Note 6 - Income Taxes |
9 Months Ended |
|---|---|
Sep. 27, 2025 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
Note 6 – Income Taxes
The Company reported an effective income tax rate of 19.8% for the third fiscal quarter of 2025, compared to 343.2% in the third fiscal quarter of 2024. The effective tax rate for the fiscal quarter ended September 27, 2025, primarily resulted from an increase in U.S. taxable income, the impact of the One Big Beautiful Bill Act (the “OBBBA”), and changes in the valuation allowance on deferred tax assets, which provided a tax benefit. Sequentially, the effective tax rate for the third quarter was mainly influenced by foreign income taxed at varying statutory rates and changes in the valuation allowance on deferred tax assets. For the nine fiscal months ended September 27, 2025, the Company reported an effective tax rate of 23.4%, compared to 41.6% for the same period in 2024.
On July 4, 2025, the OBBBA was enacted into law, extending key provisions of the 2017 Tax Cuts and Jobs Act. The OBBBA restores expensing of domestic research expenditures for years beginning after December 31, 2024. Additionally, the OBBBA restores the EBITDA-based interest expense limitation and includes changes related to the U.S. taxation of the income of our foreign subsidiaries and certain foreign derived income, and the base erosion and anti-abuse tax, and provides for accelerated depreciation for property acquired and placed in service after January 19, 2025. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. Due to the OBBBA provisions, the Company recorded tax benefit for the quarter as a decrease in valuation allowance on part of our deferred tax assets.
The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties. |