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Income Taxes (Tables)

12 Months Ended

Jan. 02, 2018

Income Taxes

Schedule of provision for income taxes

The provision for income taxes consisted of the following (in thousands):

		Fiscal Year
		2017 (1)			2016			2015
Income before income taxes		$	146,466		$	191,768		$	159,352
Income tax provision/(benefit):
Current:
Federal		$	7,148		$	42,665		$	32,765
State		7,106			10,614			8,880
Total current		14,254			53,279			41,645
Deferred:
Federal		(24,570		)	(564		)	2,659
State		(610		)	(441		)	(1,475		)
Total deferred		(25,180		)	(1,005		)	1,184
Total provision/(benefit)		$	(10,926	)	$	52,274		$	42,829

(1) The Tax Cuts and Jobs Act (“Tax Act”), which was enacted on December 22, 2017, made significant changes to how corporations are taxed in the U.S., the most prominent of which affecting us was to lower the U.S. corporate tax rate from 35% to 21%. In addition to the benefit of a lower rate in future years, the enactment of the Tax Act caused us to revalue our deferred tax assets and liabilities to reflect the new rate, resulting in a benefit to our fiscal 2017 income tax provision of $38.5 million.

Schedule of reconciliation between U.S. federal statutory rate and effective tax rate

		Fiscal Year
		2017		2016		2015
U.S. federal statutory rate		35.0	%	35.0	%	35.0	%
State and district income taxes, net of federal benefit		3.3		3.5		3.0
Credit for FICA taxes paid on tips		(9.4	)	(7.0	)	(8.0	)
Other credits and incentives		(1.9	)	(1.3	)	(1.0	)
Manufacturing deduction		(2.3	)	(2.5	)	(2.8	)
Deferred compensation		(1.5	)	(0.5	)	0.3
Equity compensation (1)		(4.5	)	—		—
Impact of statutory rate change on deferred taxes		(26.3	)	—		—
Other		0.1		0.1		0.4
Effective tax rate		(7.5	)%	27.3	%	26.9	%

(1) This item impacts our effective tax rate for the first time in fiscal 2017 due to our adoption of new accounting guidance that requires the tax impact of exercised stock options and vested restricted stock to be recorded in the income tax provision instead of additional paid-in capital. See “Recent Accounting Pronouncements” in Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of this accounting change.

Schedule of deferred tax assets and liabilities

Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):

		January 2, 2018			January 3, 2017
Deferred tax assets:
Staff member benefits		$	22,626		$	32,258
Insurance reserves		14,027			20,932
Accrued rent		12,523			20,583
Deferred income		11,607			14,409
Stock-based compensation		8,710			15,384
Tax credit carryforwards		2,308			2,247
Other		738			957
Subtotal		72,539			106,770
Less: Valuation allowance		(455		)	(457		)
Total		$	72,084		$	106,313
Deferred tax liabilities:
Property and equipment		$	(111,324	)	$	(166,183	)
Prepaid expenses		(9,120		)	(12,192		)
Inventory		(6,724		)	(10,339		)
Other		(2,132		)	—
Total		$	(129,300	)	$	(188,714	)
Net deferred tax liability		$	(57,216	)	$	(82,401	)

Schedule of reconciliation of our uncertain tax positions

 A reconciliation of the beginning and ending amount of our uncertain tax positions is as follows (in thousands):

		Fiscal Year
		2017			2016			2015
Balance at beginning of year		$	829		$	1,067		$	875
Additions related to current period tax positions		168			139			192
Reductions related to settlements with taxing authorities and lapses of statutes of limitations		(154		)	(377		)	(0		)
Balance at end of year		$	843		$	829		$	1,067

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