Income Taxes

12 Months Ended

Aug. 27, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense consisted of the following:

	2022		2021		2020
Current
Federal	$	105,863	$	71,579	$	14,318
State	24,868		16,179		2,806
Total	130,731		87,758		17,124
Deferred
Federal	(5,553)		737		(790)
State	(1,092)		(2,916)		(500)
Total	(6,645)		(2,179)		(1,290)
Provision for income taxes	$	124,086	$	85,579	$	15,834

A reconciliation of the U.S. statutory income tax rate to our effective income tax rate is as follows:

	2022		2021		2020
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	3.5	%	3.3	%	1.9	%
Income tax credits	(0.5)	%	(0.6)	%	(2.5)	%
Nondeductible compensation	0.9	%	0.5	%	0.9	%
Tax-free and dividend income	(0.1)	%	(0.1)	%	(0.6)	%
Uncertain tax position settlements and adjustments	(0.1)	%	(0.1)	%	0.1	%
Other items	(0.6)	%	(0.7)	%	(0.3)	%
Effective tax provision rate	24.1	%	23.3	%	20.5	%

Our effective tax rate increased to 24.1% in Fiscal 2022 compared to 23.3% in Fiscal 2021 primarily due to consistent tax credits year-over-year over increased income in the current year and a net unfavorable expense in the current year related to nondeductible compensation.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. Among other provisions, the IRA includes a 15% corporate minimum tax rate applied to certain large corporations and a 1% excise tax on corporate stock repurchases made after December 31, 2022. We do not expect the IRA to have a material impact on our consolidated financial statements.

The tax effects of temporary differences that give rise to deferred income taxes were as follows:

	August 27, 2022		August 28, 2021
Warranty reserves	$	30,690	$	22,450
Deferred compensation	2,978		5,224
Self-insurance reserve	4,884		4,336
Stock-based compensation	5,534		4,607
Leases	12,868		8,422
Other(1)	9,108		7,170
Total deferred tax assets	66,062		52,209
Convertible notes	1,993		2,608
Intangibles	39,493		39,940
Depreciation	19,036		15,161
Leases	11,648		7,929
Total deferred tax liabilities	72,170		65,638
Total deferred income tax liabilities, net	$	6,108	$	13,429

(1)    Other includes $113 and $400 related to state net operating losses as of August 27, 2022 and August 28, 2021, respectively. These net operating losses are subject to various expiration periods from 5 years to no expiration. We have evaluated all the positive and negative evidence and consider it more likely than not that these carryforwards can be realized before expiration.

Changes in the unrecognized tax benefits are as follows:

	2022		2021		2020
Balance at beginning of year	$	5,537	$	5,830	$	2,822
Gross increases-tax positions in a prior year	—		—		2,486
Gross decreases-tax positions in a prior year	(1,156)		(872)		—
Gross increases-current year tax positions	610		579		522
Balance at end of year	4,991		5,537		5,830
Accrued interest and penalties	753		946		681
Total unrecognized tax benefits	$	5,744	$	6,483	$	6,511

The amount of unrecognized tax benefits is not expected to change materially within the next 12 months. If the remaining uncertain tax positions are ultimately resolved favorably, $5.3 million of unrecognized tax benefits would have a favorable impact on our effective tax rate. It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense.

We file a U.S. Federal tax return, as well as returns in various international and state jurisdictions. Although certain years are no longer subject to examination by the Internal Revenue Service ("IRS") and various state taxing authorities, net operating loss carryforwards generated in those years may still be adjusted upon examination by the IRS or state taxing authorities. As of August 27, 2022, our federal returns from Fiscal 2019 to present are subject to review by the IRS. With limited exception, state returns from Fiscal 2018 to present continue to be subject to review by state taxing jurisdictions. Several years may lapse before an uncertain tax position is audited and finally resolved and it is difficult to predict the outcome of such audits. We believe we have adequately reserved for our exposure to potential additional payments for uncertain tax positions in our liability for unrecognized tax benefits.