Income Taxes

12 Months Ended

Jul. 31, 2020

Income Taxes [Abstract]

Income Taxes

15. Income Taxes

The components of the provision for income taxes (income tax benefit) for each of the three years were as follows:

	2020			2019			2018
Current:
Federal	$	(15,375	)	$	38,831		$	40,761
State		(2,115	)		8,310			6,099
Deferred:
Federal		(13,467	)		(1,427	)		(16,779	)
State		2,274			(2,759	)		722
Total provision for income taxes (income tax benefit)	$	(28,683	)	$	42,955		$	30,803

A reconciliation of the Company’s provision for income taxes (income tax benefit) and income taxes based on the statutory U.S. federal rate of 21.0%, 21.0% and 26.9% in 2020, 2019 and 2018, respectively, was as follows:

	2020			2019			2018
Provision computed at federal statutory income tax rate	$	17,070		$	55,935		$	74,859
State and local income taxes, net of federal benefit		(263	)		4,248			5,066
Loss on unconsolidated subsidiary		(29,913	)		—			—
Federal net operating loss benefit		(1,573	)		—			—
Revaluation of deferred taxes due to a reduction in the federal tax rate at the enactment date of the Tax Act		—			—			(26,772	)
Revaluation of deferred taxes due to the impact of the change in rate on 2018 temporary items		—			—			(3,710	)
Employer tax credits for FICA taxes paid on employee tip income		(11,489	)		(15,107	)		(13,707	)
Other employer tax credits		(3,606	)		(3,537	)		(4,476	)
Other-net		1,091			1,416			(457	)
Total provision for income taxes (income tax benefit)	$	(28,683	)	$	42,955		$	30,803

The decrease in the Company’s provision for income taxes (income tax benefit) from 2020 to 2019 is primarily due to the reduction in income due to the business interruption caused by the COVID-19 pandemic and the corresponding reduction in taxable income, partially offset by changes due to the Tax Act.

The increase in the Company’s provision for income taxes from 2018 to 2019 reflected the significant impact of the Tax Act.  The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%.  This rate reduction lowered deferred tax liabilities, the tax benefit of which was recognized in 2018.

Significant components of the Company’s net deferred tax liability consisted of the following at:

	July 31, 2020		August 2, 2019
Deferred tax assets:
Compensation and employee benefits	$	6,559	$	6,496
Deferred rent		—		13,424
Accrued liabilities		9,587		21,379
Operating lease liabilities		168,395		—
Insurance reserves		6,772		7,571
Inventory		3,104		2,873
Deferred tax credits		19,419		—
Deferred loss on equity investment		35,281		—
Other		8,076		536
Deferred tax assets	$	257,193	$	52,279
Deferred tax liabilities:
Property and equipment	$	99,452	$	85,379
Inventory		7,144		7,363
Operating lease right-of-use asset		172,641		—
Other		5,674		3,656
Deferred tax liabilities		284,911		96,398
Net deferred tax liability	$	27,718	$	44,119

The Company believes that adequate amounts of tax, interest and penalties have been provided for potential tax uncertainties; these amounts are included in other long-term liabilities in the Consolidated Balance Sheets.  As of July 31, 2020 and August 2, 2019, the Company’s gross liability for uncertain tax positions, exclusive of interest and penalties, was $17,835 and $18,006, respectively.

Summarized below is a tabular reconciliation of the beginning and ending balance of the Company’s total gross liability for uncertain tax positions exclusive of interest and penalties:

	July 31, 2020			August 2, 2019			August 3, 2018
Balance at beginning of year	$	18,006		$	18,634		$	20,731
Tax positions related to the current year:
Additions		1,407			2,742			3,029
Reductions		—			—			—
Tax positions related to the prior year:
Additions		202			203			610
Reductions		(256	)		(348	)		(575	)
Settlements		(138	)		(1,784	)		(3,878	)
Expiration of statute of limitations		(1,386	)		(1,441	)		(1,283	)
Balance at end of year	$	17,835		$	18,006		$	18,634

If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would be a tax benefit to the Company and impact the effective tax rate.  The following table highlights the amount of uncertain tax positions, exclusive of interest and penalties, which, if recognized, would affect the effective tax rate for each of the three years:

	2020		2019		2018
Uncertain tax positions	$	14,090	$	14,225	$	14,721

The Company had $7,210, $6,297, and $5,681 in interest and penalties accrued as of July 31, 2020, August 2, 2019, and August 3, 2018, respectively.

The Company recognized accrued interest and penalties related to unrecognized tax benefits of $913, $616 and $(447) in its provision for income taxes on July 31, 2020, August 2, 2019 and August 3, 2018, respectively.  The increase from 2018 to 2019 was primarily attributable to additional accruals in excess of settlements and expirations.

In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities.  Based on the outcome of these examinations or as a result of the expiration of the statutes of limitations for specific taxing jurisdictions, it is reasonably possible that the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company’s financial statements at July 31, 2020 by approximately $2,000 to $3,000 within the next twelve months.  At July 31, 2020, the Company was subject to income tax examinations for its U.S. federal income taxes after 2017 and for state and local income taxes generally after 2017.