Table of Contents COHERENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 16. INCOME TAXES (continued) Our effective tax rate on loss from continuing operations before income taxes for fiscal 2020 of 6.5% was lower than the U.S. federal tax rate of 21.0%. Our effective tax rate benefit for fiscal 2020 was unfavorably impacted primarily due to the impairment of goodwill that is not deductible for tax purposes and the establishment of valuation allowances for certain deferred tax assets. These unfavorable impacts were partially offset primarily from the release of unrecognized tax benefits net of settlements and competent authority offsets and losses in foreign jurisdictions subject to tax rates that are higher than the U.S. tax rates. The effective tax rate on income from continuing operations before income taxes for fiscal 2019 of 10.4% was lower than the U.S. federal tax rate of 21.0% primarily due to the tax benefit from losses of our German subsidiaries, which are subject to higher tax rates than U.S. tax rates, adjustments related to the Tax Act's transition tax, the net excess tax benefits from restricted stock unit vesting, the benefit of federal research and development tax credits and our Singapore and South Korea tax exemptions. These amounts are partially offset by an accrual for foreign withholding taxes on certain current year foreign earnings not considered permanently reinvested, stock-based compensation not deductible for tax purposes and limitations on the deductibility of compensation under Internal Revenue Code Section 162(m). On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted and signed into law. U.S. GAAP rules require recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The tax relief measures for businesses include a five-year net operating loss ("NOL") carryback for any NOL generated in a taxable year beginning after December 31, 2017 and before January 1, 2021, suspension of the 80% limitation of NOL utilization for taxable years beginning before 2021, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and technical corrections allowing accelerated deductions for qualified improvement property. The CARES Act also provided other non-tax benefits, including employee retention credits, to assist businesses impacted by the pandemic. There is no material impact of the tax benefits under the CARES Act on our consolidated financial statements. Coherent Singapore made an additional capital contribution to Coherent Korea in 2019 to take advantage of the High-Tech tax exemption provided by the Korean authorities. The High-Tech tax exemption is effective retroactively to the beginning of fiscal 2019 and the amount was used entirely in that year. There was no additional benefit available for fiscal 2020. For fiscal 2019, the tax exemption decreased Coherent Korea income taxes by approximately $2.4 million and the benefit of the tax holiday on net income (loss) per diluted share was $0.10. 109 Fiscal 2020 2019 2018 Federal statutory tax expense (benefit) $ (92,972) $ 12,610  $ 88,684  Valuation allowance 15,231 7,925  4,263  Taxes on foreign earnings at rates greater (less) than U.S. rates, net (27,041) (8,210) 8,417  Stock-based compensation 3,640 556  (8,536) State income taxes, net of federal income tax benefit (1,249) 1,131  (373) Research and development credit (4,350) (3,665) (6,972) Deferred compensation (564) (206) (560) Release of unrecognized tax benefits (20,027) (6,688) (352) Release of interest accrued for unrecognized tax benefits (4,232) (205) (156) Reversal of competent authority 8,552 —  —  U.S. tax reform impact — —  26,653  Deferred taxes on foreign earnings 1,303 1,215  —  Write-off of withholding tax credits — 1,134  —  Goodwill impairment 89,962 —  —  Other, net 3,163 626  3,127  Provision for (benefit from) income taxes $ (28,584) $ 6,223  $ 114,195  Effective tax rate 6.5 % 10.4  % 31.6  %