Income Taxes

9 Months Ended

Mar. 27, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our effective tax rate was 1.2% and 16.3% for the three months ended March 27, 2022 and March 28, 2021, respectively. Our effective tax rate was 4.0% and 15.6% for the nine month periods ended March 27, 2022 and March 28, 2021, respectively. The reduction in our effective tax rate in the current three and nine months periods as compared to the respective prior year periods is due to adjustments we made to the amounts of our fiscal 2021 estimated foreign tax credits and estimated tax impacts associated with our investment in VAST LLC. These true-up adjustments resulted from the filing of our US income tax returns during the quarter ended March 27, 2022 and were attributable to actual results included in non-US income tax returns, which are filed on a calendar year basis, and which differ from estimates included in our fiscal 2021 tax provision. The adjustment amounts recorded during the three and nine month periods ended March 27, 2022 totaled $740,000 and $1.0 million, respectively. Our effective tax rate for the three and nine month periods ended March 27, 2022 excluding these adjustments were 18.9% and 15.7%, respectively. Effective July 20, 2020, the U.S Treasury Department finalized and enacted previously proposed regulations regarding the Global Intangible Low Taxed Income (GILTI) tax provisions of the Tax Cuts and Jobs Act of 2017 (TCJA). Prior to this enactment, GILTI represented a significant U.S. income tax on our foreign earnings during our fiscal 2020. With the enactment of these final regulations, we became eligible for an exclusion from GILTI since we met the provisions for the GILTI High-Tax exception included in the final regulations. In addition, the enactment of these new regulations and our eligibility for the GILTI High-Tax exception was retroactive to the original enactment of the GILTI tax provision, which included our 2020 fiscal year. As a result, we recorded an income tax benefit of $675,000 during the nine month period ended March 28, 2021. Our effective tax rate differs from the statutory tax rate due to the GILTI provisions, our available R&D tax credit and the non-controlling interest portion of our pre-tax income. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes.