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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

Income tax benefit for the last three fiscal years consists of the following (in thousands):

 

 

 

Fiscal Year

 

 

 

2024

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

2,780

 

 

$

1,378

 

 

$

647

 

State

 

 

969

 

 

 

897

 

 

 

379

 

 

 

 

3,749

 

 

 

2,275

 

 

 

1,026

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

(10,891

)

 

 

(11,344

)

 

 

(12,653

)

State

 

 

(1,280

)

 

 

(491

)

 

 

(757

)

 

 

 

(12,171

)

 

 

(11,835

)

 

 

(13,410

)

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

$

(8,422

)

 

$

(9,560

)

 

$

(12,384

)

 

Income tax benefit for the last three fiscal years differs from the amount that would result from applying the federal statutory rate as follows:

 

 

 

Fiscal Year

 

 

 

2024

 

 

2023

 

 

2022

 

Income tax at statutory rates

 

 

21.0

%

 

 

21.0

%

 

 

(21.0

)%

State income taxes, net of federal benefit

 

 

5.5

 

 

 

5.8

 

 

 

(10.4

)

Permanent differences

 

 

10.6

 

 

 

7.7

 

 

 

17.3

 

Income tax credits

 

 

(147.1

)

 

 

(117.9

)

 

 

(156.8

)

Return to provision

 

 

0.4

 

 

 

0.9

 

 

 

(4.3

)

Stock warrant extension

 

 

11.7

 

 

 

—

 

 

 

—

 

Prior year tax credit true-up

 

 

4.3

 

 

 

(6.4

)

 

 

14.1

 

Benefit from net operating loss carryback

 

 

—

 

 

 

—

 

 

 

1.8

 

Change in valuation allowance

 

 

(8.5

)

 

 

(2.6

)

 

 

6.8

 

Other, net

 

 

0.2

 

 

 

(3.2

)

 

 

3.4

 

 

 

 

(101.9

)%

 

 

(94.7

)%

 

 

(149.1

)%

 

The components of the deferred income tax asset (liability) consist of the following (in thousands):

 

 

 

December 31, 2024

 

 

January 2, 2024

 

Deferred income tax asset:

 

 

 

 

 

 

Accrued expenses

 

$

12,526

 

 

$

12,939

 

Other

 

 

8,436

 

 

 

6,933

 

Deferred revenues

 

 

23

 

 

 

—

 

Gift cards

 

 

1,128

 

 

 

876

 

Stock-based compensation

 

 

3,667

 

 

 

5,026

 

Operating lease liability

 

 

111,254

 

 

 

116,527

 

Income tax credits

 

 

74,826

 

 

 

67,596

 

Net operating losses

 

 

4,831

 

 

 

5,085

 

State tax

 

 

358

 

 

 

226

 

Gross deferred income tax asset

 

 

217,049

 

 

 

215,208

 

Valuation allowance

 

 

(186

)

 

 

(889

)

Deferred income tax asset, net of valuation allowance

 

 

216,863

 

 

 

214,319

 

 

 

 

 

 

 

 

Deferred income tax liability:

 

 

 

 

Property and equipment

 

 

(51,516

)

 

 

(55,269

)

Intangible assets

 

 

(2,807

)

 

 

(2,951

)

Operating lease assets

 

 

(96,255

)

 

 

(101,358

)

Smallwares

 

 

(3,967

)

 

 

(4,594

)

Deferred income tax liability

 

 

(154,545

)

 

 

(164,172

)

Net deferred income tax asset

 

$

62,318

 

 

$

50,147

 

At December 31, 2024, we had federal and state income tax credit carryforwards of approximately $75.0 million and $0.1 million, respectively, consisting primarily of the credit for FICA taxes paid on reported team member tip income. The FICA tax credits will begin to expire in 2039.

At December 31, 2024, we have state and city net operating loss carryforwards of $106.4 million with statutory carryforward periods ranging from 5 years to 20 years. The earliest year that a material state net operating loss will expire is 2025.

We have completed an analysis of our ability to use our federal and state tax credit and net operating loss carry forwards. As of December 31, 2024 and January 2, 2024, we have determined that no valuation allowance is required against federal tax credit carryforwards; however, we have recorded a valuation allowance against certain state net operating loss and tax credit carryforwards of $0.2 million and $0.9 million, respectively, net of the federal benefit which are not more likely than not to be realized prior to expiration. We recognize interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2024 and January 2, 2024, we had accrued $0.1 million for interest and penalties with respect to uncertain tax positions.

As of December 31, 2024, unrecognized tax benefits recorded was approximately $0.9 million, of which approximately $0.9 million, if reversed would impact our effective tax rate. We anticipate no change in our liability for unrecognized tax benefits within the next twelve-month period.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

 

 

Fiscal Year

 

 

 

2024

 

 

2023

 

 

2022

 

Gross unrecognized tax benefits at beginning of year

 

$

967

 

 

$

1,249

 

 

$

1,198

 

Increases for tax positions taken in prior years

 

 

29

 

 

 

102

 

 

 

3

 

Decreases for tax positions taken in prior years

 

 

—

 

 

 

—

 

 

 

(29

)

Increases for tax positions taken in the current year

 

 

134

 

 

 

104

 

 

 

91

 

Lapse in statute of limitations

 

 

(256

)

 

 

(488

)

 

 

(14

)

Gross unrecognized tax benefits at end of year

 

$

874

 

 

$

967

 

 

$

1,249

 

Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of December 31, 2024, the earliest tax year still subject to examination by the Internal Revenue Service is 2021. The earliest year still subject to examination by a significant state or local taxing authority is 2020.