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Income Taxes | 12 Months Ended
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Jan. 01, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In fiscal 2021, our statutory rate was 25.8 percent which was comprised of the federal statutory income tax rate of 21.0 percent and our blended state statutory rate of 4.8 percent. In fiscal 2020, our statutory rate was 25.8 percent which was comprised of the federal statutory income tax rate of 21.0 percent and our blended state statutory rate of 4.8 percent. Our blended state rate is impacted by the mix of our income earned in various states and our federal taxable income, both of which may differ from year to year. Our effective tax rate is impacted by the effects of permanent differences occurring throughout our fiscal year. For fiscal 2021 and fiscal 2020, our effective tax was 24.8 percent and 14.9 percent, respectively.
| Fiscal Year Ended January 1, 2022 |  | Fiscal Year Ended January 2, 2021
| (In thousands)
Income before provision for income taxes | $ | 393,876 |  |  | $ | 95,081 |
Federal income taxes: |  |  |
Current | $ | 78,005 |  |  | $ | 19,673 |
Deferred | (1,585) |  |  | (9,038) |
State income taxes: |  |  |
Current | 19,382 |  |  | 2,946 |
Deferred | 1,941 |  |  | 618 |
Provision for income taxes | $ | 97,743 |  |  | $ | 14,199 |
Effective tax rate | 24.8 | % |  | 14.9 | %
Our provision for income taxes is reconciled to the federal statutory amount as follows:
| Fiscal Year Ended January 1, 2022 |  | Fiscal Year Ended January 2, 2021
| (In thousands)
Federal income taxes computed at the federal statutory tax rate | $ | 82,628 |  |  | $ | 19,967 |
State income taxes, net of federal benefit | 18,970 |  |  | 4,636 |
Valuation allowance change arising from state net operating losses | (3,018) |  |  | (4,101) |
Valuation allowance change arising from interest deduction limitation | — |  |  | (4,806) |
Uncertain tax positions | 91 |  |  | (1,879) |
Permanent differences arising from compensation | 686 |  |  | 500 |
Other | (1,614) |  |  | (118) |
Provision for income taxes | $ | 97,743 |  |  | $ | 14,199 |
Our financial statements contain certain deferred tax assets which primarily result from other temporary differences related to certain reserves, pension obligations, differences between book and tax depreciation and amortization, and state net operating losses. We record a valuation allowance against our net deferred tax assets when we determine that, based on the weight of available evidence, it is more likely than not that our net deferred tax assets will not be realized. For fiscal 2021 and fiscal 2020, the components of our net deferred income tax assets are as follows:
| January 1, 2022 |  | January 2, 2021
| (In thousands)
Deferred income tax assets: |  |  |
Inventory reserves | $ | 4,283 |  |  | $ | 2,896 |
Compensation-related accruals | 6,457 |  |  | 6,524 |
Accounts receivable | 632 |  |  | 704 |
Property and equipment | 47,857 |  |  | 50,117 |
Operating lease liability | 13,087 |  |  | 13,266 |
Pension | 4,415 |  |  | 7,374 |
Benefit from net operating loss carryovers | 5,408 |  |  | 8,010 |
Other | 251 |  |  | 585 |
Total gross deferred income tax assets | 82,390 |  |  | 89,476 |
Less: valuation allowances | (4,269) |  |  | (7,287) |
Total net deferred income tax assets | $ | 78,121 |  |  | $ | 82,189 |
Deferred income tax liabilities: |  |  |
Intangible assets | $ | (4,749) |  |  | $ | (5,688) |
Operating lease asset | (12,611) |  |  | (12,848) |
Other | (476) |  |  | (754) |
Total deferred income tax liabilities | (17,836) |  |  | (19,290) |
Deferred income tax asset, net | $ | 60,285 |  |  | $ | 62,899 |
Activity in our deferred tax asset valuation allowance for fiscal 2021 and 2020 was as follows:
| January 1, 2022 |  | January 2, 2021
| (In thousands)
Balance as of beginning of the fiscal year | $ | 7,287 |  |  | $ | 16,194 |
Valuation allowance provided for taxes related to: |  |  |
State net operating loss carryforwards | (3,018) |  |  | (4,101) |
Disallowed interest limitation under the Tax Act and CARES | — |  |  | (4,806) |
Balance as of end of the fiscal year | $ | 4,269 |  |  | $ | 7,287 |
We have recorded income tax and related interest liabilities where we believe certain of our tax positions are not more likely than not to be sustained if challenged. These balances are included in other noncurrent liabilities in our Consolidated Balance Sheets. The following table summarizes the activity related to our gross unrecognized tax benefits:
| January 1, 2022 |  | January 2, 2021
| ($ in thousands)
Balance at beginning of the fiscal year | $ | 2,262 |  |  | $ | 4,245 |
Reductions due to lapse of applicable statute of limitations | (57) |  |  | (1,983) |
Balance at end of the fiscal year | $ | 2,205 |  |  | $ | 2,262 |
Included in the unrecognized tax benefits as of January 1, 2022 and January 2, 2021, were approximately $2.2 million and $2.1 million, respectively of tax benefits that, if recognized, would reduce our annual effective tax rate for fiscal 2021 and 2020. No penalties were accrued for either 2021 or 2020. We have accrued interest associated with our unrecognized tax benefits which we release as those benefits are realized due to the lapse of applicable statute of limitations. Interest expense associate with our unrecognized tax benefits is reported as interest expense, net in our Consolidated Statement of Operations and Comprehensive Income. Impacts of the Tax Act and CARES In December of 2017, the U.S. enacted comprehensive tax legislation under the Tax Cuts and Jobs Act, (“The Tax Act”), which made broad and complex changes to the tax code. During fiscal 2019, we recorded a valuation allowance of $4.8 million primarily related to interest disallowed for deduction related to changes included in the Tax Act. In March of 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security (“CARES” Act). CARES included a provision which raised the level of deductibility for previously disallowed interest which had been enacted under the Tax Act. During fiscal 2020, because of the provision included in CARES, we benefited from the release of the $4.8 million in valuation allowance which we had recorded during fiscal 2019 under the provisions of the Tax Act. We had no impact to our income tax provision in fiscal 2021 from either The Tax Act nor CARES. Net Operating Losses At the end of fiscal 2020, our gross state net operating loss carryovers are $162.6 million and our tax-effected state net operating loss carryovers are $8.0 million, of which $7.3 million was subject to a valuation allowance arising from expiration date when considered conjunction with state limitations related to Internal Revenue Code (“IRC”) Section 382. At the end of fiscal 2021, our gross state net operating loss carryovers are $98.6 million and our tax-effected state net operating loss carryovers are $5.4 million, of which $4.3 million is subject to a valuation allowance arising from expiration dates when considered in conjunction with state limitation related to IRC Section 382. Our state net operating loss carryovers will expire in 1 to 20 years. For fiscal 2021, we reversed $3.0 million in valuation allowance against our state net operating losses. Based on our taxable income for 2021 in the states where we have net operating loss carryforwards, we believe we will be able to utilize this amount of state net operating losses that were previously reserved by this valuation allowance. We file U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations and may be subject to audit based on periods that are not limited by applicable statutes. Our U.S. federal income tax returns for tax years 2018, 2019 and 2020 remain subject to audit under the federal statute of limitations. Our auditable state income tax returns vary depending on the jurisdiction and its applicable statute of limitations. Although we believe our estimates are reasonable in the carrying value of our valuation allowances against our deferred tax items, the ultimate determination of the appropriate amounts of valuation allowance involves significant judgement. Assessing our Deferred Tax Assets Quarterly, we assess the carrying value of our deferred tax assets for impairment by evaluating the weight of available evidence at the end of each fiscal quarter. In our evaluation of the weight of available evidence at the end of fiscal 2021, we considered the recent reported income in the current year, as well as the reported income for 2020 and reported loss for 2019, which resulted in a three-year cumulative income situation as positive evidence which carried substantial weight. While this was substantial, it was not the only evidence we evaluated. We also considered evidence related to the four sources of taxable income, to determine whether such positive evidence outweighed the negative evidence. The evidence considered included: •future reversals of existing taxable temporary differences; •future taxable income exclusive of reversing temporary differences and carryforwards; •taxable income in prior carryback years, if carryback is permitted under the tax law; and •tax planning strategies. In addition to the positive evidence discussed above, we considered as positive evidence forecasted future taxable income, the future timing of the reversal of our deferred tax assets and liabilities, and the evidence from business and tax planning strategies. At the end of fiscal 2021 and 2020, in our evaluation of the weight of available evidence, we concluded that our deferred tax assets were not impaired other than $4.3 million of the state net operating losses.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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