Income Taxes

12 Months Ended

Dec. 29, 2021

Income Tax Disclosure [Abstract]

Income Taxes

9. INCOME TAXES

The provision for income taxes is based on the following components (in thousands):

	December 29,		December 30,		December 25,
For the Years Ended	2021		2020		2019
Current income taxes:
Federal	$	7,163	$	520	$	—
State		2,158		1,123		104
Total current		9,321		1,643		104
Deferred income taxes:
Federal		93		3,350		5,991
State		918		658		3,587
Total deferred		1,011		4,008		9,578
Tax provision for income taxes	$	10,332	$	5,651	$	9,682

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21.0% for fiscal 2021, 2020 and 2019 as follows:

	December 29,		December 30,		December 25,
For the Years Ended	2021		2020		2019
Statutory federal income tax rate applied to earnings before income taxes and extraordinary items	21.0	%	21.0	%	21.0	%
State income tax expense (net of federal benefit)	5.9		4.3		6.0
Change in valuation allowance	0.1		0.4		2.4
162(m)	0.8		0.2		0.3
WOTC Credit	(0.5)		(0.9)		(0.8)
Stock option exercises	(1.4)		(6.6)		(1.0)
Other	0.3		0.4		—
Total	26.2	%	18.8	%	27.9	%

As of December 29, 2021, the Company had no federal and less than $0.1 million state NOL carryforwards. These State NOLs expire beginning 2028. The Company also has state enterprise zone credits of approximately $9.5 million, which expire in 2023. The utilization of NOL carryforwards may be subject to limitation under section 382 of the Internal Revenue Code of 1986 (the “Code”) and similar state law provisions. 

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets. After evaluating all of the positive and negative evidence, including the Company’s continued income from operations, the

Company concluded that it is more likely than not that its deferred tax assets except from certain state credits will be realized. In fiscal 2020 and 2019, the Company recorded a valuation allowance of approximately $0.1 million and $0.9 million, respectively, against its deferred tax asset resulting from certain tax credits that may not be realizable prior to the time the credits expire. In fiscal 2021, the Company recorded an additional less than $0.1 million to the valuation allowance. As of December 29, 2021, the total valuation allowance was $6.2 million.

On July 30, 2014, the Company entered into the TRA. The TRA calls for the Company to pay its pre-IPO stockholders 85% of the cash savings that the Company realizes in its taxes as a result of utilizing its NOLs and other tax attributes attributable to preceding periods. The TRA charge expense (benefit) is a permanent add-back to the Company’s taxable income. TRA resulted in less than $0.1 million of expense in fiscal 2021 as a result of the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income, $0.1 million of expense in fiscal 2020 as a result of changes to future forecasted results and deduction on 2018 legal settlement accrual and $0.1 million of expense in fiscal 2019 as a result of changes to future forecasted results. In fiscal 2021, 2020 and 2019, the Company paid $1.7 million, $5.2 million and $5.8 million, respectively, to its pre-IPO stockholders under the TRA.

As of December 29, 2021 and December 30, 2020, the deferred tax assets related to California Enterprise Zone credits, net of valuation allowances are $1.3 million and $2.5 million, respectively.

The Company’s deferred tax assets and liabilities as of December 29, 2021 and December 30, 2020 are summarized below.

	December 29,		December 30,
	2021		2020
Deferred assets:
Capital leases	$	60	$	27
Accrued vacation		503		506
Accrued workers’ compensation		2,616		1,894
Enterprise zone and other credits		7,524		8,579
Net operating losses		5		5
Fixed assets		4,393		4,643
ROU assets		51,864		53,875
Other		5,694		6,349
Total deferred tax assets		72,659		75,878
Valuation allowance		(6,181)		(6,127)
Net deferred tax assets		66,478		69,751
Deferred liabilities:
Goodwill		(6,349)		(6,218)
Trademark		(16,727)		(16,773)
Prepaid expense		(498)		(720)
ROU liabilities		(46,484)		(48,005)
Other		361		(96)
Deferred tax liabilities		(69,697)		(71,812)
Net deferred tax liability	$	(3,219)	$	(2,061)

The net deferred tax asset amounts above as of December 29, 2021 and December 30, 2020 have been classified in the accompanying consolidated balance sheets as noncurrent assets and are as follows (in thousands):

	December 29,		December 30,
	2021		2020
Noncurrent:
Assets - state	$	2,245	$	3,166
Liabilities - federal		(5,464)		(5,227)
Net deferred tax liability	$	(3,219)	$	(2,061)

As of December 29, 2021 and December 30, 2020, the Company had no accrual for unrecognized tax benefits. Consequently, no interest or penalties have been accrued by the Company. The Company believes that no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months. The Company is subject to taxation in the United States and in various state jurisdictions.

The Company is no longer subject to U.S. examination for years before 2018 by the federal taxing authority, and for years before 2017 by state taxing authorities.