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Income Taxes

12 Months Ended

Jan. 02, 2024

Income Taxes

Income Taxes

17.   Income Taxes

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

​

​	​	​	​	​	​	​	​	​	​
​	​	Fiscal Year
​		2023			2022			2021
​	​	​	​	​	​	​	​	​	​
Income before income taxes	​	$	100,014	​	$	32,892	​	$	71,620
Income tax provision/(benefit):	​	​	​	​	​	​	​	​	​
Current:	​	​	​	​	​	​	​	​	​
Federal	​	$	7,183	​	$	3,520	​	$	15,746
State	​		7,195	​		4,895	​		4,350
Total current	​		14,378	​		8,415	​		20,096
Deferred:	​	​	​	​	​	​	​	​	​
Federal	​		(15,329)	​		(17,733)	​		(20,434)
State	​		(386)	​		(913)	​		(415)
Total deferred	​		(15,715)	​		(18,646)	​		(20,849)
Total benefit	​	$	(1,337)	​	$	(10,231)	​	$	(753)

​

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

​

​	​	​	​	​	​	​	​
​		Fiscal Year
​		2023		2022		2021
​	​	​	​	​	​	​	​
U.S. federal statutory rate		21.0	%	21.0	%	21.0	%
State and district income taxes, net of federal benefit		5.4	​	8.9	​	4.2	​
Credit for FICA taxes paid on tips		(24.9)	​	(66.4)	​	(24.2)	​
Other credits and incentives		(2.2)	​	(10.7)	​	(4.2)	​
Impact of net operating loss carryback		0.0	​	0.0	​	(6.3)	​
Deferred compensation		(2.4)	​	9.7	​	(2.9)	​
Equity compensation	​	1.5	​	5.5	​	0.0	​
Uncertain tax positions	​	(0.7)	​	(2.3)	​	10.3	​
Non-deductible executive compensation	​	0.8	​	2.8	​	0.3	​
Other		0.2	​	0.4	​	0.7	​
Effective tax rate		(1.3)	%	(31.1)	%	(1.1)	%

​

On March 27, 2020, the CARES Act was signed into law. It included provisions allowing for the carryback of net operating losses generated in fiscal years 2018, 2019 and 2020. During fiscal 2021, we filed a refund claim in the amount of $18.4 million for our fiscal 2020 net operating loss carryback, which was received during fiscal 2022. 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. These refunds have not yet been received. 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. These adjustments had a minor effect on our fiscal 2021 provision for income taxes. In our fiscal 2021 provision for income taxes, we also recorded the effects of accelerating the remittance of certain FICA taxes that had been deferred pursuant to the CARES Act. The accelerated remittance increased the value of our fiscal 2020 loss carryback by $4.3 million. We made no further adjustments in our fiscal 2023 provision for income taxes relating to these amounts.

​

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

​

​	​	​	​	​	​	​
​		January 2, 2024			January 3, 2023
Deferred tax assets:	​	​	​	​	​	​
Staff member benefits	​	$	35,932	​	$	31,325
Insurance reserves	​		14,931	​		14,374
Operating lease liability	​	​	324,587	​	​	323,094
Deferred income	​		38,074	​		35,928
Tax credit carryforwards	​		74,004	​		57,710
Goodwill	​		22,743	​		21,331
Stock-based compensation	​	​	10,789	​	​	10,769
State and foreign net operating loss carryforwards	​	​	1,640	​	​	2,435
Other	​	​	674	​	​	604
Subtotal	​		523,374	​		497,570
Less: Valuation allowance	​		(1,444)	​		(1,223)
Total	​	$	521,930	​	$	496,347
​	​	​	​	​	​	​
Deferred tax liabilities:	​	​	​	​	​	​
Property and equipment	​	$	(121,219)	​	$	(113,565)
Prepaid expenses	​		(8,933)	​		(8,151)
Inventory	​		(8,882)	​		(8,399)
Accrued rent	​	​	(5,889)	​	​	(5,285)
Operating lease asset	​	​	(284,244)	​	​	(283,921)
Other	​	​	(819)	​	​	(781)
Total	​	$	(429,986)	​	$	(420,102)
​	​	​	​	​	​	​
Net deferred tax asset	​	$	91,944	​	$	76,245

​

At January 2, 2024 and January 3, 2023, we had $72.8 million and $56.5 million, respectively of U.S. federal credit carryforwards which begin to expire in 2038 and $1.6 million and $1.6 million, respectively, of state hiring and investment credits which begin to expire in 2024. At January 2, 2024 and January 3, 2023, we had $2.3 million and $2.5 million, respectively of foreign net operating loss carryforwards which begin to expire in 2038 and $27.4 million and $46.6 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.

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 January 2, 2024 and January 3, 2023 we carried a valuation allowance of $1.4 million and $1.2 million, respectively, 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 2015.

​

At January 2, 2024, we had a reserve of $3.8 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
​		2023			2022			2021
​	​	​	​	​	​	​	​	​	​
Balance at beginning of year	​	$	3,787	​	$	4,799	​	$	655
Additions related to prior year tax positions	​	​	181	​	​	227	​	​	4,157
Additions related to current period tax positions	​		(121)	​		(54)	​		(13)
Reductions related to settlements with taxing authorities	​		—	​		(1,185)	​		—
Balance at end of year	​	$	3,847	​	$	3,787	​	$	4,799

​

At January 2, 2024 and January 3, 2023, we had $1.4 million and $2.2 million, respectively, of accrued interest and penalties related to uncertain tax positions. $0.3 million of the balance of uncertain tax positions at January 2, 2024 related to tax positions for which it is reasonably possible that the total amount could decrease during the next twelve months based on the lapses of statutes of limitations.

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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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