|6 Months Ended|
Sep. 26, 2020
|Income Tax Disclosure [Abstract]|
|INCOME TAXES||INCOME TAXES
The effective income tax rate for the six months ended September 2020 was (78.9)% compared to (12.1)% in the 2019 period. The six months ended September 2020 included a net discrete tax expense of $3.9 million, which included a $2.0 million net tax expense related to unrecognized tax benefits and interest and a $1.8 million tax expense related to withholding taxes on prior foreign earnings. Excluding the $3.9 million net discrete tax expense in the 2020 period, the effective income tax rate would have been (58.9)%. The six months ended September 2019 included a net discrete tax benefit of $177.4 million, which included a $6.4 million tax benefit related to stock compensation, a $6.9 million net tax benefit related to
unrecognized tax benefits and interest and a $164.4 million tax benefit related to the Federal Act on Tax Reform and AHV Financing ("Swiss Tax Act"). Excluding the $177.4 million net discrete tax benefit in the 2019 period, the effective income tax rate would have been 16.7%. Without discrete items, the effective income tax rate for the six months ended September 2020 decreased by 75.6% compared with the 2019 period primarily due to losses generated in the current year.
VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the Internal Revenue
Service ("IRS") examinations for tax years through 2015 have been effectively settled. The examination of Timberland’s 2011 tax return is ongoing.
In addition, VF is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years and has concluded that VF’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on VF’s consolidated financial statements. Management believes that some of these audits and negotiations will conclude during the next 12 months.
VF was granted a ruling which lowered the effective income tax rate on taxable earnings for years 2010 through 2014 under Belgium’s excess profit tax regime. In February 2015, the European Union Commission (“EU”) opened a state aid investigation into Belgium’s rulings. On January 11, 2016, the EU announced its decision that these rulings were illegal and ordered that tax benefits granted under these rulings should be collected from the affected companies, including VF.
On March 22, 2016, the Belgium government filed an appeal seeking annulment of the EU decision. Additionally, on June 21, 2016, VF Europe BVBA filed its own application for annulment of the EU decision.
On December 22, 2016, Belgium adopted a law which entitled the Belgium tax authorities to issue tax assessments, and demand
timely payments from companies which benefited from the excess profits regime. On January 10, 2017, VF Europe BVBA received an assessment for €31.9 million tax and interest related to excess profits benefits received in prior years. VF Europe BVBA remitted €31.9 million ($33.9 million) on January 13, 2017, which was recorded as an income tax receivable in 2017 based on the expected success of the aforementioned requests for annulment. An additional assessment of €3.1 million ($3.8 million) was received and paid in January 2018. On February 14, 2019 the General Court annulled the EU decision and on April 26, 2019 the EU appealed the General Court’s annulment. Both listed requests for annulment remain open and unresolved. Additionally, the EU has initiated proceedings related to individual rulings granted by Belgium, including the ruling granted to VF. If this matter is adversely resolved, these amounts will not be collected by VF.
During the six months ended September 2020, the amount of net unrecognized tax benefits and associated interest increased by $3.7 million to $168.8 million. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits and interest may decrease during the next 12 months by approximately $16.2 million related to the completion of examinations and other settlements with tax authorities and the expiration of statutes of limitations, of which $8.8 million would reduce income tax expense.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef