Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 21. Income Taxes

The company’s provision for income tax expense (benefit) consists of the following for Fiscal 2022, 2021, and 2020 (amounts in thousands):

	Fiscal 2022			Fiscal 2021			Fiscal 2020
Current Taxes:
Federal	$	54,462		$	46,018		$	64,113
State		14,409			11,790			15,434
		68,871			57,808			79,547
Deferred Taxes:
Federal		3,508			6,946			(26,112	)
State		(2,062	)		(169	)		(5,042	)
		1,446			6,777			(31,154	)
Income tax expense	$	70,317		$	64,585		$	48,393

Fiscal 2020 deferred income taxes included the impact of the termination of Plan No.1. See Note 20, Postretirement Plans, for a description of the termination of Plan No. 1.

Income tax expense (benefit) differs from the amount computed by applying the applicable U.S. federal income tax rate of 21% because of the effect of the following items for Fiscal 2022, 2021 and 2020 (amounts in thousands):

	Fiscal 2022			Fiscal 2021			Fiscal 2020
Tax at U.S. federal income tax rate	$	62,729		$	56,862		$	42,149
State income taxes, net of federal income tax benefit		9,754			9,181			8,209
Net share-based windfalls		(2,219	)		(104	)		(80	)
Other		53			(1,354	)		(1,885	)
Income tax expense	$	70,317		$	64,585		$	48,393

In Fiscal 2022, 2021 and 2020, the most significant difference in the effective rate and the statutory rate was state income taxes.

Deferred tax assets (liabilities) are comprised of the following (amounts in thousands):

	December 31, 2022			January 1, 2022
Self-insurance	$	6,507		$	5,502
Compensation and employee benefits		9,991			8,816
Deferred income		3,834			4,948
Loss and credit carryforwards		13,138			12,990
Equity-based compensation		7,692			6,797
Legal accrual		1,369			6,514
Deferred payroll tax under CARES act		—			4,100
Pension and postretirement benefits		384			1,722
Financing and operating lease right-of-use liabilities		72,470			77,422
Capitalized research and development costs		14,898			—
Other		7,101			6,642
Valuation allowance		(1,030	)		(1,030	)
Deferred tax assets		136,354			134,423
Depreciation		(74,402	)		(71,041	)
Intangibles		(119,380	)		(114,882	)
Financing and operating lease right-of-use assets		(70,385	)		(75,233	)
Hedging		(700	)		(2,015	)
Other		(6,319	)		(5,009	)
Deferred tax liabilities		(271,186	)		(268,180	)
Net deferred tax liability	$	(134,832	)	$	(133,757	)

In Fiscal 2022, the company recorded a deferred tax asset for newly effective legislation requiring capitalization of certain expenses. This enactment required expenses related to research and development activities and certain information technology costs, which were previously deductible, to be capitalized and amortized for tax purposes. The resulting deferred tax asset of $14.9 million is reflected in the 2022 balances.

The company has a deferred tax asset of $2.5 million related to a federal net operating loss carryforward which we expect to fully utilize before expiration. Additionally, the company and various subsidiaries have a net deferred tax asset of $4.5 million related to state net operating loss carryforwards with expiration dates from Fiscal 2024 through Fiscal 2040, and $6.1 million for credit carryforwards with expiration dates from Fiscal 2027 through Fiscal 2031. The utilization of a portion of these state carryforwards could be limited in the future; therefore, a valuation allowance has been recorded. Should the company determine at a later date that certain of these losses which have been reserved for may be utilized, a benefit may be recognized in the Consolidated Statements of Income. Likewise, should the company determine at a later date that certain of these net operating losses for which a deferred tax asset has been recorded may not be utilized, a charge to the Consolidated Statements of Income may be necessary. See Note 2, Summary of Significant Accounting Policies, for the deferred tax asset valuation allowance analysis.

There are no unrecognized gross tax benefits as of December 31, 2022. These amounts would be presented exclusive of interest accrued and recorded in other long-term liabilities on the Consolidated Balance Sheets.

The company accrues interest expense and penalties related to income tax liabilities as a component of income before taxes. No accrual of penalties is reflected on the company’s balance sheet as the company believes the accrual of penalties is not necessary based upon the merits of its income tax positions. The company had no accrued interest balance at December 31, 2022 and January 1, 2022.

The company defines the federal jurisdiction as well as various state jurisdictions as “major” jurisdictions. The company is no longer subject to federal examinations for years prior to 2019, and with limited exceptions, for years prior to 2018 in state jurisdictions.

The following is a reconciliation of the total amounts of unrecognized tax benefits for Fiscal 2022, 2021, and 2020 (amounts in thousands):

	Fiscal 2022		Fiscal 2021		Fiscal 2020
Unrecognized tax benefit at beginning of fiscal year	$	—	$	—	$	306
Lapses of statutes of limitations		—		—		(306	)
Unrecognized tax benefit at end of fiscal year	$	—	$	—	$	—

At this time, we do not anticipate significant changes to the amount of gross unrecognized tax benefits over the next twelve months.