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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income before income taxes were as follows for the periods indicated (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Domestic | $ | 107,578 |  |  | $ | 262,182 |  |  | $ | 201,919 |
Foreign | 8,599 |  |  | 6,228 |  |  | 3,282 |
Income before income taxes | $ | 116,177 |  |  | $ | 268,410 |  |  | $ | 205,201 |
The components of income tax expense were as follows for the periods indicated (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Current tax expense: |  |  |  |  |
U.S. federal | $ | 43,967 |  |  | $ | 37,963 |  |  | $ | 41,884 |
State | 11,761 |  |  | 11,018 |  |  | 10,619 |
Foreign | 3,372 |  |  | 1,726 |  |  | 829 |
Total current tax expense | 59,100 |  |  | 50,707 |  |  | 53,332 |
Deferred tax expense (benefit): |  |  |  |  |
U.S. federal | (26,783) |  |  | 4,770 |  |  | (3,332) |
State | (4,499) |  |  | 540 |  |  | (538) |
Foreign | (1,334) |  |  | (209) |  |  | (62) |
Total deferred tax expense (benefit) | (32,616) |  |  | 5,101 |  |  | (3,932) |
Total income tax expense | $ | 26,484 |  |  | $ | 55,808 |  |  | $ | 49,400 |
A reconciliation of income taxes computed at the federal statutory income tax rate of 21% to the effective income tax rate is as follows for the periods indicated (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Income taxes at the statutory rate | $ | 24,397 |  |  | $ | 56,366 |  |  | $ | 43,092 |
Increase (decrease) resulting from: |  |  |  |  |
State income taxes, net of federal tax effect | 4,454 |  |  | 8,562 |  |  | 7,816 |
Foreign-derived intangible income | (2,878) |  |  | (3,056) |  |  | (1,046) |
Research and development tax credits | (742) |  |  | (630) |  |  | (580) |
Tax benefit related to stock-based compensation | (472) |  |  | (7,259) |  |  | (611) |
Other | 1,725 |  |  | 1,825 |  |  | 729 |
Income tax expense | $ | 26,484 |  |  | $ | 55,808 |  |  | $ | 49,400 |
Deferred tax assets and liabilities consisted of the following for the periods indicated (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022
Deferred tax assets: |  |  |
Accrued liabilities | $ | 24,339 |  |  | $ | 7,188 |
Allowances and other reserves | 3,510 |  |  | 3,350 |
Inventory | 13,022 |  |  | 4,990 |
Stock-based compensation | 5,410 |  |  | 4,298 |
Operating lease liabilities | 16,817 |  |  | 16,201 |
Capitalized research and development expenditures | 7,921 |  |  | — |
Other | 4,520 |  |  | 3,225 |
Total deferred tax assets | $ | 75,539 |  |  | $ | 39,252 |
Deferred tax liabilities: |  |  |
Operating lease assets | $ | (13,828) |  |  | $ | (13,516) |
Prepaid expenses | (1,286) |  |  | (1,602) |
Property and equipment | (15,734) |  |  | (15,180) |
Intangible assets | (21,346) |  |  | (18,180) |
Other | (112) |  |  | (92) |
Total deferred tax liabilities | (52,306) |  |  | (48,570) |
Net deferred tax liabilities | $ | 23,233 |  |  | $ | (9,318) |
Amounts included in the Consolidated Balance Sheets: |  |  |
Deferred income taxes | $ | 23,233 |  |  | $ | 1,602 |
Other liabilities | — |  |  | (10,920) |
Net deferred income tax liabilities | $ | 23,233 |  |  | $ | (9,318) |
We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes have been recognized on such earnings except for the transition tax recognized as part of the Tax Cuts and Jobs Act (“the Tax Act”) during 2017. We continue to evaluate our plans for reinvestment or repatriation of unremitted foreign earnings. If we determine that all or a portion of our foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. We believe it is not practicable to estimate the amount of additional taxes, which may be payable upon distribution of these earnings. At December 31, 2022, we had unremitted earnings of foreign subsidiaries of $30.2 million. The Tax Act introduced new provisions for U.S. taxation of certain global intangible low-taxed income (“GILTI”). We elected to account for the tax on GILTI as a period cost and therefore have not recorded deferred taxes related to GILTI on our foreign subsidiaries. As of December 31, 2022, we had Texas research and development tax credit carryforwards of approximately $1.9 million, which if not utilized, will expire beginning in 2037. The following table summarizes the activity related to our unrecognized tax benefits for the periods indicated (excluding interest and penalties) (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022
Balance, beginning of year | $ | 11,113 |  |  | $ | 7,250 |
Gross increases related to current year tax positions | 2,270 |  |  | 4,070 |
Gross increases related to prior year tax positions | 36 |  |  | — |
Gross decreases related to prior year tax positions | (68) |  |  | (100) |
Decreases as a result of settlements during the current period | (260) |  |  | — |
Lapse of statute of limitations | (500) |  |  | (107) |
Balance, end of year | $ | 12,591 |  |  | $ | 11,113 |
If our positions are sustained by the relevant taxing authorities, approximately $12.6 million (excluding interest and penalties) of uncertain tax position liabilities as of December 31, 2022 would favorably impact our effective tax rate in future periods. We do not anticipate that the balance of gross unrecognized tax benefits will change significantly during the next twelve months. We include interest and penalties related to unrecognized tax benefits in our current provision for income taxes in the accompanying consolidated statements of operations. As of December 31, 2022, we had recognized a liability of $2.0 million for interest and penalties related to unrecognized tax benefits. We file income tax returns in the United States and various state and foreign jurisdictions. The tax years 2019 through 2022 remain open to examination in the United States, and the tax years 2016 through 2022 remain open to examination in Texas. The tax years 2018 through 2022 remain open to examination in most other state and foreign jurisdictions.

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