Income Tax

12 Months Ended

Jan. 02, 2021

Note 13 – Income Tax

The income tax provision for continuing operations is made up of the following components:

	2020			2019			2018
(In thousands)	(53 Weeks)			(52 Weeks)			(52 Weeks)
Current income tax expense (benefit):
Federal	$	1,844		$	(899	)	$	(1,607	)
State		5,149			817			1,107
Total current income tax expense (benefit)		6,993			(82	)		(500	)
Deferred income tax expense (benefit):
Federal		5,637			126			8,370
State		(3,180	)		(2,386	)		(963	)
Total deferred income tax expense (benefit)		2,457			(2,260	)		7,407
Total income tax expense (benefit)	$	9,450		$	(2,342	)	$	6,907

A reconciliation of the statutory federal rate to the effective rate is as follows:

	2020				2019				2018
	(53 Weeks)				(52 Weeks)				(52 Weeks)
Federal statutory income tax rate		21.0		%		21.0		%		21.0		%
Stock compensation		0.7				7.2				0.7
Non-deductible expenses		1.9				0.8				0.6
Federal rate change effect on deferred taxes		—				—				(1.2	)
Change in tax contingencies		0.9				—				(2.5	)
Charitable product donations		(0.2	)			(5.6	)			(0.6	)
Other, net		(1.0	)			(2.4	)			(0.9	)
Federal loss carryback (a)		(11.9	)			—				—
State taxes, net of federal income tax benefit		1.7				(36.1	)			1.7
Tax credits		(2.0	)			(50.4	)			(1.8	)
Effective income tax rate		11.1		%		(65.5	)	%		17.0		%

(a)

On March 27, 2020, the U.S. government enacted tax legislation to provide economic stimulus and support businesses and individuals during the COVID-19 pandemic, referred to as the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. In connection with the CARES Act, the Company recorded net discrete income tax benefits of $10.1 million in 2020 associated with the additional deductibility of certain expenses combined with provisions which enable companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act (“Tax Reform”), where the federal statutory income tax rate was 35%. As a result of carrying back losses to previous tax years, the Company recorded $0.8 million in expense to reinstate tax contingencies which had previously expired, included in the “Change in tax contingencies” line in the table above.

Deferred tax assets and liabilities resulting from temporary differences as of January 2, 2021 and December 28, 2019 are as follows:

	January 2,		December 28,
(In thousands)	2021		2019
Deferred tax assets:
Employee benefits	$	33,115	$	17,087
Accrued workers' compensation		1,834		1,632
Allowance for doubtful accounts		1,688		10,870
Intangible assets		2,203		1,319
Restructuring		377		472
Deferred revenue		1,679		1,678
Stock warrants		1,896		—
Lease liabilities		87,606		85,005
Accrued insurance		964		1,007
Federal net operating loss carryforwards (a)		—		2,332
Federal credits		—		851
State net operating loss carryforwards (a)		6,175		4,498
All other		2,481		4,472
Total deferred tax assets		140,018		131,223

Deferred tax liabilities:
Property and equipment		47,472		45,136
Lease assets		77,673		73,191
Inventory		33,531		33,739
Goodwill		26,025		21,404
All other		1,045		864
Total deferred tax liabilities		185,746		174,334
Net deferred tax liability	$	45,728	$	43,111

(a)

As of January 2, 2021, the Company’s state net operating loss carryforwards in various taxing jurisdictions expire in tax years 2021 through 2040 if not utilized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(In thousands)	2020			2019
Balance at beginning of year	$	1,425		$	1,477
Gross increases - tax positions taken in prior years		910			71
Gross decreases - tax positions taken in prior years		(1,000	)		(125	)
Gross increases - tax positions taken in current year		—			850
Lapsed statutes of limitations		(18	)		(848	)
Balance at end of year	$	1,317		$	1,425

Unrecognized tax benefits of $0.2 million are set to expire prior to January 1, 2022. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. The amount recognized due to a lapse in the statute of limitations that reduced the Company’s effective income tax rate in 2020 and 2019 was immaterial in both years. The amount of unrecognized tax benefits, including interest and penalties, that would reduce the Company’s effective income tax rate if recognized in future periods was $1.1 million as of January 2, 2021.

SpartanNash or its subsidiaries file income tax returns with federal, state and local tax authorities within the United States. With few exceptions, SpartanNash is no longer subject to examinations by U.S. federal tax authorities for fiscal years before the year ended January 3, 2015, and state or local tax authorities for fiscal years before the year ended December 31, 2016.

- 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.

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