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INCOME TAXES
 12 Months Ended
Dec. 25, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXESThe Company’s entire pretax loss for the fiscal years ended December 25, 2022, December 26, 2021, and December 27, 2020 was from its U.S domestic operations. For the fiscal years ended December 25, 2022
December 26, 2021 and December 27, 2020, the Company recorded an income tax expense of $1.3 million, $0.1 million, and $0 respectively.

The components of the provision for income taxes for the fiscal year ended December 25, 2022 and December 26, 2021 are as follows (in thousands):

(dollar amounts in thousands)Fiscal Year Ended
December 25, 2022
Fiscal Year Ended
December 26, 2021
Current:
Federal
$— $— 
State
55 22 
Total Current
55 22 
Deferred:
Federal
1,271 35 
State
19 90 
Total deferred1,290 125 
Total provision for income taxes$1,345 $147 
A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows:
 December 25,
2022		December 26,
2021		December 27,
2020
Federal statutory rate
21.0 %21.0 %21.0 %
Effect of:
State taxes, net of federal benefit
7.1 %6.9 %7.4 %
Permanent differences
(0.8 %)(3.6 %)0.1 %
Nondeductible executive compensation(7.8 %)(2.8 %)— %
Change in valuation allowance
(19.4 %)(22.9 %)(28.6 %)
Other
(0.8 %)1.3 %0.1 %
Total
(0.7 %)(0.1 %)— 
Components of the Company’s net deferred tax (liabilities)/assets consisted of the following:
(dollar amounts in thousands)December 25,
2022		December 26,
2021
Deferred tax assets:
Net operating loss carryforward
$189,926 $151,095 
Charitable contributions
296 349 
Deferred rent
16,127 8,643 
Stock-based compensation expense
4,787 5,371 
Accrued expenses
1,177 3,110 
Deferred revenue
618 572 
Other
1,061 522 
Total deferred tax assets
213,992 169,662 
Valuation allowance
(163,750)(126,847)
Total deferred tax assets, net of valuation allowance
50,242 42,815 
Deferred tax (liabilities):
Depreciation and amortization differences
(40,197)(33,769)
State deferred taxes
(11,459)(9,171)
Total deferred tax liabilities
(51,656)(42,940)
Net deferred tax asset (liability)
$(1,414)$(125)
As of December 25, 2022 and December 26, 2021, Company management assessed the realizability of deferred tax assets, in order to determine the need for a valuation allowance. As of the fiscal years ended December 25, 2022 and December 26, 2021, the Company is in a net deferred tax asset position of $163.8 million and $126.8 million, respectively. The deferred tax assets consist principally of net operating loss carryforwards. The future realization of the tax benefits from existing temporary differences and tax attributes ultimately depends on the existence of sufficient taxable income. In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.
In concluding on its evaluation, Company management placed significant emphasis on guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.” Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth. On the basis of this evaluation, as of December 25, 2022 and December 26, 2021, a full valuation allowance of $163.8 million and $126.8 million, respectively, has been recorded against the deferred tax assets, which represents an increase of $36.9 million year over year.
As of December 25, 2022, the Company had U.S. Federal net operating loss carryforwards of $688.5 million, of which $586.6 million may be carried forward indefinitely, and the remaining carryforwards $101.9 million expire at various dates from 2029 through 2037. As of December 25, 2022, the Company had state net operating loss carryforwards of $610.1 million, of which $71.8 million may be carried forward indefinitely, and the remaining carryforwards of $538.3 million expire at various dates from 2022 through 2040.
The future realization of the Company’s net operating loss carryforwards and other tax attributes may also be limited by the change in ownership rules under the U.S. Internal Revenue Code Section 382. In general, under Section 382 of the Internal Revenue Code (Section 382), a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its pre-change net operating loss carryovers and tax credits to offset future taxable income. The Company completed a Section 382 analysis to evaluate whether any ownership changes and related limitations impacted the Company’s ability to utilize net operating loss carryforwards or other attributes prior to their expiration dates. The Company’s existing net operating loss carryforwards and tax credits are subject to annual limitations arising from ownership changes which occurred in previous periods. Currently, the limitations imposed by Section 382 are not expected to impair the Company’s ability to fully realize its net operating losses. Future changes in the Company’s stock ownership, some of which
are outside of the Company’s control, could result in an additional ownership change under Section 382 of the Code; if that occurs, the Company’s ability to utilize net operating losses could be further limited. Furthermore, the Company’s ability to utilize net operating losses of companies that we may acquire in the future may be subject to limitations under Section 382 of the Code.
The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions in which it operates, and therefore is subject to tax examination by various taxing authorities. The Company is not currently under examination and is not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions. As of December 25, 2022, tax years from 2018 to present remain open to examination under the statutes applied by the relevant taxing jurisdictions in which the Company files tax returns. Additionally, to the extent the Company utilizes tax attribute carryforwards, such as net operating losses, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities.
The calculation and assessment of the Company’s tax exposures generally involve the uncertainties in the application of complex tax laws and regulations for federal, state and local jurisdictions. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, on the basis of the technical merits. As of December 25, 2022 and December 26, 2021, the Company had approximately $1.6 million and $1.3 million of unrecognized tax benefits, respectively. Due to the valuation allowance position, none of the unrecognized tax benefits, if recognized, will impact the Company’s effective tax rate. The Company recognizes accrued interest and penalties, if any, related to uncertain tax positions in income tax provision in its financial statements, if applicable. The Company did not have any accrued interest of penalties associated with any uncertain tax positions, and no interest expense was recognized during the fiscal years ended December 25, 2022 and December 26, 2021. The following table summarizes the activity related to the Company’s gross uncertain tax positions for the fiscal years ended December 25, 2022 and December 26, 2021:
(dollar amounts in thousands)December 25,
2022		December 26,
2021
Uncertain Tax Positions
Beginning of year balance
$1,333 $907 
Increases related to prior year tax positions
— — 
Decreases related to prior year tax positions
— — 
Increases related to current year tax positions
223 426 
Decreases related to lapsing of statute of limitations
— — 
End of year balance
1,556 1,333 

On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”). The ARPA includes several provisions, such as measures that extend and expand the employee retention credit, previously enacted under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), through December 31, 2021. The ARPA did not have a material impact on the Company’s consolidated financial statements.

The Inflation Reduction Act of 2022 (the “IRA”), which incorporates a Corporate Alternative Minimum Tax (“CAMT”), was passed on August 16, 2022. The changes will affect the tax years beginning after December 31, 2022. The IRA will require companies to compute two separate calculations for federal income tax purposes and pay the greater of the new CAMT or their regular tax liability. The Company will be monitoring the impacts of the IRA to determine if it will have a material impact for the Company for tax years beginning after December 31, 2022. As of fiscal year 2022 end, it is not expected to have a material impact on the Company.