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Income Taxes | 12 Months Ended
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Dec. 28, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
Note 2 3. | Income Taxes
On December 22, 2017, the President of the U.S. enacted tax reform, which was effective for the company in the fourth quarter of 2017. The Act reduced our corporate statutory rate from 35% to 21%, repealed the domestic manufacturing deduction, and expanded certain permanent differences. In conjunction with tax reform, the SEC provided guidance which allows recording provisional amounts related to tax reform and subsequent adjustments during and up to a one-year measurement period, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment. The company’s 2017 financial results included the income tax effects of the Act for which the accounting was complete, and provisional amounts for those specific income tax effects of the Act for which the accounting was incomplete, but a reasonable estimate could be determined. In the fourth quarter ending December 30, 2017, a tax benefit of $48.2 million was recorded as an estimate of the impact of the Act. Due to the different federal income tax rates in effect for fiscal 2017 (35%) and fiscal 2018 (21%), the provisional amount was adjusted in the second quarter of fiscal 2018 to reflect the actual timing differences reported on the 2017 federal tax return. The adjustment resulted in a discrete tax benefit of $5.6 million, a reduction to federal income tax payable of $16.4 million and an increase to federal deferred tax liabilities of $10.8 million. The adjustment primarily relates to pension contributions and bonus depreciation on certain assets placed in service during fiscal 2017. The company’s provision for income tax expense (benefit) consists of the following for fiscal years 2019, 2018, and 2017 (amounts in thousands):
|  | Fiscal 2019 |  |  | Fiscal 2018 |  |  | Fiscal 2017 |
Current Taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 23,397 |  |  | $ | 11,642 |  |  | $ | 53,076 |
State |  |  | 5,539 |  |  |  | 6,702 |  |  |  | 7,403 |
|  |  | 28,936 |  |  |  | 18,344 |  |  |  | 60,479 |
Deferred Taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 17,335 |  |  |  | 21,762 |  |  |  | (59,385 | )
State |  |  | 1,274 |  |  |  | (105 | ) |  |  | (1,921 | )
|  |  | 18,609 |  |  |  | 21,657 |  |  |  | (61,306 | )
Income tax expense (benefit) |  | $ | 47,545 |  |  | $ | 40,001 |  |  | $ | (827 | )
Income tax expense (benefit) differs from the amount computed by applying the applicable U.S. federal income tax rate of 21% for fiscal years 2019 and 2018, and 35% for fiscal year 2017 (amounts in thousands):
|  | Fiscal 2019 |  |  | Fiscal 2018 |  |  | Fiscal 2017 |
Tax at U.S. federal income tax rate |  | $ | 44,538 |  |  | $ | 41,404 |  |  | $ | 52,253 |
State income taxes, net of federal income tax benefit |  |  | 5,384 |  |  |  | 5,213 |  |  |  | 3,564 |
Tax reform impact |  |  | — |  |  |  | (5,575 | ) |  |  | (48,160 | )
Section 199 qualifying production activities benefit |  |  | — |  |  |  | — |  |  |  | (5,422 | )
Net share-based payments (windfalls) shortfalls |  |  | (828 | ) |  |  | 1,639 |  |  |  | (1,001 | )
Other |  |  | (1,549 | ) |  |  | (2,680 | ) |  |  | (2,061 | )
Income tax expense (benefit) |  | $ | 47,545 |  |  | $ | 40,001 |  |  | $ | (827 | )
In 2019, the most significant difference in the effective rate and the statutory rate was state taxes. In 2018 and in 2017, the effective rate included benefits to revalue net deferred liabilities to reflect the reduction of the federal rate from 35% to 21%. In 2018, the most significant differences in the effective rate and the statutory rate were state income taxes and benefits related to tax reform. Absent the Act, in 2017, the most significant differences between the effective rate and the statutory rate were the Section 199 qualifying production activities deduction and state taxes. Deferred tax assets (liabilities) are comprised of the following (amounts in thousands):
|  | December 28, 2019 |  |  | December 29, 2018 |
Self-insurance |  | $ | 4,882 |  |  | $ | 5,208 |
Compensation and employee benefits |  |  | 6,929 |  |  |  | 8,718 |
Deferred income |  |  | 7,488 |  |  |  | 8,867 |
Loss and credit carryforwards |  |  | 13,304 |  |  |  | 14,027 |
Equity-based compensation |  |  | 2,135 |  |  |  | 4,646 |
Legal accrual |  |  | 7,238 |  |  |  | 2,245 |
Hedging |  |  | — |  |  |  | 1,397 |
Pension and postretirement benefits |  |  | 4,336 |  |  |  | 10,764 |
Financing and operating lease right-of-use liabilities |  |  | 102,797 |  |  |  | — |
Other |  |  | 6,820 |  |  |  | 7,394 |
Valuation allowance |  |  | (703 | ) |  |  | (364 | )
Deferred tax assets |  |  | 155,226 |  |  |  | 62,902 |
Depreciation |  |  | (67,639 | ) |  |  | (59,294 | )
Intangibles |  |  | (105,238 | ) |  |  | (104,380 | )
Financing and operating lease right-of-use assets |  |  | (101,217 | ) |  |  | — |
Hedging |  |  | (560 | ) |  |  | — |
Other |  |  | (1,967 | ) |  |  | (1,886 | )
Deferred tax liabilities |  |  | (276,621 | ) |  |  | (165,560 | )
Net deferred tax liability |  | $ | (121,395 | ) |  | $ | (102,658 | )
The company has a deferred tax asset of $3.4 million related to a federal net operating loss carryforward which we expect to fully utilize before expiration. Additionally, the company and various subsidiaries have a net deferred tax asset of $5.6 million related to state net operating loss carryforwards, and $4.3 million for credit carryforwards with expiration dates through fiscal 2037. The utilization of a portion of these state carryforwards could be limited in the future; therefore, a valuation allowance has been recorded. Should the company determine at a later date that certain of these losses which have been reserved for may be utilized, a benefit may be recognized in the Consolidated Statements of Income. Likewise, should the company determine at a later date that certain of these net operating losses for which a deferred tax asset has been recorded may not be utilized, a charge to the Consolidated Statements of Income may be necessary. See Note 2, Significant Accounting Policies, for the deferred tax asset valuation allowance analysis. The gross amount of unrecognized tax benefits was $0.3 million and $0.8 million as of December 28, 2019 and December 29, 2018, respectively. This change is due to the expiration of the statute of limitations on previously unrecognized tax benefits. These amounts are exclusive of interest accrued and are recorded in other long-term liabilities on the Consolidated Balance Sheets. If recognized, the $0.3 million (less $0.1 million related to tax imposed in other jurisdictions) would impact the effective rate. The company accrues interest expense and penalties related to income tax liabilities as a component of income before taxes. No accrual of penalties is reflected on the company’s balance sheet as the company believes the accrual of penalties is not necessary based upon the merits of its income tax positions. The company had an accrued interest balance of approximately $0.1 million and $0.1 million at December 28, 2019 and December 29, 2018, respectively. The company defines the federal jurisdiction as well as various state jurisdictions as “major” jurisdictions. The company is no longer subject to federal examinations for years prior to 2016, and with limited exceptions, for years prior to 2015 in state jurisdictions. The following is a reconciliation of the total amounts of unrecognized tax benefits for fiscal years 2019, 2018, and 2017 (amounts in thousands):
|  | Fiscal 2019 |  |  | Fiscal 2018 |  |  | Fiscal 2017 |
Unrecognized tax benefit at beginning of fiscal year |  | $ | 750 |  |  | $ | 1,259 |  |  | $ | 1,754 |
Gross increases |  |  | — |  |  |  | — |  |  |  | — |
Lapses of statutes of limitations |  |  | (444 | ) |  |  | (509 | ) |  |  | (495 | )
Unrecognized tax benefit at end of fiscal year |  | $ | 306 |  |  | $ | 750 |  |  | $ | 1,259 |
At this time, we do not anticipate significant changes to the amount of gross unrecognized tax benefits over the next twelve months.

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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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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