16. Income Taxes

The income tax expense differs from the amount that would have resulted from applying the combined Canadian federal and provincial statutory income tax rate to earnings (loss) from continuing operations before income taxes due to the following:

	December 28, 2024		December 30, 2023		December 31, 2022
	$		$		$
Earnings (loss) from continuing operations before income taxes	(10,004	)	(21,912	)	3,185
Canadian statutory rate	26.5%		26.5%		26.5%
Income tax expense (benefit) at statutory rate	(2,651	)	(5,807	)	844
Stock-based compensation	1,392		(607	)	1,054
Change in valuation allowance	2,534		6,607		(49	)
Disallowed executive compensation	140		2,372		367
Foreign tax rate differential	(29	)	107		(156	)
Change in enacted tax rates	6		90		(9	)
Other	78		507		(1,155	)
Income tax expense	1,470		3,269		896

The components of earnings (loss) from continuing operations before income taxes are shown below:

	December 28, 2024		December 30, 2023		December 31, 2022
	$		$		$
Canada	(10,470	)	(12,709	)	(13,102	)
U.S.	1,011		(9,203	)	16,287
Mexico	(545	)	-		-
Earnings (loss) from continuing operations before income taxes	(10,004	)	(21,912	)	3,185

The components of income tax expense are shown below:

	December 28, 2024		December 30, 2023		December 31, 2022
	$		$		$
Current income tax expense (benefit):
Canada	113		(32	)	84
U.S.	213		(677	)	1,108
Mexico	1,324		-		-
	1,650		(709	)	1,192

Deferred income tax expense (benefit):
Canada	-		-		-
U.S.	-		3,978		(296	)
Mexico	(180	)	-		-
	(180	)	3,978		(296	)
Income tax expense	1,470		3,269		896

Deferred income taxes of the Company are comprised of the following:

	December 28, 2024		December 30, 2023
	$		$
Loss and credit carryovers	52,021		44,671
Lease liabilities	29,771		30,801
Interest expense limitation (163j)	19,970		15,906
Stock-based compensation	1,431		1,625
Inventory basis differences	1,351		3,723
Right-of-use lease assets	(28,374	)	(29,691	)
Property, plant and equipment and intangible assets	(24,892	)	(18,537	)
Other	5,945		3,068
	57,223		51,566
Less: valuation allowance	57,548		52,071
Deferred income tax liability	(325	)	(505	)

The components of the deferred income tax liability are shown below:

	December 28, 2024		December 30, 2023
	$		$
Canada	(325	)	(325	)
U.S.	-		-
Mexico	-		(180	)
Deferred income tax liability	(325	)	(505	)

The components of the deferred income tax valuation allowance are as follows:

	December 28, 2024	December 30, 2023
	$	$
Balance, beginning of year	52,071	5,262
Increase in valuation allowance	5,477	46,809
Balance, end of year	57,548	52,071

The following table details the Company's tax attributes as at December 28, 2024, primarily related to net operating losses, tax credits and capital losses for which it has recorded deferred tax assets:

		Gross attribute amount		Net attribute amount	Expiration years
Tax Attributes
Net operating losses - Canada	$	5,952	$	1,577	2040-2041
Net operating losses - U.S. Federal		171,565		36,029	2037 and indefinite
Net operating losses - U.S. State		145,853		6,680	2027-2044 and indefinite
Net operating losses - Other		2,194		658	2028
Federal credits - Canada		-		255	N/A
Federal credits - U.S.		-		3,042	2031-2044
State credits - U.S.		-		92	2025-2026
Federal capital loss - Canada		27,838		3,689	N/A
Total			$	52,021

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determinations, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on this evaluation, as at December 28, 2024, a valuation allowance of $57.5 million (December 30, 2023 - $52.1 million) had been recorded against certain assets to reduce the net benefit recorded in the consolidated financial statements.

As the undistributed earnings of the Company's non-Canadian affiliates and associated companies are considered to be indefinitely reinvested, no provision for deferred taxes has been provided thereon.

For the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company did not identify any material uncertain tax positions or recognize any related tax benefits. The Company believes it has adequately examined its tax positions taken or expected to be taken in a tax return; however, amounts asserted by taxing authorities could differ from the Company's positions. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Consistent with its historical financial reporting, the Company has classified interest and penalties related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations, and with the related liability on the consolidated balance sheets.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions are the U.S. (including multiple states) and Canada (Ontario). The Company's 2020 through 2023 tax years (and any tax year for which available non-capital loss carryforwards were generated up to the amount of non-capital loss carryforward) remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes, and tax years 2017 through 2023 remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing audits in various other jurisdictions that are not considered material to the Company's consolidated financial statements.

The Organization for Economic Co-operation and Development has introduced the Pillar Two framework, which establishes a global minimum corporate tax rate of 15% for multinational enterprises with consolidated annual revenues of €750 million or more. During 2024, Canada enacted legislation to adopt Pillar Two effective for fiscal years beginning on or after December 31, 2023. The Company does not expect Pillar Two will have a material impact on its corporate income tax rate. The Company will continue to monitor legislative and regulatory developments with respect to this initiative.