Income Taxes

12 Months Ended

Sep. 29, 2019

INCOME TAXES

Income taxes consist of the following in each fiscal year (in thousands):



	2019			2018		2017
Current:
Federal	$	14,683		$	51,454	$	79,038
State	5,242			4,922		12,368
	19,925			56,376		91,406
Deferred:
Federal	3,750			23,462		(13,176		)
State	350			1,890		(2,898		)
	4,100			25,352		(16,074		)
Income tax expense from continuing operations	$	24,025		$	81,728	$	75,332

Income tax expense (benefit) from discontinued operations	$	(2,863	)	$	15,700	$	(4,119	)

A reconciliation of the federal statutory income tax rate to our effective tax rate for continuing operations is as follows:



	2019		2018		2017
Income tax expense at federal statutory rate	21.0	%	24.5	%	35.0	%
State income taxes, net of federal tax benefit	5.3	%	4.7	%	3.8	%
One-time, non-cash impact of the Tax Act	—	%	17.5	%	—	%
Stock compensation excess tax benefit	(0.1	)%	(1.1	)%	—	%
Benefit of jobs tax credits, net of valuation allowance	(0.3	)%	(0.4	)%	(0.4	)%
Release of federal tax liability	(0.6	)%	—	%	—	%
Adjustment to state tax provision	(0.9	)%	—	%	—	%
Benefit related to COLIs	(1.0	)%	(0.4	)%	(1.1	)%
Termination of interest rate swaps	(2.6	)%	—	%	—	%
Other, net	—	%	(0.9	)%	(0.4	)%
	20.8	%	43.9	%	36.9	%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each fiscal year-end are presented below (in thousands):



	2019			2018
Deferred tax assets:
Accrued defined benefit pension and postretirement benefits	$	46,918		$	34,776
Deferred income	13,803			1,535
Impairment	9,981			11,388
Accrued insurance	7,133			8,994
Share-based compensation	5,415			4,936
Tax loss and tax credit carryforwards	5,327			7,458
Lease commitments related to closed or refranchised locations	3,786			4,696
Deferred interest deduction	3,188			—
Other reserves and allowances	2,965			851
Accrued incentive compensation	2,617			2,055
Accrued compensation expense	1,092			2,034
Interest rate swaps	—			181
Other, net	868			2,206
Total gross deferred tax assets	103,093			81,110
Valuation allowance	(2,485		)	(3,554		)
Total net deferred tax assets	100,608			77,556
Deferred tax liabilities:
Intangible assets	(10,520		)	(10,492		)
Leasing transactions	(3,822		)	(2,790		)
Property and equipment, principally due to differences in depreciation	(128		)	(1,855		)
Other	(574		)	(279		)
Total gross deferred tax liabilities	(15,044		)	(15,416		)
Net deferred tax assets	$	85,564		$	62,140

The Tax Act was enacted into law on December 22, 2017. The Tax Act included a reduction in the U.S. federal statutory corporate income tax rate (the “Tax Rate”) from 35% to 21% and introduced new limitations on certain business deductions. As a result, for the fiscal year ended September 30, 2018, we recognized a year-to-date, non-cash $32.5 million tax provision expense impact primarily related to the re-measurement of our deferred tax assets and liabilities due to the reduced Tax Rate.

Deferred tax assets as of September 29, 2019 include state net operating loss carry-forwards of approximately $27.4 million expiring at various times between 2020 and 2038. At September 29, 2019, we recorded a valuation allowance of $2.5 million related to losses and state tax credits, which decreased from the $3.6 million at September 30, 2018 primarily due to the release of the valuation allowance on prior year net operating losses. We believe that it is more likely than not that these net operating loss and credit carry-forwards will not be realized and that all other deferred tax assets will be realized through future taxable income or alternative tax strategies.

The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax. The federal statutes of limitations have not expired for fiscal years 2016 and forward. The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 2015 and forward.