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Income Taxes
 12 Months Ended
May 28, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The (benefit) provision for income taxes from continuing operations consisted of the following:

(in thousands)Year Ended
 May 28, 2023May 29, 2022May 30, 2021
As Restated
As Restated
Current:   
Federal$(1)$— $(38)
State55 23 74 
Foreign— 356 56 
 Total54 379 92 
Deferred:
Federal234 (4,936)(5,983)
State20 (654)(459)
 Total254 (5,590)(6,442)
Income tax provision (benefit)
$308 $(5,211)$(6,350)
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
 May 28, 2023May 29, 2022May 30, 2021
As Restated
As Restated
Tax at U.S. statutory rate (1)$(13,932)$(4,344)$(6,256)
State income taxes, net of federal benefit(1,805)(638)(830)
Change in valuation allowance19,461 (1,065)2,597 
Tax credit carryforwards(611)(436)(606)
Other compensation-related activity283 234 249 
Impairment of goodwill — 2,347 — 
Foreign rate differential(2,749)(496)(1,414)
Other(339)(813)(90)
Income tax provision (benefit)
$308 $(5,211)$(6,350)
(1) Statutory rate was 21.0% for fiscal year 2023, 2022 and 2021.

The effective tax rate for fiscal year 2023 changed from a tax benefit of 25.19% to a tax provision of 0.48% in comparison to fiscal year 2022 after adjustment for discontinued operations. The decrease in the effective tax rate for fiscal year 2023 was primarily due to a significant valuation allowance increase and the impairment of Yucatan goodwill. The income tax (provision) benefit from discontinued operations for fiscal years 2023, 2022, and 2021 of $0.0 million, $0.7 million, and $1.4 million are not included in the above income tax benefit from continuing operations.

The effective tax rate for fiscal year 2022 changed from a tax provision benefit of 21.32% to a tax provision benefit of 25.19% in comparison to fiscal year 2021 after adjustment for discontinued operations. The increase in the income tax benefit for fiscal year 2022 was primarily due to significant decrease in the Company’s loss before tax from continuing operations, and the decrease in change in valuation allowance which offsets the impairment of Yucatan goodwill.
Significant components of deferred tax assets and liabilities reported in the accompanying Consolidated Balance Sheets consisted of the following:

(in thousands)
Year Ended
 May 28, 2023May 29, 2022
As Restated
Deferred tax assets:
Accruals and reserves$1,798 $1,753 
Net operating loss carryforwards44,618 28,957 
Stock-based compensation984 880 
Research and AMT credit carryforwards6,269 5,611 
Lease liability1,843 2,874 
Limitations on business interest expense8,614 3,504 
Goodwill and other indefinite life intangibles— 2,745 
Other 434 752 
Gross deferred tax assets64,560 47,076 
Valuation allowance(52,510)(36,531)
Net deferred tax assets12,050 10,545 
Deferred tax liabilities:
Depreciation and amortization(10,526)(8,594)
Goodwill and other indefinite life intangibles(877)— 
Right of use asset(1,027)(2,077)
Deferred tax liabilities(12,430)(10,671)
Net deferred tax liabilities$(380)$(126)

The effective tax rates for fiscal years 2023 and 2022 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.
As of May 28, 2023, the Company had federal, California, Indiana, and other state net operating loss carryforwards of approximately $171.8 million, $70.7 million, $33.7 million, and $33.1 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 28, 2023, the Company has federal, California, and Minnesota research and development tax credit carryforwards of approximately $3.3 million, $2.2 million, and $1.7 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 28, 2023, a valuation allowance of federal $41.1 million, and state $11.7 million should be recorded as a result of uncertainty around the utilization of federal and state 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 28, 2023May 29, 2022May 30, 2021
As Restated
As Restated
Unrecognized tax benefits – beginning of the period$1,041 $958 $836 
Gross increases – prior-period tax positions
16 — — 
Gross increases – current-period tax positions116 83 122 
Unrecognized tax benefits – end of the period$1,173 $1,041 $958 

As of May 28, 2023, the total amount of net unrecognized tax benefits is $1.2 million, of which, $1.0 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 28, 2023. 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.