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Note 12 - Income Taxes
 12 Months Ended
Sep. 27, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

12    INCOME TAXES

 

Income tax expense (benefit) consists of the following:

 

(Thousands of Dollars)

 

2020

  

2019

  

2018

 
             

Current:

            
Federal 8,779  8,763  275 
State (11) 1,171  875 
Deferred (4,665) (2,003) (17,378)
   4,104   7,931   (16,228)

 

Income tax expense (benefit) related to continuing operations differs from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes. The reasons for these differences are as follows:

 

(Percent of Income (Loss) Before Income Taxes)

 

2020

  

2019

  

2018

 
             
Computed “expected” income tax expense (benefit) 21.0  21.0  24.7 
State income tax expense, net of federal tax impact 21.7  1.3  2.6 
Net income of associated companies taxed at dividend rates (18.3) (3.9) (5.1)
Resolution of tax matters (30.5) 1.7  (8.4)
Remeasurement due to rate changes 24.0  —  — 
Non-deductible expenses 19.4  3.4  2.9 
Valuation allowance 110.0  10.8  9.9 
Warrant valuation (7.3) (0.6) 0.2 
Revaluation of deferred income taxes due to law charges —  —  (79.1)
Other 4.4  (0.4) (0.4)
   144.4   33.3   (52.7)

 

Net deferred income tax liabilities consist of the following components:

 

  

September 27

  

September 29

 

(Thousands of Dollars)

 

2020

  

2019

 
         

Deferred income tax liabilities:

        
Property and equipment  (18,646)  (14,424)
Identified intangible assets  (16,765)  (15,358)
ASC 842 - Leases DTL  (18,669)  — 
Investments  (6,154)  (3,164)
   (60,234)  (32,946)

Deferred income tax assets:

        
Allowance for doubtful accounts  1,733   1,279 
Pension and postretirement benefits  7,075   2,048 
Long-term debt  350   (9,219)
Interest deduction limitation  5,383   4,255 
Operating loss carryforwards  28,240   41,610 
ASC 842 - Leases DTA  18,675   — 
Accrued compensation  13,142   1,810 
Accrued expenses  1,673   426 
Other  430   844 
   76,701   43,053 
Valuation allowance  (31,675)  (39,913)

Net deferred income tax liabilities

  (15,208)  (29,806)

 

All deferred taxes are categorized as non-current.

 

A reconciliation of 2020 and 2019 changes in gross unrecognized tax benefits is as follows:

 

(Thousands of Dollars)

 

2020

  

2019

 
         
Balance, beginning of year  18,252   16,104 
Increases (decreases) in tax positions for prior years  (331)  33 
Increases in tax positions for the current year  9,825   2,472 
Lapse in statute of limitations  (738)  (357)

Balance, end of year

  27,008   18,252 

 

Approximately $10,319,000 and $10,665,000 of the gross unrecognized tax benefit balances for 2020 and 2019, respectively, relate to state net operating losses which are netted against deferred taxes on our balance sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $12,518,000 at September 27, 2020. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was, net of tax, $1,000,000 at  September 27, 2020 and $848,000 at September 29, 2019. There were no amounts provided for penalties at  September 27, 2020 or September 29, 2019.

 

At September 27, 2020, we had a deferred tax asset of $5,383,000 related to disallowed interest expense.

 

No significant income tax audits are currently in progress and the Company has not received any notices of intent to audit. Certain of the Company's state income tax returns for the year ended September 29, 2014 are open for examination. The Federal and remaining state returns are open beginning with the September 28, 2015 year.

 

At September 27, 2020, we have state tax benefits of approximately $46,066,000 in net operating loss ("NOL") carryforwards that expire between 2021 and 2040. These NOL carryforwards result in a deferred income tax asset of $36,392,000 at September 27, 2020, a portion of which is offset by a valuation allowance.