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Income Taxes | 12 Months Ended
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May 29, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes, As Restated The (benefit) provision for income taxes from continuing operations consisted of the following:
(in thousands) | Year Ended
| As restated |  |  |  |
| May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | (38) |  |  | $ | (7,723) |
State | 23 |  |  | 74 |  |  | 38 |
Foreign | 356 |  |  | 56 |  |  | 56 |
Total | 379 |  |  | 92 |  |  | (7,629) |
Deferred: |  |  |  |  |
Federal | (5,670) |  |  | (1,536) |  |  | (983) |
State | (654) |  |  | (459) |  |  | (162) |
Total | (6,324) |  |  | (1,995) |  |  | (1,145) |
Income tax benefit | $ | (5,945) |  |  | $ | (1,903) |  |  | $ | (8,774) |
The actual (benefit) provision for income taxes from continuing operations differs from the statutory U.S. federal income tax rate as follows:
(in thousands) | Year Ended
| As restated |  |  |  |
| May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Tax at U.S. statutory rate (1) | $ | (14,548) |  |  | $ | (2,409) |  |  | $ | (6,435) |
State income taxes, net of federal benefit | (2,195) |  |  | (304) |  |  | (1,048) |
Tax reform/CARES Act | — |  |  | — |  |  | (2,770) |
Change in valuation allowance | 10,134 |  |  | 2,667 |  |  | 2,014 |
Tax credit carryforwards | (436) |  |  | (606) |  |  | (613) |
Other compensation-related activity | 234 |  |  | 249 |  |  | 334 |
Impairment of goodwill | 2,347 |  |  | — |  |  | 647 |
Foreign rate differential | (496) |  |  | (1,414) |  |  | (986) |
Other | (985) |  |  | (86) |  |  | 83 |
Income tax benefit | $ | (5,945) |  |  | $ | (1,903) |  |  | $ | (8,774) |
(1) Statutory rate was 21.0% for fiscal year 2022, 2021 and 2020. The effective tax rate for fiscal year 2022 changed from a tax provision benefit of 16.59% to a tax provision benefit of 8.56%, as restated, in comparison to fiscal year 2021 after adjustment for discontinued operations. The decrease in the effective tax rate for fiscal year 2022 was primarily due to a significant valuation allowance increase and the impairment of Yucatan Foods goodwill, customer relations intangible assets, and property and equipment. The income tax benefit from discontinued operations for fiscal years 2022, 2021, and 2020 of $0.1 million, $5.9 million, and $4.3 million are not included in the above income tax benefit from continuing operations. The effective tax rate for fiscal year 2021 changed from a tax provision benefit of 28.63% to a tax provision benefit of 16.59% in comparison to fiscal year 2020 after adjustment for discontinued operations. The decrease in the income tax benefit for fiscal year 2021 was primarily due to significant decrease in the Company's loss before tax from continuing operations, and the increase in change in valuation allowance which offsets federal and state research and development credits, and $2.8 million of NOL carryback benefit applied only for fiscal year 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes, among other items, provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act allows losses incurred in tax years 2018, 2019, and 2020 to be carried back to each of the five preceding tax years and to offset 100% of regular taxable income. Additionally, the CARES Act accelerates the Company’s ability to receive refunds of alternative minimum tax credits generated in prior tax years. In fiscal year 2020, the Company was able to benefit net operating losses generated in fiscal year 2019 and fiscal year 2020 at the 21% federal statutory rate in effect for those years and carried back to tax years with a 35% federal statutory rate thus recognizing a tax provision benefit of $2.8 million during the year ended May 31, 2020. Significant components of deferred tax assets and liabilities reported in the accompanying Consolidated Balance Sheets consisted of the following:
(in thousands) | Year Ended
| As restated |  |
| May 29, 2022 |  | May 30, 2021
Deferred tax assets: |  |  |
Accruals and reserves | $ | 867 |  |  | $ | 3,366 |
Net operating loss carryforwards | 28,558 |  |  | 21,916 |
Stock-based compensation | 880 |  |  | 1,123 |
Research and AMT credit carryforwards | 5,611 |  |  | 5,150 |
Lease liability | 2,874 |  |  | 5,902 |
Limitations on business interest expense | 4,245 |  |  | 2,411 |
Goodwill and other indefinite life intangibles | 2,745 |  |  | — |
Other | 750 |  |  | 927 |
Gross deferred tax assets | 46,530 |  |  | 40,795 |
Valuation allowance | (35,942) |  |  | (10,460) |
Net deferred tax assets | 10,588 |  |  | 30,335 |
Deferred tax liabilities: |  |  |
Depreciation and amortization | (8,614) |  |  | (16,600) |
Goodwill and other indefinite life intangibles | — |  |  | (13,406) |
Basis difference in investment in non-public company | — |  |  | (1,382) |
Right of use asset | (2,100) |  |  | (5,087) |
Deferred tax liabilities | (10,714) |  |  | (36,475) |
Net deferred tax liabilities | $ | (126) |  |  | $ | (6,140) |
The effective tax rates for fiscal years 2022 and 2021 differ from the blended statutory federal income tax rate of 21% as a result of several factors, including the change in valuation allowance related with federal, state and foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, impairment of goodwill and intangibles, and the benefit of federal and state research and development credits. The effective tax rates for fiscal year 2020 differ from the blended statutory federal income tax rate of 21% as a result of several factors, including carryback of net operating losses, the change in valuation allowance related with state and foreign deferred balances, foreign rate differential, change in ending state deferred blended rate, impairment of goodwill and fixed assets, and the benefit of federal and state research and development credits. As of May 29, 2022, the Company had federal, foreign, California, Indiana, and other state net operating loss carryforwards of approximately $74.1 million, $25.9 million, $38.1 million, $30.6 million, and $21.0 million, respectively. These losses expire in different periods through 2032, if not utilized. The Company acquired additional net operating losses through the acquisition of Greenline. Utilization of these acquired net operating losses in a specific year is limited due to the “change in ownership” provision of the Internal Revenue Code of 1986 and similar state provisions. The net operating losses presented above for federal and state purposes is net of any such limitation. As of May 29, 2022, the Company has federal, California, and Minnesota research and development tax credit carryforwards of approximately $2.8 million, $2.1 million, and $1.4 million, respectively. The research and development tax credit carryforwards have an unlimited carryforward period for California purposes, 20 year carryforward for federal purposes, and 15 year carryforward for Minnesota purposes. Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. Based on this analysis and considering all positive and negative evidence, we determined that as of May 29, 2022, a valuation allowance of $19.1 million (as restated), $8.8 million (as restated), and $8.1 million should be recorded as a result of uncertainty around the utilization of federal, state, and foreign net operating losses, and federal capital loss carryforward. The accounting for uncertainty in income taxes recognized in an enterprise’s financial statements prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and the derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands) | Year Ended
| May 29, 2022 |  | May 30, 2021 |  | May 31, 2020
Unrecognized tax benefits – beginning of the period | $ | 942 |  |  | $ | 827 |  |  | $ | 616 |
Gross increases – tax positions in prior period | — |  |  | — |  |  | 101 |
Gross decreases – tax positions in prior period | — |  |  | — |  |  | (11) |
Gross increases – current-period tax positions | 83 |  |  | 115 |  |  | 121 |
Unrecognized tax benefits – end of the period | $ | 1,025 |  |  | $ | 942 |  |  | $ | 827 |
As of May 29, 2022 the total amount of net unrecognized tax benefits is $1.0 million, of which, $0.9 million, if recognized, would affect the effective tax rate. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest is not material as of May 29, 2022. The Company does not expect its unrecognized tax benefits to decrease within the next twelve months. Due to tax attribute carryforwards, the Company is subject to examination for tax years 2013 forward for U.S. tax purposes. The Company was also subject to examination in various state jurisdictions for tax years 2012 forward, none of which were individually material.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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