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INCOME TAXES | 12 Months Ended
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Dec. 25, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The provision for income taxes is comprised of the following:
(in thousands) | 2022 | 2021 | 2020
Current taxes: |  |  |
Federal | $ | 1,360 |  | $ | 4,925 |  | $ | (7,318) |
State | 1,397 |  | 4,067 |  | (382) |
Foreign | 4,635 |  | 2,393 |  | 3,045 |
Total current taxes | 7,392 |  | 11,385 |  | (4,655) |
Deferred taxes: |  |  |
Federal | 3,434 |  | 617 |  | (22,416) |
State | 345 |  | 88 |  | (3,369) |
Foreign | (28) |  | 126 |  | (981) |
Total deferred taxes | 3,751 |  | 831 |  | (26,766) |
Provision for income taxes | $ | 11,143 |  | $ | 12,216 |  | $ | (31,421) |
The items accounting for the difference between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income (Loss) are as follows:
(in thousands, except percentages) | 2022 | % | 2021 | % | 2020 | %
Income tax expense (benefit) based on statutory rate | $ | 15,417 |  | 21.0 | % | $ | 15,508 |  | 21.0 | % | $ | (36,385) |  | 21.0 | %
Increase (decrease) resulting from: |  |  |  |  |  |
State income taxes, net of federal benefit | 3,008 |  | 4.1 |  | 3,548 |  | 4.8 |  | (6,631) |  | 3.8 |
Hiring tax credits, net | (7,911) |  | (10.8) |  | (7,582) |  | (10.3) |  | (7,719) |  | 4.5 |
CARES Act | — |  | — |  | (468) |  | (0.6) |  | (2,939) |  | 1.7 |
Uncertain tax positions | (1,336) |  | (1.8) |  | (391) |  | (0.5) |  | (51) |  | — |
Non-deductible goodwill impairment charge | — |  | — |  | — |  | — |  | 21,849 |  | (12.6) |
Non-deductible and non-taxable items | 1,377 |  | 1.9 |  | 589 |  | 0.8 |  | 124 |  | (0.1) |
Foreign taxes | 654 |  | 0.9 |  | 211 |  | 0.3 |  | (977) |  | 0.5 |
Other, net | (66) |  | (0.1) |  | 801 |  | 1.0 |  | 1,308 |  | (0.7) |
Total tax expense (benefit) | $ | 11,143 |  | 15.2 | % | $ | 12,216 |  | 16.5 | % | $ | (31,421) |  | 18.1 | %
Our effective tax rate for fiscal 2022 was 15.2%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results primarily from WOTC. Other differences result from state and foreign income tax, certain non-taxable income and non-deductible expenses, changes in uncertain tax positions and tax effects of stock-based compensation. The CARES Act provided certain changes to tax laws, including the ability to carry back current year losses to obtain refunds related to prior year tax returns with a higher federal tax rate of 35%. The non-deductible goodwill and intangible asset impairment charge related to an impairment charge of the carrying amounts of goodwill and other intangible assets of $175.2 million, recorded in the first quarter of 2020. Of the total impairment loss, $84.7 million (tax-effect $21.8 million) related to reporting units from stock acquisitions and accordingly were not deductible for tax purposes. The remaining impairment loss of $90.5 million (tax-effect $23.3 million) related to reporting units from asset acquisitions and accordingly were deductible for tax purposes. U.S. and foreign components of income (loss) before tax expense (benefit) was as follows:
(in thousands) | 2022 | 2021 | 2020
U.S. | $ | 56,964 |  | $ | 61,433 |  | $ | (148,492) |
Foreign | 16,452 |  | 12,417 |  | (24,770) |
Income (loss) before tax expense (benefit) | $ | 73,416 |  | $ | 73,850 |  | $ | (173,262) |
The components of deferred tax assets and liabilities were as follows:
(in thousands) | December 25, 2022 | December 26, 2021
Deferred tax assets: |  |
Allowance for credit losses | $ | 869 |  | $ | 1,750 |
Workers’ compensation | — |  | 1,653 |
Accounts payable and other accrued expenses | 9,641 |  | 8,970 |
Net operating loss carryforwards | 1,243 |  | 2,002 |
Tax credit carryforwards | 9,801 |  | 11,920 |
Accrued wages and benefits | 8,877 |  | 9,227 |
Deferred compensation | 8,641 |  | 9,083 |
Lease liabilities | 16,025 |  | 16,762 |
Other | 368 |  | 137 |
Total | 55,465 |  | 61,504 |
Valuation allowance | (2,152) |  | (2,368) |
Total deferred tax asset, net of valuation allowance | 53,313 |  | 59,136 |
Deferred tax liabilities: |  |
Prepaid expenses, deposits and other current assets | (583) |  | (515) |
Lease right-of-use assets | (12,909) |  | (13,638) |
Depreciation and amortization | (14,100) |  | (15,653) |
Workers’ compensation | (347) |  | — |
Total deferred tax liabilities | (27,939) |  | (29,806) |
Deferred income taxes, net | $ | 25,374 |  | $ | 29,330 |
The deferred tax balance is reported net by jurisdiction on our Consolidated Balance Sheets, resulting in a deferred tax liability of $0.5 million, included in Other long-term liabilities as of December 25, 2022. Based on our deferred tax asset realizability analysis, we have determined that a valuation allowance is appropriate for certain tax credits and net operating losses (“NOLs”) that we expect will not be utilized within the permitted carryforward periods as of December 25, 2022 and December 26, 2021. Changes to deferred taxes related to foreign currency translation were immaterial for fiscal 2022, 2021 and 2020. The following table summarizes our credit carryforwards and NOLs along with their respective valuation allowance as of December 25, 2022:
(in thousands) | Carryover tax benefit | Valuation allowance | Expected benefit | Year expiration begins
Year-end tax attributes: |  |  |  |
Federal WOTCs | $ | 8,542 |  | $ | — |  | $ | 8,542 |  | 2039
State NOLs | 1,243 |  | (893) |  | 350 |  | Various
California Enterprise Zone credits | 1,259 |  | (1,259) |  | — |  | 2023
Foreign alternative minimum tax credits | 311 |  | — |  | 311 |  | 2032
Total | $ | 11,355 |  | $ | (2,152) |  | $ | 9,203 |  |
The activity related to the income tax valuation allowance was as follows:
(in thousands) | 2022 | 2021 | 2020
Beginning balance | $ | 2,368 |  | $ | 3,072 |  | $ | 1,780 |
Charged to expense | (216) |  | 26 |  | 1,292 |
Release of allowance | — |  | (730) |  | — |
Ending balance | $ | 2,152 |  | $ | 2,368 |  | $ | 3,072 |
The following table summarizes the activity related to our unrecognized tax benefits:
(in thousands) | 2022 | 2021 | 2020
Beginning balance | $ | 1,881 |  | $ | 1,930 |  | $ | 2,078 |
Increases for tax positions related to the current year | 53 |  | 188 |  | 218 |
Decreases for tax positions related to prior years | — |  | (52) |  | — |
Reductions due to lapsed statute of limitations | (1,104) |  | (185) |  | (366) |
Ending balance | $ | 830 |  | $ | 1,881 |  | $ | 1,930 |
As of December 25, 2022, our liability for unrecognized tax benefits was $0.8 million. If recognized, $0.7 million would impact our effective tax rate. We do not believe the amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the fiscal year ended December 25, 2022. In general, the tax years 2019 through 2021 remain open to examination by the major taxing jurisdictions where we conduct business. Interest and penalties accrued related to the unrecognized tax benefits noted above were immaterial as of December 25, 2022.

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