Income Taxes

12 Months Ended

Dec. 26, 2020

The components of income before income taxes were taxed under the following jurisdictions:


(In thousands)	2020		2019		2018

Domestic	$	144,770	$	112,812	$	105,455
Foreign	64,419		53,271		44,962

Income before income taxes	$	209,189	$	166,083	$	150,417

Income tax expense consists of the following:


(In thousands)	2020		2019		2018

Current tax expense:
Federal	$	37,964	$	19,066	$	17,974
Foreign	16,221		12,727		9,650
State and local	5,182		3,892		3,158

Current tax expense	59,367		35,685		30,782

Deferred tax (benefit) expense:
Federal	(5,991)		1,725		(1,381)
Foreign	90		(2,311)		551
State and local	1,855		158		1,000

Deferred tax (benefit) expense	(4,046)		(428)		170

Income tax expense	$	55,321	$	35,257	$	30,952

The difference between the reported income tax expense and a tax determined by applying the applicable U.S. federal statutory income tax rate to income before income taxes is reconciled as follows:


(In thousands)	2020		2019		2018

Expected income tax expense	$	43,930	$	34,892	$	31,588
State and local income tax, net of federal benefit	5,949		3,234		3,495
Effect of foreign statutory rates different from U.S. and other foreign adjustments	2,783		(771)		759



Investment in unconsolidated affiliates	(387)		538		(2,776)


Effect of tax on accumulated foreign earnings	—		(111)		(4,415)

Other, net	3,046		(2,525)		2,301

Income tax expense	$	55,321	$	35,257	$	30,952

The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017. The Act required companies to pay a one-time transition tax on the accumulated earnings of certain foreign subsidiaries. The Company applied the guidance in Staff Accounting Bulletin No. 118 in accounting for the enactment date effects of the Act. During the fourth quarter of 2018, the Company completed its accounting for all of the enactment-date income tax effects of the Act, and following the completion of the analysis of the calculation of the transition tax, the Company recorded a reduction to income tax expense of $4.4 million, or eight cents per diluted share, to reduce this liability. During 2019, the Treasury Department finalized regulation related to the calculation of the transition tax, the impact of which was immaterial to the Company’s Consolidated Financial Statements. The Company continues to assert that the undistributed earnings of most of its foreign subsidiaries are permanently reinvested. No taxes have been accrued with respect to these undistributed earnings or any outside basis differences. The Company has elected to provide for the tax expense related to global intangible low-taxed income (GILTI) in the year the tax is incurred.

The Company includes interest and penalties related to income tax matters as a component of income tax expense, none of which was material in 2020, 2019, and 2018.

The statute of limitations is open for the Company’s federal tax return for 2015 and for 2017 and all subsequent years. The statutes of limitations for most state returns are open for 2017 and all subsequent years, and some state and foreign returns are also open for some earlier tax years due to differing statute periods. The Internal Revenue Service is currently auditing the Company’s 2015 and 2017 tax returns. While the Company believes that it is adequately reserved for possible audit adjustments, the final resolution of these examinations cannot be determined with certainty and could result in final settlements that differ from current estimates.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:


(In thousands)	2020		2019

Deferred tax assets:
Inventories	$	13,910	$	12,247
Other postretirement benefits and accrued items	11,477		9,271

Other reserves	7,782		6,834
Foreign tax attributes	6,250		5,909
State tax attributes, net of federal benefit	21,178		22,395
Stock-based compensation	3,751		3,378
Right of Use Liability	6,034		5,965
Basis difference in unconsolidated affiliates	8,478		6,547

Total deferred tax assets	78,860		72,546
Less valuation allowance	(27,199)		(23,130)

Deferred tax assets, net of valuation allowance	51,661		49,416

Deferred tax liabilities:
Property, plant, and equipment	48,990		47,791
Pension	—		949
Right of Use Asset	6,157		5,967
Other Liabilities	638		311


Total deferred tax liabilities	55,785		55,018

Net deferred tax liabilities	$	(4,124)	$	(5,602)

As of December 26, 2020, after consideration of the federal impact, the Company had state income tax credit carryforwards of $2.6 million, all of which expire by 2023, and other state income tax credit carryforwards of $9.0 million with unlimited lives. The Company had state net operating loss (NOL) carryforwards with potential tax benefits of $9.6 million, after consideration of the federal impact, expiring between 2021 and 2035. The state tax credit and NOL carryforwards are offset by valuation allowances totaling $12.0 million.

As of December 26, 2020, the Company had other foreign tax attributes with potential tax benefits of $4.6 million that have an unlimited life. These attributes were offset by a valuation allowance totaling $3.4 million. The Company also had other foreign tax attributes of $1.6 million, which have limited lives expiring between 2034 and 2040. The Company has also recorded a valuation allowance against deferred tax assets related to the book-tax differences in investments in unconsolidated affiliates.

Income taxes paid were approximately $49.3 million in 2020, $41.8 million in 2019, and $38.1 million in 2018.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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