INCOME TAXES

12 Months Ended

Dec. 27, 2023

INCOME TAXES

INCOME TAXES

9. INCOME TAXES

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

	December 27,		December 28,		December 29,
For the Years Ended	2023		2022		2021
Current income taxes:
Federal	$	6,572	$	2,366	$	7,163
State		1,846		1,112		2,158
Total current		8,418		3,478		9,321
Deferred income taxes:
Federal		(29)		2,958		93
State		935		1,642		918
Total deferred		906		4,600		1,011
Tax provision for income taxes	$	9,324	$	8,078	$	10,332

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21.0% for fiscal 2023, 2022 and 2021 as follows:

	December 27,		December 28,		December 29,
For the Years Ended	2023		2022		2021
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)	6.4		7.7		5.9
Change in valuation allowance	(19.3)		—		0.1
State credit expiration	19.1		—		—
TRA expense (income)	0.1		(0.3)		—
162(m)	0.6		0.5		0.8
WOTC Credit	(0.7)		(0.9)		(0.5)
Stock option exercises	0.1		0.3		(1.4)
Deferred tax liability true up	(1.1)		—		—
Other	0.5		(0.3)		0.3
Total	26.7	%	28.0	%	26.2	%

As of December 27, 2023, the Company had no federal and less than $0.1 million state NOL carryforwards. These State NOLs expire beginning 2029. The utilization of NOL carryforwards and state enterprise zone credits 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 for certain state credits will be realized. In fiscal 2021 and 2022, the Company recorded a valuation allowance of approximately $0.1 million and $0.5 million, respectively, against its deferred tax asset resulting from certain tax credits that may not be realizable prior to the time the credits expire. As of December 27, 2023, the Company released the corresponding valuation allowance since the ten-year carryover period for California Enterprise Zone credits expired at the end of fiscal 2023. As of December 28, 2022, the deferred tax assets related to the California Enterprise Zone credits, net of valuation allowances are $0.5 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. In fiscal 2023, 2022 and 2021, TRA resulted in $0.1 million of expense, $0.4 million of income and less than $0.1 of expense, respectively, in each case 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. In fiscal 2023, 2022 and 2021, the Company paid $0.3 million, $0.4 million and $1.7 million, respectively, to its pre-IPO stockholders under the TRA.

The Company’s deferred tax assets and liabilities as of December 27, 2023 and December 28, 2022 are summarized below.

	December 27,		December 28,
	2023		2022
Deferred assets:
Capital leases	$	62	$	55
Accrued vacation		470		508
Accrued workers’ compensation		2,352		2,201
Enterprise zone and other credits		—		7,258
Net operating losses		5		5
Fixed assets		2,705		2,392
ROU liabilities		50,735		50,112
Other		5,560		4,397
Total deferred tax assets		61,889		66,928
Valuation allowance		—		(6,727)
Net deferred tax assets		61,889		60,201
Deferred liabilities:
Goodwill		(5,938)		(6,420)
Trademark		(16,740)		(16,721)
Prepaid expense		(1,128)		(595)
ROU assets		(45,445)		(44,737)
Fixed assets		(1,470)		—
Other		(46)		267
Deferred tax liabilities		(70,767)		(68,206)
Net deferred tax liability	$	(8,878)	$	(8,005)

The net deferred tax asset/(liability) amounts above as of December 27, 2023 and December 28, 2022 have been classified in the accompanying consolidated balance sheets as noncurrent assets/(liabilities) and are as follows (in thousands):

	December 27,		December 28,
	2023		2022
Noncurrent:
(Liabilities) assets - state	$	(416)	$	512
Liabilities - federal		(8,462)		(8,517)
Net deferred tax liability	$	(8,878)	$	(8,005)

As of December 27, 2023 and December 28, 2022, 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 2020 by the federal taxing authority, and for years before 2019 by state taxing authorities.