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Income Taxes
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

7. INCOME TAXES

We calculate our interim income tax provision in accordance with ASC Topic 270, “Interim Reporting” and ASC Topic 740, “Accounting for Income Taxes.” The Company calculates its provision for income taxes at the end of each interim reporting period by computing an estimated annual effective tax rate adjusted for tax items that are discrete to each period. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain significant estimates and judgment including the expected operating income for the year, permanent and temporary differences because of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained or the tax environment changes.

 

Our effective income tax rate for the thirty-nine weeks ended September 30, 2025 was an expense rate of 0.5% compared to a benefit rate of 15.0% for the comparable thirty-nine weeks ended October 1, 2024. The effective tax rate expense and benefit for the thirty-nine weeks ended September 30, 2025 and October 1, 2024, respectively, was different from the statutory tax rate primarily as a result of significant Federal Insurance Contributions Act (“FICA”) tax tip credits.

As of September 30, 2025, we had unrecognized tax benefits of approximately $0.9 million, which, if reversed, would impact our effective tax rate.

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

 

 

 

For the Thirty-Nine Weeks Ended

 

 

 

September 30, 2025

 

 

October 1, 2024

 

Beginning gross unrecognized tax benefits

 

$

874

 

 

$

967

 

Increases for tax positions taken in prior years

 

 

—

 

 

 

29

 

Decrease for tax positions taken in prior years

 

 

(46

)

 

 

—

 

Increases for tax positions taken in the current year

 

 

66

 

 

 

100

 

Ending gross unrecognized tax benefits

 

$

894

 

 

$

1,096

 

 

Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of September 30, 2025, 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.

 

H.R. 1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was signed into law on July 4, 2025. The legislation included provisions that impact the timing and magnitude of certain tax deductions, including restoring 100% bonus depreciation for qualifying property and the immediate expensing of domestic research and experimental (R&E) expenditures. The impact of the OBBBA is anticipated to result in a net zero tax expense effect, as the projected $5.0 million deferred tax expense is expected to be fully offset by a corresponding current tax expense.