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INCOME TAXES | 12 Months Ended
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Oct. 02, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES On March 27, 2020, the CARES Act was enacted to provide economic relief to those impacted by the COVID-19 pandemic. In addition to the PPP loans, the CARES Act made various tax law changes including among other things (i) modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 tax years to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes, (ii) enhanced recoverability of AMT tax credit carryforwards, (iii) increased the limitation under Internal Revenue Code ("IRC") Section 163(j) for 2019 and 2020 to permit additional expensing of interest, and (iv) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k). On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP loans as fully deductible for tax purposes. During the year ended October 2, 2021, the Company recorded income of $10,400,000 (including $84,000 of accrued interest) for financial reporting purposes related to the forgiveness of its PPP loans. The forgiveness of these amounts is not taxable. . As a result of the CARES Act and the CAA, the Company carried back taxable losses from fiscal year 2020 and is expected to carryback taxable losses from fiscal 2021 to generate a refund of previously paid income taxes. As a result of these carrybacks, the Company recorded income tax benefits as the taxable losses from fiscal 2020 and fiscal 2021 are being carried back to tax years in which the Company was subject to a higher federal corporate income tax rate. Included in Prepaid and Refundable Income Taxes at October 2, 2021 is $3,766,000 related these carryback claims. The provision for income taxes consists of the following:
| Year Ended
| October 2, 2021 |  | October 3, 2020
| (in thousands)
Current provision (benefit): |  |  |
Federal | $ | (1,093) |  |  | $ | (2,652) |
State and local | 77 |  |  | 58 |
| (1,016) |  |  | (2,594) |
Deferred provision (benefit): |  |  |
Federal | 946 |  |  | (780) |
State and local | 1,251 |  |  | (1,011) |
| 2,197 |  |  | (1,791) |
| $ | 1,181 |  |  | $ | (4,385) |
The effective tax rate differs from the U.S. income tax rate as follows:
| Year Ended
| October 2, 2021 |  | October 3, 2020
| (in thousands)
Provision at Federal statutory rate (21%) | $ | 3,240 |  |  | $ | (1,891) |
State and local income taxes, net of tax benefits | 433 |  |  | (919) |
Gain on forgiveness of PPP Loans | (1,974) |  |  | — |
Tax credits | (741) |  |  | (542) |
Income (loss) attributable to non-controlling interest | (287) |  |  | (15) |
Changes in tax rates | 33 |  |  | (65) |
Net operating loss carryback Federal rate benefit | (159) |  |  | (1,022) |
Change in valuation allowance | 845 |  |  | 21 |
Other | (209) |  |  | 48 |
| $ | 1,181 |  |  | $ | (4,385) |
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
| October 2, 2021 |  | October 3, 2020
| (in thousands)
Deferred tax assets: |  |  |
State net operating loss carryforwards | $ | 5,595 |  |  | $ | 5,427 |
Lease liabilities | 12,116 |  |  | 10,729 |
Deferred compensation | 310 |  |  | 358 |
Tax credits | 2,777 |  |  | 1,862 |
Partnership investments | — |  |  | 346 |
Other | 492 |  |  | 550 |
Deferred tax assets, before valuation allowance | 21,290 |  |  | 19,272 |
Valuation allowance | (1,258) |  |  | (413) |
Deferred tax assets, net of valuation allowance | 20,032 |  |  | 18,859 |
Deferred tax liabilities: |  |  |
Depreciation and amortization | (15,308) |  |  | (12,440) |
Partnership investments | (566) |  |  | — |
Prepaid expenses | (458) |  |  | (522) |
Deferred tax liabilities | (16,332) |  |  | (12,962) |
Net deferred tax assets | $ | 3,700 |  |  | $ | 5,897 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including forecasts of future earnings and the duration of statutory carryforward periods. The Company recorded a valuation allowance of $1,258,000 and $413,000 as of October 2, 2021 and October 3, 2020, respectively, attributable to state and local net operating loss carryforwards which are not realizable on a more-likely-than-not basis. During the years ended October 2, 2021 and October 3, 2020, the Company’s valuation allowance increased by approximately $845,000 and $81,000, respectively, as the Company determined that certain state net operating losses became unrealizable on a more-likely-than-not basis due to certain restaurant closures in the related period. As of October 2, 2021, the Company had General Business Credit carryforwards of approximately $2,777,000 which expire through fiscal 2041. In addition, as of October 2, 2021, the Company has New York State net operating loss carryforwards of approximately $28,039,000 and New York City net operating loss carryforwards of approximately $26,364,000 that expire through fiscal 2041. A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is as follows:
| October 2, 2021 |  | October 3, 2020
| (in thousands)
Balance at beginning of year | $ | 102 |  |  | $ | 158 |
Additions based on tax positions taken in current and prior years | 76 |  |  | 19 |
Settlements | — |  |  | — |
Lapse in statute of limitations | — |  |  | — |
Decreases based on tax positions taken in prior years | — |  |  | (75) |
Balance at end of year | $ | 178 |  |  | $ | 102 |
The entire amount of unrecognized tax benefits if recognized would reduce our annual effective tax rate. For the years ended October 2, 2021 and October 3, 2020, there are no amounts accrued for the payment of interest and penalties. The Company does not expect a significant change to its unrecognized tax benefits within the next 12 months. The Company files tax returns in the U.S. and various state and local jurisdictions with varying statutes of limitations. The 2018 through 2021 fiscal years remain subject to examination by the Internal Revenue Service and most state and local tax authorities.

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