(10)Income Taxes

The components of income before income tax expense consist of the following (in thousands):

 

Income tax (benefit) expense consists of the following (in thousands):

(10)Income Taxes (Continued)

Income tax expense differs from the expected income tax expense (computed by applying the U.S. federal income tax rate of 35% for fiscal years 2017, 2016 and 2015 to income before income tax expense) as a result of the following:

In the fourth quarter of 2017, as a result of the U.S. Tax Act, we remeasured our U.S. deferred tax assets and liabilities at the lower U.S. corporate income tax rate, which resulted in a discrete tax benefit of approximately $133.3 million. In fiscal 2017, 2016 and 2015, changes in state apportionments or state tax laws impacted our blended state rate, resulting in a state tax expense in fiscal 2017, fiscal 2016 and fiscal 2015 of $5.8 million, $1.8 million and $7.2 million, respectively.

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):

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based upon the level of historical taxable income and projections for future taxable income and reversal of deferred tax liabilities over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences, at December 30, 2017.  The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during future periods are reduced. The valuation allowance at December 30, 2017 and December 31, 2016 was $0.

(10)Income Taxes (Continued)

At December 30, 2017 we had intangibles of $1,265.3 million for tax purposes, which are amortizable through 2032.

We operate in multiple taxing jurisdictions within the United States, Canada and Mexico and from time to time face audits from various tax authorities regarding the deductibility of certain expenses, state income tax nexus, intercompany transactions, transfer pricing and other matters.  In August 2016, our company received notice that the IRS intended to conduct an audit of our 2014 tax year. During the third and fourth quarter of 2016, we provided documents and information to the IRS in response to its questions. During 2017 we closed this audit with no changes. Although we do not believe that we are otherwise currently under examination in any of our major tax jurisdictions, we remain subject to examination in all of our tax jurisdictions until the applicable statutes of limitations expire.  As of December 30, 2017, a summary of the tax years that remain subject to examination in our major tax jurisdictions are:

 

As of December 30, 2017, we do not have any reserves for uncertain tax positions.  Our policy is to classify interest and penalties that result from any income tax uncertainties as income tax expense.

U.S. Tax Act.  On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, which we refer to as the “U.S. Tax Act.” The U.S. Tax Act provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017.  

Beginning on January 1, 2018, the U.S. Tax Act lowers the U.S. corporate income tax rate from 35% to 21% on our U.S. earnings from that date and beyond. The revaluation of our U.S. deferred tax assets and liabilities to the 21% corporate tax rate reduced our net U.S. deferred income tax liability by approximately $133.3 million and has been reflected as a reduction in our income tax benefit in our results for the fourth quarter ended December 30, 2017.  This tax benefit was partially offset by an increase in our blended state rate of approximately $5.8 million and a repatriation expense of $0.9 million.

The U.S. Tax Act also limits the deduction for net interest expense incurred by a corporate taxpayer to 30% of the taxpayer’s adjusted taxable income. We are currently assessing the impact this limitation will have on us.

The Securities and Exchange Commission issued guidance on December 23, 2017 providing a one-year measurement period from a registrant’s reporting period that includes the U.S. Tax Act’s enactment date to allow the registrant sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740. As of December 30, 2017, we have recorded all known and estimable impacts of the U.S. Tax Act that are effective for fiscal 2017. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

The ultimate impact of the U.S. Tax Act on our reported results in fiscal 2018 may differ from the estimates provided herein, possibly materially, due to, among other things, changes in interpretations and assumptions we have made, guidance that may be issued, and other actions we may take as a result of the U.S. Tax Act different from that currently contemplated.