Income Taxes

3 Months Ended

Mar. 29, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

	THIRTEEN WEEKS ENDED
(dollars in thousands)	MARCH 29, 2020			MARCH 31, 2019
(Loss) income before (benefit) provision for income taxes	$	(54,069	)	$	71,145
(Benefit) provision for income taxes	$	(19,655	)	$	5,496
Effective income tax rate	36.4		%	7.7		%

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Accordingly, the applicable provisions of the CARES Act have been reflected in the Company’s tax provision for the thirteen weeks ended March 29, 2020. The CARES Act, among other items, includes U.S. corporate tax provisions related to the deferment of employer social security payments, net operating loss (“NOL”) carryback periods, alternative minimum tax credits, modifications to interest deduction limitations and technical corrections on tax depreciation methods for qualified improvement property (“QIP”).

The effective income tax rate for the thirteen weeks ended March 29, 2020 increased by 28.7 percentage points as compared to the thirteen weeks ended March 31, 2019. The increase was primarily due to the benefit of the five-year carryback of the forecasted 2020 NOL under the CARES Act and favorable discrete items recorded in the thirteen weeks ended March 29, 2020.

As of December 29, 2019, the Company had $128.6 million in general business tax credits carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. The Company expects to increase its general business credit carryforwards in 2020 by approximately $50 million to $80 million as a result of the carryback of the forecasted 2020 NOL, additional credits generated in 2020 and the application of the QIP technical correction enacted as part of the CARES Act. The Company currently expects to utilize these tax credit carryforwards within a seven to nine year period. However, the Company’s ability to utilize these tax credits could be adversely impacted by, among other items, a future “ownership change” as defined under Section 382 of the Internal Revenue Code.

The Company has a blended federal and state statutory rate of approximately 26%. The effective income tax rate for the thirteen weeks ended March 29, 2020 was higher than the statutory rate primarily due to the benefit of the five-year carryback of the forecasted 2020 NOL under the CARES Act and tax credits for FICA taxes on certain employees’ tips.