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Income Taxes

12 Months Ended

Dec. 29, 2020

(9) Income Taxes

Components of our income tax (benefit) expense for the years ended December 29, 2020, December 31, 2019 and December 25, 2018 are as follows:


	Fiscal Year Ended
	December 29, 2020		December 31, 2019		December 25, 2018
Current:
Federal	$	(648)	$	15,643	$	2,934
State		4,505		10,050		8,794
Foreign		403		369		210
Total current		4,260		26,062		11,938
Deferred:
Federal		(16,859)		4,396		11,909
State		(3,073)		1,939		410
Total deferred		(19,932)		6,335		12,319
Income tax (benefit) expense	$	(15,672)	$	32,397	$	24,257

Our pre-tax income is substantially derived from domestic restaurants.

A reconciliation of the statutory federal income tax rate to our effective tax rate for December 29, 2020, December 31, 2019 and December 25, 2018 is as follows:


	Fiscal Year Ended
	December 29, 2020		December 31, 2019		December 25, 2018
Tax at statutory federal rate	21.0	%	21.0	%	21.0	%
State and local tax, net of federal benefit	3.6		3.8		3.6
FICA tip tax credit	(92.5)		(9.4)		(9.6)
Work opportunity tax credit	(12.4)		(1.5)		(1.5)
Stock compensation	(2.3)		(0.1)		(1.4)
Net income attributable to noncontrolling interests	(3.0)		(0.6)		(0.8)
Officers compensation	2.6		1.2		1.7
Other	1.6		0.7		(0.1)
Total	(81.4)	%	15.1	%	12.9	%

Our effective tax rate was a benefit of 81.4% in 2020 compared to expense of 15.1% in 2019. This was primarily due to the impact of FICA tip and Work opportunity tax credits on lower pre-tax income. Additionally, these credits exceeded our federal tax liability in 2020 but we expect to utilize these credits in future years or by carrying back to our 2019 tax year.

Our effective tax rate increased to 15.1% in 2019 compared to 12.9% in 2018 primarily due to lower excess tax benefits related to our share-based compensation program partially offset by lower non-deductible officer compensation. In addition, the prior year tax rate benefitted from an adjustment related to tax reform that we recorded in conjunction with the filing of our 2017 tax return.

Components of deferred tax liabilities, net are as follows:


	December 29, 2020		December 31, 2019
Deferred tax assets:
Deferred revenue—gift cards	$	26,692	$	16,122
Insurance reserves		5,998		4,774
Long-term deferred payroll taxes		5,995		—
Other reserves		705		601
Share-based compensation		5,621		5,510
Operating lease liabilities		146,803		137,744
Deferred compensation		12,778		10,503
Tax credit carryforwards		10,360		1,710
Other assets		2,119		2,482
Total deferred tax asset		217,071		179,446
Deferred tax liabilities:
Property and equipment		(71,263)		(63,777)
Goodwill and intangibles		(6,896)		(6,241)
Operating lease right-of-use asset		(131,718)		(123,813)
Other liabilities		(9,996)		(8,310)
Total deferred tax liability		(219,873)		(202,141)
Net deferred tax liability	$	(2,802)	$	(22,695)

As of December 29, 2020, we have federal tax credit carryforwards of $10.2 million expiring in 2040 and state tax credit carryforwards of $0.2 million expiring in 2023. The federal tax credits include FICA tip and Work opportunity tax credits that exceeded credit limitations in the current year. We expect to generate sufficient earnings in future periods and/or may implement tax planning strategies that would allow us to fully utilize these credits. As such, we have not provided any valuation allowances for these credits, or any of our other deferred tax assets, as their realization is more likely than not.

A reconciliation of the beginning and ending liability for unrecognized tax benefits, all of which would impact the effective tax rate if recognized, is as follows:


Balance at December 25, 2018	$	1,482
Additions to tax positions related to prior years		16
Additions to tax positions related to current year		362
Reductions due to statute expiration		(314)
Reductions due to exam settlements		—
Balance at December 31, 2019		1,546
Additions to tax positions related to prior years		148
Additions to tax positions related to current year		389
Reductions due to statute expiration		(421)
Reductions due to exam settlement		—
Balance at December 29, 2020	$	1,662

As of December 29, 2020 and December 31, 2019, the total amount of accrued penalties and interest related to uncertain tax provisions was not material.

All entities for which unrecognized tax benefits exist as of December 29, 2020 possess a December tax year-end. As a result, as of December 29, 2020, the tax years ended December 26, 2017, December 25, 2018 and December 31, 2019 remain subject to examination by all tax jurisdictions. As of December 29, 2020, no audits were in process by a tax jurisdiction that, if completed during the next twelve months, would be expected to result in a material change to our unrecognized tax benefits. Additionally, as of December 29, 2020, no event occurred that is likely to result in a significant increase or decrease in the unrecognized tax benefits through December 28, 2021.

- Definition

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.

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