
Net deferred tax liabilities	$	38,910	$	41,694

The deferred tax asset valuation allowance is related to certain non-U.S. net operating loss and non-U.S. interest expense carryforwards which are not expected to be realized. The remaining U.S. and non-U.S. net operating loss and non-U.S. interest expense carryforwards either have no expiration date or are expected to be utilized prior to expiration. No deferred tax asset nor valuation allowance has been recorded for certain U.S. and non-U.S. net operating loss carryforwards for which the possibility of usage has been determined to be remote.

Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. The Company believes the determination of the amount of such deferred income taxes is impractical as it would depend upon income tax laws and circumstances at the time of the hypothetical distributions or dispositions. As of December 26, 2020, unremitted earnings of the Company’s non-U.S. subsidiaries was approximately $767 million. A distribution of such earnings will generally not be subject to U.S. federal income tax. The Company recognized deferred tax liabilities of $14.2 million ($13.9 million for non-U.S. taxes net of related U.S. foreign tax credits, and $0.3 million for U.S. state taxes) as of December 26, 2020 and $13.0 million ($12.6 million for non-U.S. taxes net of related U.S. foreign tax credits, and $0.4 million for U.S. state taxes) as of December 28, 2019, related to taxes on certain non-U.S. earnings which are not considered to be permanently reinvested. Some of these non-U.S. taxes will provide a U.S. federal income tax benefit as a foreign tax credit, and the amounts as of December 26, 2020 and December 28, 2019 are net of such benefit.

The Company has two subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply for three-year periods, subject to extension. The tax holiday for one of these subsidiaries expired at the end of 2020, and it will seek an extension. Such tax holidays contributed $4.1 million in tax benefits, or $0.17 per diluted share, during 2020. Future year tax benefits will depend upon the Company’s ability to obtain extensions, and the level of income earned by the two applicable subsidiaries.


(in thousands)	Unrecognized Tax Benefits
Balance at December 29, 2018	$	18,259
Additions for tax positions taken in the current year	1,305
Decreases due to a lapse in the statute of limitations	(2,758)
Other	(85)
Balance at December 28, 2019	16,721
Additions for tax positions taken in the current year	700
Decreases due to a lapse in the statute of limitations	(103)
Other	119
Balance at December 26, 2020	17,437

The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The company recognized such interest expense of $1.6 million, $1.3 million (net of a $0.6 million decrease due to a lapse in the statute of limitations), and $1.5 million (net of a $0.3 million decrease due to a lapse in the statute of limitations) in 2020, 2019, and 2018, respectively. Accrued interest for such matters included in Other long-term liabilities within the Consolidated Balance Sheets was $8.8 million and $7.2 million as of December 26, 2020 and December 28, 2019, respectively.

The amount of unrecognized tax benefits included in Other long-term liabilities within the Consolidated Balance Sheets was $17.4 million and 16.7 million as of December 26, 2020 and December 28, 2019, respectively. The December 26, 2020 total represents the net amount of tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. Of this amount, only an insignificant amount may be recognized in 2021 based upon the possible lapse in the statute of limitations. None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.

The U.S. federal statute of limitations remains open for the Company for the 2017 tax year and later years. The U.S. federal statute of limitations remains open for the IXYS pre-acquisition tax period ending January 17, 2018. Non-U.S. and U.S. state statutes of limitations generally range from three to seven years, although certain jurisdictions do not have a statute expiration. Non-U.S. tax examinations occur from time to time, including examinations currently in process in Italy, the Philippines, and Hong Kong. The company does not expect to recognize a significant amount of additional tax expense as a result of concluding these examinations. The Company has been informed that it will receive a notice of assessment from the Canadian tax authorities as a consequence of concluding their recent audit. Although the exact amount of the assessment is not known, it is estimated to approximate $3 million. The Company believes the assessment is in error and intends to appeal. The Company does not expect to recognize a significant amount of additional tax expense upon conclusion of such appeal.