Income Taxes

12 Months Ended

Dec. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 22. Income Taxes

The company’s provision for income tax expense (benefit) consists of the following for Fiscal 2023, 2022, and 2021 (amounts in thousands):

	Fiscal 2023			Fiscal 2022			Fiscal 2021
Current Taxes:
Federal	$	63,351		$	54,462		$	46,018
State		13,680			14,409			11,790
		77,031			68,871			57,808
Deferred Taxes:
Federal		(36,474	)		3,508			6,946
State		(6,866	)		(2,062	)		(169	)
		(43,340	)		1,446			6,777
Income tax expense	$	33,691		$	70,317		$	64,585

Income tax expense 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 2023, 2022 and 2021 (amounts in thousands):

	Fiscal 2023			Fiscal 2022			Fiscal 2021
Tax at U.S. federal income tax rate	$	32,992		$	62,729		$	56,862
State income taxes, net of federal income tax benefit		5,383			9,754			9,181
Net share-based windfalls		(1,960	)		(2,219	)		(104	)
Excess executive compensation		1,950			2,218			1,480
Tax credits		(2,655	)		(2,263	)		(2,506	)
Other		(2,019	)		98			(328	)
Income tax expense	$	33,691		$	70,317		$	64,585

In Fiscal 2023, 2022 and 2021, 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 30, 2023			December 31, 2022
Self-insurance	$	8,478		$	6,507
Compensation and employee benefits		10,292			9,991
Deferred income		2,643			3,834
Loss and credit carryforwards		13,111			13,138
Equity-based compensation		8,636			7,692
Legal accrual		33,407			1,369
Pension and postretirement benefits		—			384
Financing and operating lease right-of-use liabilities		72,011			72,470
Capitalized software and research and development costs		32,519			14,898
Other		9,975			7,101
Valuation allowance		(1,586	)		(1,030	)
Deferred tax assets		189,486			136,354
Depreciation		(77,931	)		(74,402	)
Intangibles		(125,555	)		(119,380	)
Financing and operating lease right-of-use assets		(69,987	)		(70,385	)
Hedging		(322	)		(700	)
Pension and postretirement benefits		(143	)		—
Other		(6,793	)		(6,319	)
Deferred tax liabilities		(280,731	)		(271,186	)
Net deferred tax liability	$	(91,245	)	$	(134,832	)

During Fiscal 2022, the company recorded a $14.9 million deferred tax asset for the then 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 cumulative deferred tax asset of $32.5 million is reflected in the 2023 balances.

In Fiscal 2023, the company recorded a deferred tax asset, in the amount of $33.4 million, related to a legal settlement accrued during the year for the repurchase of distribution rights. See Note 23, Commitments and Contingencies, for details of this settlement.

The company has a deferred tax asset of $2.2 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 $3.3 million related to state net operating loss carryforwards with expiration dates from Fiscal 2024 through Fiscal 2040, and $7.6 million for credit carryforwards with expiration dates from Fiscal 2027 through Fiscal 2034. The utilization of a portion of these state carryforwards could be limited in the future; therefore, a valuation allowance of $1.6 million 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.

The company did not have any unrecognized tax benefits for fiscal years 2023, 2022 and 2021. At this time, we do not anticipate significant changes to the amount of gross unrecognized tax benefits over the next twelve months.

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 30, 2023 and December 31, 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 2020, and with limited exceptions, for years prior to 2019 in state jurisdictions.