Income Taxes

12 Months Ended

Sep. 27, 2020

INCOME TAXES

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


	2020		2019		2018
Current:
Federal	$	19,721	$	14,683	$	51,454
State	7,844		5,242		4,922
	27,565		19,925		56,376
Deferred:
Federal	4,625		3,750		23,462
State	537		350		1,890
	5,162		4,100		25,352
Income tax expense from continuing operations	$	32,727	$	24,025	$	81,728

Income tax expense (benefit) from discontinued operations	$	144	$	(2,863)	$	15,700

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


	2020		2019		2018
Income tax expense at federal statutory rate	21.0	%	21.0	%	24.5	%
State income taxes, net of federal tax benefit	5.3	%	5.3	%	4.7	%
One-time, non-cash impact of the Tax Cuts and Jobs Act	—	%	—	%	17.5	%
Stock compensation excess tax benefit	(0.4)	%	(0.1)	%	(1.1)	%
Benefit of jobs tax credits, net of valuation allowance	(0.5)	%	(0.3)	%	(0.4)	%
Release of federal tax liability	—	%	(0.6)	%	—	%
Adjustment to state tax provision	—	%	(0.9)	%	—	%
Benefit related to COLIs	(0.9)	%	(1.0)	%	(0.4)	%
Termination of interest rate swaps	—	%	(2.6)	%	—	%
Officers’ compensation limitation	2.2	%	1.1	%	0.4	%
Other, net	0.1	%	(1.1)	%	(1.3)	%
	26.8	%	20.8	%	43.9	%

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):


	2020		2019
Deferred tax assets:
Operating and finance lease liabilities	$	234,926	$	—
Accrued defined benefit pension and postretirement benefits	44,436		46,918
Deferred income	12,921		13,803
Impairment	8,895		9,981
Accrued insurance	6,500		7,133
Tax loss and tax credit carryforwards	4,273		5,327
Share-based compensation	4,143		5,415
Accrued incentive compensation	2,585		2,617
Other reserves and allowances	2,440		2,965
Accrued compensation expense	672		1,092
Lease commitments related to closed or refranchised locations	—		3,786
Deferred interest deduction	—		3,188
Other, net	2,364		868
Total gross deferred tax assets	324,155		103,093
Valuation allowance	(2,104)		(2,485)
Total net deferred tax assets	322,051		100,608
Deferred tax liabilities:
Operating and finance lease ROU assets	(235,373)		(3,822)
Intangible assets	(11,437)		(10,520)
Property and equipment, principally due to differences in depreciation	(1,781)		(128)
Other	(1,138)		(574)
Total gross deferred tax liabilities	(249,729)		(15,044)
Net deferred tax assets	$	72,322	$	85,564

Deferred tax assets as of September 27, 2020 include state net operating loss carry-forwards of approximately $20.1 million expiring at various times between 2021 and 2038. At September 27, 2020, we recorded a valuation allowance of $2.1 million related to losses and state tax credits, which decreased from the $2.5 million at September 29, 2019 primarily due to the release of the valuation allowance on California Enterprise Zone Credits. We believe 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 2017 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 2016 and forward.