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Income Taxes

12 Months Ended

Dec. 28, 2021

Income Taxes

Income Taxes

20.   Income Taxes

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

​

​	​	​	​	​	​	​	​	​	​
​	​	Fiscal Year
​		2021			2020			2019
​	​	​	​	​	​	​	​	​	​
Income/(Loss) before income taxes	​	$	71,620	​	$	(356,036)	​	$	140,334
Income tax (benefit)/provision:	​	​	​	​	​	​	​	​	​
Current:	​	​	​	​	​	​	​	​	​
Federal	​	$	15,746	​	$	(38,414)	​	$	8,211
State	​		4,350	​		2,971	​		7,027
Total current	​		20,096	​		(35,443)	​		15,238
Deferred:	​	​	​	​	​	​	​	​	​
Federal	​		(20,434)	​		(52,607)	​		(3,695)
State	​		(415)	​		(14,621)	​		1,498
Total deferred	​		(20,849)	​		(67,228)	​		(2,197)
Total (benefit)/provision	​	$	(753)	​	$	(102,671)	​	$	13,041

​

The following reconciles the U.S. federal statutory rate to the effective tax rate:

​

​	​	​	​	​	​	​	​
​		Fiscal Year
​		2021		2020		2019
​	​	​	​	​	​	​	​
U.S. federal statutory rate		21.0	%	21.0	%	21.0	%
State and district income taxes, net of federal benefit		4.2	​	2.6	​	4.9	​
Credit for FICA taxes paid on tips		(24.2)	​	2.1	​	(12.8)	​
Other credits and incentives		(4.2)	​	0.3	​	(1.4)	​
Impact of net operating loss carryback		(6.3)	​	3.4	​	—	​
Deferred compensation		(2.9)	​	0.6	​	(1.7)	​
Equity compensation	​	0.0	​	(0.4)	​	(0.2)	​
Uncertain tax positions	​	10.3	​	0.0	​	0.0	​
Other		1.0	​	(0.8)	​	(0.5)	​
Effective tax rate		(1.1)	%	28.8	%	9.3	%

​

On March 27, 2020, the CARES Act was signed into law. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions allowing for the carryback of net operating losses generated in fiscal years 2018, 2019 and 2020 and technical amendments regarding the expensing of qualified improvement property (“QIP”). During fiscal 2021, we filed a refund claim in the amount of $18.4 million for our fiscal 2020 net operating loss carryback and in January 2022, we filed amended returns for tax years 2018 and 2019 requesting total refunds of $21.3 million for credits released by our fiscal 2020 loss carryback. The effects of these claims were primarily included in our fiscal 2020 provision for income taxes, using estimates based on the best information available at the time we prepared our fiscal 2020 consolidated financial statements, and were adjusted to as-filed actual amounts in our fiscal 2021 provision for income taxes. Except for the increase to our loss carryback resulting from the remittance of all of our deferred FICA taxes as discussed below, these adjustments had a minor effect on our fiscal 2021 provision for income taxes.

​

The CARES Act also allowed eligible employers to defer the remittance of certain FICA taxes otherwise payable during calendar year 2020 and remit half of such deferred amounts on or before December 31, 2021 and half on or before December 31, 2022. We deferred approximately $36.6 million of FICA tax remittances under this provision. We previously planned to remit the first half of the deferred FICA taxes within 8.5 months of year-end 2020 to secure a fiscal 2020 tax deduction and we recorded the effects of that planned remittance in our fiscal 2020 provision for income taxes. Prior to filing our 2020 federal tax return and within 8.5 months of year-end 2020, we remitted all of the deferred FICA taxes, which increased the value of our fiscal 2020 loss carryback by $4.3 million. We recorded the effects of this increased remittance in our fiscal 2021 provision for income taxes.

​

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

​

​	​	​	​	​	​	​
​		December 28, 2021			December 29, 2020
Deferred tax assets:	​	​	​	​	​	​
Staff member benefits	​	$	36,295	​	$	33,419
Insurance reserves	​		12,897	​		11,460
Operating lease liability	​	​	315,403	​	​	319,274
Deferred income	​		33,075	​		31,119
Tax credit carryforwards	​		34,871	​		37,107
Goodwill	​		19,103	​		15,632
Stock-based compensation	​	​	10,122	​	​	9,937
State and foreign net operating loss carryforwards	​	​	3,005	​	​	3,536
Derivative asset	​	​	—	​	​	1,409
Other	​	​	1,063	​	​	1,466
Subtotal	​		465,834	​		464,359
Less: Valuation allowance	​		(1,036)	​		(1,041)
Total	​	$	464,798	​	$	463,318
​	​	​	​	​	​	​
Deferred tax liabilities:	​	​	​	​	​	​
Property and equipment	​	$	(109,019)	​	$	(124,634)
Prepaid expenses	​		(7,312)	​		(7,027)
Inventory	​		(7,802)	​		(7,766)
Accrued rent	​	​	(5,087)	​	​	(4,947)
Operating lease asset	​	​	(277,220)	​	​	(280,845)
Other	​	​	(724)	​	​	(214)
Total	​	$	(407,164)	​	$	(425,433)
​	​	​	​	​	​	​
Net deferred tax asset/(liability)	​	$	57,634	​	$	37,885

​

At December 28, 2021 and December 29, 2020, we had $33.6 million and $35.6 million, respectively of U.S. federal credit carryforwards which begin to expire in 2038 and $64.6 million and $79.5 million, respectively, of state net operating loss carryforwards with statutory carryforward periods ranging from 5 years to no expiration period. The earliest year that a material state net operating loss will expire is 2032. At December 28, 2021 and December 29, 2020, we had $1.7 million and $1.9 million, respectively, of state hiring and investment credits which begin to expire in 2024. At both December 28, 2021 and December 29, 2020, we had $2.7 million of foreign net operating loss carryforwards which begin to expire in 2038.

We assess the available evidence to estimate if these carryforwards and our other deferred tax assets will be realized. We concluded that a substantial portion of our deferred tax assets are more likely than not to be realized by reversals of existing taxable temporary differences and that forecasted future taxable income, exclusive of reversing temporary differences, will result in realization of a substantial portion of the remainder. We did not need to consider tax planning strategies in this analysis. Based on this evaluation, at both December 28, 2021 and December 29, 2020 we carried a valuation allowance of $1.0 million to reflect the amount that we will likely not realize. This assessment could change if estimates of future taxable income during the carryforward period are revised. The earliest tax year still subject to examination by a significant taxing jurisdiction is 2010.

​

At December 28, 2021, we had a reserve of $4.8 million for uncertain tax positions, all of which would favorably impact our effective income tax rate if resolved in our favor. A reconciliation of the beginning and ending amount of our uncertain tax positions is as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​		Fiscal Year
​		2021			2020			2019
​	​	​	​	​	​	​	​	​	​
Balance at beginning of year	​	$	655	​	$	704	​	$	830
Additions related to prior year tax positions	​	​	4,157	​	​	—	​	​	—
Additions related to current period tax positions	​		(13)	​		(49)	​		13
Reductions related to settlements with taxing authorities and lapses of statutes of limitations	​		—	​		—	​		(139)
Balance at end of year	​	$	4,799	​	$	655	​	$	704

​

At December 28, 2021 and December 29, 2020, we had $3.6 million and $0.3 million, respectively of accrued interest and penalties related to uncertain tax positions. We believe it is reasonably possible that the balance of uncertain tax positions at December 28, 2021 will decrease by $1.8 million during the next twelve months as a result of an anticipated settlement of our litigation regarding Section 199 deductions.

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- 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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