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Income Taxes | 12 Months Ended
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Jan. 02, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | (7) Income Taxes Income before provision for income taxes in 2021, 2020 and 2019 consisted of the following:
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. |  | $ | 611,267 |  |  | $ | 541,646 |  |  | $ | 468,467 |
Foreign |  |  | 14,438 |  |  |  | 13,484 |  |  |  | 14,170 |
Income before provision for income taxes |  | $ | 625,705 |  |  | $ | 555,130 |  |  | $ | 482,637 |
The differences between the U.S. Federal statutory income tax provision (using the statutory rate of 21%) and the Company’s consolidated provision for income taxes for 2021, 2020 and 2019 are summarized as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal income tax provision based on the statutory rate |  | $ | 131,398 |  |  | $ | 116,577 |  |  | $ | 101,354 |
State and local income taxes, net of related Federal income taxes |  |  | 15,108 |  |  |  | 16,660 |  |  |  | 15,141 |
Non-resident withholding and foreign income taxes |  |  | 21,833 |  |  |  | 18,741 |  |  |  | 20,351 |
Foreign tax and other tax credits |  |  | (23,509 | ) |  |  | (19,506 | ) |  |  | (20,090 | )
Foreign derived intangible income |  |  | (16,800 | ) |  |  | (12,390 | ) |  |  | (12,810 | )
Excess tax benefits from equity-based compensation |  |  | (18,911 | ) |  |  | (60,364 | ) |  |  | (25,735 | )
Non-deductible expenses, net |  |  | 4,501 |  |  |  | 4,359 |  |  |  | 3,090 |
Unrecognized tax provision, net of related Federal income taxes |  |  | 4,372 |  |  |  | 516 |  |  |  | 694 |
Other |  |  | (2,754 | ) |  |  | (759 | ) |  |  | (67 | )
Provision for income taxes |  | $ | 115,238 |  |  | $ | 63,834 |  |  | $ | 81,928 |
Excess tax benefits from equity-based compensation activity resulted in a decrease in the Company’s provision for income taxes of $18.9 million in 2021, $60.4 million in 2020 and $25.7 million in 2019, primarily due to the recognition of excess tax benefits for options exercised and the vesting of equity awards. The components of the 2021, 2020 and 2019 consolidated provision for income taxes were as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
Provision for Federal income taxes |  |  |  |  |  |  |  |  |
Current provision |  | $ | 74,910 |  |  | $ | 19,894 |  |  | $ | 49,539 |
Deferred (benefit) provision |  |  | (2,051 | ) |  |  | 14,301 |  |  |  | (2,862 | )
Total provision for Federal income taxes |  |  | 72,859 |  |  |  | 34,195 |  |  |  | 46,677 |
Provision for state and local income taxes |  |  |  |  |  |  |  |  |
Current provision |  |  | 16,507 |  |  |  | 10,775 |  |  |  | 15,335 |
Deferred (benefit) provision |  |  | (461 | ) |  |  | 123 |  |  |  | (435 | )
Total provision for state and local income taxes |  |  | 16,046 |  |  |  | 10,898 |  |  |  | 14,900 |
Provision for non-resident withholding and foreign income taxes |  |  |  |  |  |  |  |  |
Current provision |  |  | 21,833 |  |  |  | 18,741 |  |  |  | 20,351 |
Deferred provision |  |  | 4,500 |  |  |  | — |  |  |  | — |
Total provision for non-resident withholding and foreign income taxes |  |  | 26,333 |  |  |  | 18,741 |  |  |  | 20,351 |
Provision for income taxes |  | $ | 115,238 |  |  | $ | 63,834 |  |  | $ | 81,928 |
As of January 2, 2022 and January 3, 2021, the significant components of net deferred income taxes were as follows:
|  | January 2, 2022 |  |  | January 3, 2021 |
Deferred income tax assets |  |  |  |  |  |
Operating lease liabilities |  | $ | 54,478 |  |  | $ | 58,885 |
Accruals and reserves |  |  | 15,207 |  |  |  | 14,148 |
Insurance reserves |  |  | 12,867 |  |  |  | 12,447 |
Non-cash equity-based compensation expense |  |  | 7,861 |  |  |  | 8,331 |
Foreign tax credit |  |  | 10,206 |  |  |  | 6,603 |
Other |  |  | 8,158 |  |  |  | 7,720 |
Deferred income tax assets before valuation allowance |  |  | 108,777 |  |  |  | 108,134 |
Less: Valuation allowance |  |  | (11,364 | ) |  |  | (7,600 | )
Total deferred income tax assets |  |  | 97,413 |  |  |  | 100,534 |
Deferred income tax liabilities |  |  |  |  |  |
Operating lease right-of-use assets |  |  | 51,793 |  |  |  | 56,446 |
Capitalized software |  |  | 19,828 |  |  |  | 29,596 |
Depreciation, amortization and asset basis differences |  |  | 18,570 |  |  |  | 18,687 |
Unrealized gain on investments |  |  | 9,035 |  |  |  | — |
Total deferred income tax liabilities |  |  | 99,226 |  |  |  | 104,729 |
Net deferred income taxes |  | $ | (1,813 | ) |  | $ | (4,195 | )
Realization of the Company’s deferred tax assets is dependent upon many factors, including, but not limited to, the Company’s ability to generate sufficient taxable income. Although realization of the Company’s deferred tax assets is not assured, on an ongoing basis, management assesses whether it remains more likely than not the deferred tax assets will be realized. As of January 2, 2022 and January 3, 2021, the Company had total foreign tax credits of $10.2 million and $6.6 million, respectively, which were fully offset with a corresponding valuation allowance. As of January 2, 2022 and January 3, 2021, the Company also had valuation allowances related to interest deductibility in separately filed states of $1.2 million and $1.0 million, respectively. Management believes the remaining deferred tax assets will be realized. For financial reporting purposes, the Company’s investment in foreign subsidiaries does not exceed its tax basis. Therefore, no deferred income taxes have been provided. In 2021, the Company recorded an unrealized gain on its non-controlling interest in DPC Dash (Note 4) and accordingly, has also recorded a deferred tax liability representing the book basis over tax basis related to this unrealized gain. The Company recognizes the financial statement benefit of a tax position if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authorities widely understood administrative practices and precedents. For tax positions meeting the “more likely than not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and recognizes penalties in income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits as of January 2, 2022, January 3, 2021 and December 29, 2019 is as follows:
|  | January 2, 2022 |  |  | January 3, 2021 |  |  | December 29, 2019 |
Unrecognized tax benefits at beginning of period |  | $ | 3,318 |  |  | $ | 2,802 |  |  | $ | 1,964 |
Additions for tax positions of current year |  |  | 2,611 |  |  |  | 494 |  |  |  | 468 |
Additions for tax positions of prior years |  |  | 2,624 |  |  |  | 506 |  |  |  | 789 |
Reductions for changes in prior year tax positions |  |  | (379 | ) |  |  | (178 | ) |  |  | (284 | )
Reductions for lapses of applicable statute of limitations |  |  | (484 | ) |  |  | (306 | ) |  |  | (135 | )
Unrecognized tax benefits at end of period |  | $ | 7,690 |  |  | $ | 3,318 |  |  | $ | 2,802 |
As of January 2, 2022, the amount of unrecognized tax benefits was $7.7 million of which, if ultimately recognized, $6.7 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. As of January 2, 2022, the Company had $0.3 million of accrued interest and no accrued penalties. As of January 3, 2021, the amount of unrecognized tax benefits was $3.3 million of which, if ultimately recognized, $2.4 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. As of January 3, 2021, the Company had $0.2 million of accrued interest and no accrued penalties. There are currently no Internal Revenue Service audits in progress for the Company. The Company continues to be under examination by certain states. The Company’s Federal statute of limitation has expired for years prior to 2018, but it varies for state and foreign locations. The Company believes appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

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