Income Taxes

6 Months Ended

Jun. 16, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective income tax rates were 123.8% and 27.7% for the twelve weeks ended June 16, 2020 and June 18, 2019, respectively. The provision for income taxes was $3.0 million and $0.8 million for the twelve weeks ended June 16, 2020 and June 18, 2019, respectively. The effective income tax rates were 2.8% and 27.8% for the twenty-four weeks ended June 16, 2020 and June 18, 2019, respectively. The Company had a benefit for income taxes of $3.0 million for the twenty-four weeks ended June 16, 2020 and a provision for income taxes of $1.4 million for the twenty-four weeks ended June 18, 2019.

The income tax provision for the twelve weeks ended June 16, 2020 is driven by the estimated effective income tax rate of 123.8%, which consists of statutory federal and state tax rates based on estimated apportioned income for fiscal year 2020 and

the impact of non-tax deductible compensation to executives, partially offset by federal targeted job credits. The income tax provision for the twelve weeks ended June 18, 2019 is driven by the estimated effective income tax rate of 27.7%, which primarily consists of statutory federal and state tax rates based on apportioned income and the impact of non-tax deductible compensation to executives, partially offset by federal targeted job credits.

The benefit for income taxes for the twenty-four weeks ended June 16, 2020 is primarily impacted by impairment of non-tax deductible goodwill of $87.3 million and reclassification of $3.5 million of goodwill from held for sale, as well as statutory federal and state tax rates based on estimated apportioned income for fiscal year 2020 and the impact of non-tax deductible compensation to executives, partially offset by federal targeted job credits. The income tax expense for the twenty-four weeks ended June 18, 2019 is driven by the estimated effective income tax rate of 27.8%, which primarily consists of statutory federal and state tax rates based on apportioned income and the impact of non-tax deductible compensation to executives, partially offset by federal targeted job credits.

Management believes it is more likely than not that all deferred tax assets will be realized and therefore no valuation allowance as of June 16, 2020 and December 31, 2019 is required.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of social security taxes, the creation of certain refundable employee retention credits, and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company anticipates it will benefit from the technical correction for qualified leasehold improvements eligible for 100% tax bonus depreciation, and beginning with pay dates on and after April 14, 2020, the Company has elected to defer the employer-paid portion of social security taxes. The Company is also currently assessing its eligibility for certain employee retention tax credits but does not expect such credits to have a material impact on the financial statements.