Income Taxes |
6 Months Ended |
|---|---|
Mar. 29, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | INCOME TAXES Our effective tax rates were 51.0% and 26.9% for the second quarter of fiscal 2025 and 2024, respectively, and 25.1% and 28.0% for the first six months of fiscal 2025 and 2024, respectively. In all periods presented, the effective tax rates were higher than the federal statutory tax rate primarily due to state taxes, partially offset by various tax benefits. The effective tax rates for the second quarter and first six months of fiscal 2025 were also increased by the impact of net unfavorable permanent book-to-tax differences and changes in unrecognized tax benefits. Additionally, the effective tax rate for the first six months of fiscal 2025 was decreased by the release of a $9 million valuation allowance on losses related to a production facility fire in the Netherlands and our subsequent decision to sell the facility. The release of the valuation allowance was due to tax legislation enacted in the Netherlands in the first quarter of fiscal 2025. The effective tax rates for the second quarter and first six months of fiscal 2024 were higher than the federal statutory tax rate due to the impact of foreign losses for which a tax benefit cannot be recognized. Unrecognized tax benefits were $157 million and $151 million at March 29, 2025 and September 28, 2024, respectively. In December 2021, we received an assessment from the Mexican tax authorities related to the 2015 sale of our direct and indirect equity interests in subsidiaries which held our Mexico operations. The assessment totals approximately $447 million (9.1 billion Mexican pesos), which includes tax, inflation adjustment, interest and penalties as of March 29, 2025. Additionally, the purchaser in the transaction also received an assessment from the Mexican tax authorities related to the sale of the indirect equity interests, which was affirmed in January 2025 by a circuit court in Mexico, but remains subject to potential further judicial review under a petition filed by the purchaser. The transaction agreement contains certain mutual indemnification provisions, and both parties have provided notice of indemnification claims to the other party. The purchaser has not indicated the total amount it seeks in indemnification from us in its notice of indemnification claim. We believe any final assessment levied against and collected from the purchaser should prohibit potential assessment against us related to the sale of these same indirect equity interests because the Mexican tax authorities cannot collect twice for the same alleged underlying tax liability. We do not reasonably expect that the total amount sought in indemnification could exceed our assessment total at this time. In addition, we further believe the assertions made in the assessment against us with respect to the sale of both our direct and indirect equity interests have no merit and will defend our positions through the Mexican administrative appeal process and litigation, if necessary. Based on our analysis of our assessment in accordance with FASB guidance related to unrecognized tax benefits, we have not recorded a liability related to our assessment. Additionally, we have not recorded a liability for the indemnification claim from the purchaser, because we do not believe a loss is probable, or that a range of possible loss, if any, is reasonably estimable at this time, because we believe we have valid and meritorious defenses against the claim.
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