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INCOME TAXES
 12 Months Ended
Dec. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Provision for Income Taxes
The provision for income taxes consisted of the following:
For the fiscal year ended
(dollars in thousands)December 30, 2023December 31, 2022January 1, 2022
Current tax provision:
Federal$47,643 $43,569 $75,408 
State8,943 8,307 16,905 
Foreign13,756 15,562 19,761 
Total current provision$70,342 $67,438 $112,074 
Deferred tax (benefit) provision:
Federal$(148)$(1,484)$(10,541)
State(512)425 (2,428)
Foreign60 319 (563)
Total deferred (benefit) provision(600)(740)(13,532)
Total provision$69,742 $66,698 $98,542 
The foreign portion of the tax position substantially relates to the Company’s international operations in Canada, Hong Kong and Mexico, in addition to foreign tax withholdings related to the Company’s foreign royalty income.
The Company plans to repatriate undistributed earnings from Hong Kong and has provided for deferred income taxes related to these earnings. Since the current U.S. tax regime taxes foreign earnings in the year earned, taxes associated with repatriation are not material. Deferred income taxes have not been provided for undistributed foreign earnings from Canada or Mexico, or any additional outside basis difference inherent in all foreign entities, as these amounts continue to be indefinitely reinvested in foreign operations. Total undistributed earnings from the Company’s subsidiaries in Canada and Mexico amounted to approximately $106.9 million. Unrecognized deferred tax liability related to undistributed earnings from the Company’s subsidiaries in Canada and Mexico is estimated to be approximately $4.9 million, based on applicable withholding taxes, levels of foreign income previously taxed in the U.S. and applicable foreign tax credit limitations. The company accounts for the additional U.S. income tax on its foreign earnings under Global Intangible Low-Taxed Income (“GILTI”) as a period expense in the period in which additional tax is due.
The components of income before income taxes were as follows:
For the fiscal year ended
(dollars in thousands)December 30, 2023December 31, 2022January 1, 2022
Domestic$240,627 $227,929 $333,900 
Foreign61,615 88,807 104,390 
Total $302,242 $316,736 $438,290 
Effective Rate Reconciliation
The difference between the Company’s effective income tax rate and the federal statutory tax rate is reconciled below:
For the fiscal year ended
December 30, 2023December 31, 2022January 1, 2022
Statutory federal income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal income tax benefit3.0 %2.8 %3.0 %
Impact of foreign operations(0.8)%(2.0)%(1.8)%
Settlement of uncertain tax positions(0.6)%(0.7)%(0.3)%
Benefit from stock-based compensation— %(0.1)%(0.3)%
Goodwill impairments and other0.5 %0.1 %0.9 %
Total23.1 %21.1 %22.5 %
The Company and its subsidiaries file a consolidated United States federal income tax return, as well as separate and combined income tax returns in numerous state and foreign jurisdictions. In most cases, the Company is no longer subject to U.S. tax authority examinations for years prior to fiscal 2020.
Deferred Taxes
The following table reflects the Company’s calculation of the components of deferred tax assets and liabilities as of December 30, 2023 and December 31, 2022.
(dollars in thousands)December 30, 2023December 31, 2022
Deferred tax assets:Assets (Liabilities)
Accounts receivable allowance$5,263 $6,715 
Inventory14,271 16,902 
Accrued liabilities11,208 8,230 
Equity-based compensation3,511 4,397 
Deferred employee benefits3,397 3,247 
Leasing liabilities105,756 83,886 
Other4,771 3,724 
Total deferred tax assets148,177 127,101 
Deferred tax liabilities:
Depreciation(19,654)(18,560)
Leasing assets(93,943)(72,162)
Tradename and licensing agreements(71,361)(73,534)
Other(2,516)(1,614)
Total deferred tax liabilities(187,474)(165,870)
Net deferred tax liability$(39,297)$(38,769)
Amounts recognized in the consolidated balance sheets:
(dollars in thousands)December 30, 2023December 31, 2022
Assets (Liabilities)
Deferred tax assets$2,173 $2,466 
Deferred tax liabilities(41,470)(41,235)
Net deferred tax liability$(39,297)$(38,769)
Uncertain Tax Positions
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
(dollars in thousands)
Balance at January 2, 2021$12,523 
Additions based on tax positions related to fiscal 2021810 
Reductions for prior year tax positions(2,207)
Reductions for lapse of statute of limitations(2,270)
Balance at January 1, 2022$8,856 
Additions based on tax positions related to fiscal 20221,040 
Reductions for prior year tax positions— 
Reductions for lapse of statute of limitations(2,803)
Balance at December 31, 2022$7,093 
Additions based on tax positions related to fiscal 20231,545 
Reductions for prior year tax positions— 
Reductions for lapse of statute of limitations(2,373)
Balance at December 30, 2023$6,265 
As of December 30, 2023, the Company had gross unrecognized tax benefits of approximately $6.3 million, of which $5.6 million, if ultimately recognized, will affect the Company’s effective tax rate in the period settled. The Company has recorded
tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions. Because of deferred tax accounting, changes in the timing of these deductions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authorities.
Included in the reserves for unrecognized tax benefits are approximately $1.7 million of reserves for which the statute of limitations is expected to expire within the next fiscal year. If these tax benefits are ultimately recognized, such recognition, net of federal income taxes, may affect the annual effective tax rate for fiscal 2024 and the effective tax rate in the quarter in which the benefits are recognized.
The Company recognizes interest related to unrecognized tax benefits as a component of interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During fiscal 2023, expense recorded on uncertain tax positions was not material. Expense recorded on uncertain tax positions was approximately $0.4 million for each of the fiscal years 2022 and 2021. The Company had accrued interest on uncertain tax positions of approximately $1.5 million and $1.5 million as of December 30, 2023 and December 31, 2022, respectively.