Income Taxes

6 Months Ended

Jul. 02, 2024

Income Tax Disclosure [Abstract]

Income Taxes

7. INCOME TAXES

We calculate our interim income tax provision in accordance with ASC Topic 270, “Interim Reporting” and ASC Topic 740, “Accounting for Income Taxes.” The related tax expense or benefit is recognized in the interim period in which it occurs. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires significant estimates and judgment including estimating the expected operating income for the year, permanent and temporary differences because of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained or the tax environment changes.

Our effective income tax rate for the twenty-six weeks ended July 2, 2024 was a benefit of 11.7% compared to a benefit rate of 35.0% for the comparable twenty-six weeks ended July 4, 2023. The effective tax rate benefit for the twenty-six weeks ended July 2, 2024 and July 4, 2023, was different from the statutory tax rate primarily as a result of significant Federal Insurance Contributions Act (“FICA”) tax tip credits.

As of July 2, 2024, we had unrecognized tax benefits of approximately $1.0 million, of which approximately $0.9 million, if reversed, would impact our effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is the following (in thousands):

	For the Twenty-Six Weeks Ended
	July 2, 2024		July 4, 2023
Beginning gross unrecognized tax benefits	$	967	$	1,249
Increases for tax positions taken in prior years		—		—
Increases for tax positions taken in the current year		51		22
Decreases due to lapse of statute of limitations		—		(236	)
Ending gross unrecognized tax benefits	$	1,018	$	1,035

Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of July 2, 2024, the earliest tax year still subject to examination by the Internal Revenue Service is 2020, although 2015 is still open due to amendments related to a net operating loss carryback. The earliest year still subject to examination by a significant state or local taxing authority is 2019.