Income Taxes

12 Months Ended

Mar. 28, 2020

Income Taxes

Income Taxes

13. Income Taxes

Income tax expense consisted of the following:

	Fiscal Year Ended
	March 28,		March 30,		March 31,
(in thousands)	2020		2019		2018
Current:
Federal	$	7,619	$	2,728	$	(104)
State		2,150		2,057		544
Foreign		—		—		—
Total current		9,769		4,785		440
Deferred:
Federal		3,149		4,056		622
State		(554)		133		1,237
Foreign		—		—		1
Total deferred		2,595		4,189		1,860
Total income tax expense	$	12,364	$	8,974	$	2,300

The reconciliation between the Company’s effective tax rate on income from operations and the statutory tax rate is as follows:

	Fiscal Year Ended
	March 28,		March 30,		March 31,
	2020		2019		2018
Expected provision at statutory U.S. federal tax rate	21.0	%	21.0	%	30.8	%
State and local income taxes, net of federal tax benefit	3.6		3.9		3.3
Change in state rate	—		—		(0.2)
Federal rate change	—		—		(22.4)
Permanent items	0.2		0.3		0.3
Excess tax benefit of stock-based compensation	(3.5)		(7.6)		(5.7)
IRC Section 162(M)	0.9		0.6		0.8
Valuation allowance	(0.7)		(0.1)		0.1
Other	(1.0)		0.6		0.4
Effective tax rate	20.5	%	18.7	%	7.4	%

Differences between the effective tax rate and the statutory rate relate primarily to excess tax benefits due to income tax accounting for share-based compensation and state taxes.

Deferred taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reporting and the amount used for income tax purposes. Significant components of the Company’s net deferred tax liabilities as of March 28, 2020 and March 30, 2019 consisted of the following (in thousands):

	March 28		March 30,
	2020		2019
Deferred tax assets:
State taxes	$	266	$	129
Accrued liabilities		2,053		2,500
Award program liabilities		220		322
Deferred revenue		1,959		1,457
Inventory		3,783		3,163
Stock options		1,249		1,261
Net operating loss carryforward		826		1,280
Long-term lease liabilities		42,554		—
Other, net		1,267		1,181
Total deferred tax assets		54,177		11,293
Deferred tax liabilities:
Depreciation and amortization		(31,346)		(27,459)
Prepaid expenses		(313)		(398)
Right-of-use assets		(42,319)		—
Total deferred tax liabilities		(73,978)		(27,857)
Valuation allowance		—		(638)
Net deferred tax liabilities	$	(19,801)	$	(17,202)

As of March 28, 2020, the Company had net operating loss carryforwards for federal and state tax purposes of zero and $17.1 million, respectively. Net operating losses generated in years beginning prior to January 1, 2018 will begin to expire at various dates beginning in 2023.

Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized. To this end, the Company has considered and evaluated its sources of taxable income, including forecasted future taxable income, and the Company has concluded that a valuation allowance is not necessary at March 28, 2020.

The Company applies ASC 740, which contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments. At March 28, 2020 and March 30, 2019, no material amounts were recorded for any uncertain tax positions.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits as of March 28, 2020 and March 30, 2019.

The Company does not anticipate a significant change in its uncertain tax benefits over the next 12 months.

The major jurisdictions in which the Company files income tax returns include the U.S. federal jurisdiction, as well as various state jurisdictions within the U.S. The Company’s fiscal years 2015 through 2019 returns are subject to examination by the U.S. federal and various state tax authorities.