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Income Taxes
 12 Months Ended
Jan. 02, 2021
Income Taxes [Line Items]  
Income Taxes Income Taxes
 
Summit Inc.’s tax provision includes its proportional share of Summit Holdings’ tax attributes. Summit Holdings’ subsidiaries are primarily limited liability companies, but do include certain entities organized as C corporations and a Canadian subsidiary. The tax attributes related to the limited liability companies are passed on to Summit Holdings and then to its partners, including Summit Inc. The tax attributes associated with the C corporation and Canadian subsidiaries are fully reflected in the Company’s consolidated financial statements. For the years ended January 2, 2021, December 28, 2019 and December 29, 2018, income taxes consisted of the following:
 
 202020192018
Provision for income taxes:   
Current$3,827 $69 $463 
Deferred(16,012)17,032 59,284 
Income tax expense (benefit)$(12,185)$17,101 $59,747 
 
The effective tax rate on pre-tax income differs from the U.S. statutory rate of 21% for 2020, 2019 and 2018, respectively, due to the following:
 202020192018
Income tax expense (benefit) at federal statutory tax rate$27,100 $16,427 $20,177 
Less: Income tax benefit at federal statutory tax rate for LLC entities(593)(658)(561)
State and local income taxes5,067 3,792 4,894 
Permanent differences(3,345)(6,272)(5,537)
Effective tax rate change4,257 (2,006)4,034 
Unrecognized tax benefits(41,548)18,885 22,663 
Tax receivable agreement (benefit) expense(6)2,436 (8,282)
Change in valuation allowance— (17,691)17,592 
Other(3,117)2,188 4,767 
Income tax expense (benefit)$(12,185)$17,101 $59,747 

The following table summarizes the components of the net deferred income tax asset (liability) as January 2, 2021 and December 28, 2019: 
 20202019
Deferred tax assets (liabilities):  
Net intangible assets$199,497 $240,790 
Accelerated depreciation(209,644)(201,126)
Net operating loss227,560 164,335 
Investment in limited partnership(33,139)(31,987)
Mining reclamation reserve3,306 2,018 
Working capital (e.g., accrued compensation, prepaid assets)45,972 37,287 
Interest expense limitation carryforward— 2,691 
Less valuation allowance(1,675)(1,675)
Deferred tax assets231,877 212,333 
Less foreign deferred tax liability (included in other noncurrent liabilities)(18,393)(8,267)
Net deferred tax asset$213,484 $204,066 
 
As of January 2, 2021, $378.5 million of our deferred tax assets subject to our TRA are included in the net intangible assets and the net operating loss line items above.
 
Our income tax expense (benefit) was $(12.2) million, $17.1 million and $59.7 million in the fiscal years ended 2020, 2019 and 2018, respectively. Our effective income tax rate in 2020 and 2019 was impacted by the IRS interpretative guidance of TCJA, a change in state tax rates and a change in the amount of our TRA liability.
 
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible, as well as consideration of tax-planning strategies we may seek to utilize net operating loss carryforwards that begin to expire in 2030. The Company updates the analysis, and adjusted the valuation allowance for interest expense carryforwards limited under the TCJA based on updated forecast models each year. 
 
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was enacted. Among other things, the TCJA, beginning January 1, 2018, reduced the federal statutory rate from 35% to 21% and extended bonus depreciation provisions. In
addition, the TCJA prescribes the application of net operating loss carryforwards generated in 2018 and beyond will be limited, 100% asset expensing will be allowed through 2022 and begin to phase out in 2023, and the amount of interest expense we are able to deduct may also be limited in future years.  We completed our analysis of the TCJA in 2018 consistent with the guidance of Staff Accounting Bulletin 118 and any adjustments during the measurement period were included in net earnings from continuing operations as an adjustment to income tax expense. As such, in the fourth quarter of 2018, we recorded additional tax expense of $17.6 million resulting from the IRS interpretative guidance of TCJA.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Unrecognized Tax Benefits
Balance—December 29, 2018$22,663 
Additions based on tax position in 201818,885 
Balance—December 28, 2019$41,548 
Reductions based on new regulations(41,548)
Balance—January 2, 2021$— 

At January 2, 2021, December 28, 2019 and December 29, 2018 there was $0.0 million, $41.5 million and $22.7 million, respectively, of unrecognized tax benefits that if recognized would affect the annual effective tax rate. We did not recognize interest or penalties related to this amount as it is offset by other attributes.
 
Our net operating loss carryforward deferred tax assets begin to expire in 2030 and are expected to reverse before expiration. Therefore, we have not given consideration to any potential tax planning strategies as a source of future taxable income to monetize those net operating loss carryforwards. The Company will continue to monitor facts and circumstances, including our analysis of other sources of taxable income, in the reassessment of the likelihood that the tax benefit of our deferred tax assets will be realized.
     
As of January 2, 2021, Summit Inc. had federal net operating loss carryforwards of $917 million, a portion of which expire between 2030 and 2038. As of January 2, 2021, $497 million of our federal net operating losses were under the terms of our TRA. As of January 2, 2021 and December 28, 2019, Summit Inc. had a valuation allowance on net deferred tax assets of $1.7 million and $1.7 million, respectively, where realization of our net operating losses are not more likely than not.
 20202019
Valuation Allowance:  
Beginning balance$(1,675)$(19,366)
Current year decreases (increases) from operations— 17,691 
Ending balance$(1,675)$(1,675)
 
Tax Receivable Agreement— During 2015, the Company entered into a TRA with the holders of LP Units and certain other pre-initial public offering owners (“Investor Entities”) that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA, is deemed to realize) as a result of increases in the tax basis of tangible and intangible assets of Summit Holdings and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.
 
When LP Units are exchanged for an equal number of newly-issued shares of Summit Inc.’s Class A common stock, these exchanges result in new deferred tax assets. Using tax rates in effect as of each year end, $2.4 million and $1.1 million of deferred tax assets were created during the years ended January 2, 2021 and December 28, 2019, respectively, when LP Units were exchanged for shares of Class A common stock.

Each year, we update our estimate as to when TRA payments will be made. As noted above, when payments are made under the TRA, a portion of the payment made will be characterized as imputed interest under IRS regulations. The TCJA enacted in late 2017 contained provisions whereby interest expense deductions may be limited, and the IRS issued proposed regulations in late 2018 around the deductibility of interest expense. Under our forecast prepared at the end of 2018, we expected the amount of imputed interest based on future TRA payments would result in interest expense deductions being limited, and therefore we would not benefit from that deduction. However, based on the updated forecast model at the end of 2019, which updated our forecast of the timing of TRA payments, we believe that our interest expense deductions will not be
limited under the proposed regulations. We also updated our estimate of the state income tax rate that will be in effect at the date the TRA payments are made. As a result of our updated state income tax rate, and the imputed interest limitation noted above, we have decreased our TRA liability $7.6 million and increased by $16.2 million as of January 2, 2021 and December 28, 2019, respectively.

Our TRA liability as of January 2, 2021 and December 28, 2019 was $321.7 million and $327.0 million, respectively.
 
Tax Distributions – The holders of Summit Holdings’ LP Units, including Summit Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of
Summit Holdings provides for pro rata cash distributions (“tax distributions”) to the holders of the LP Units in an amount generally calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. In general, these tax distributions are computed based on Summit Holdings’ estimated taxable income allocated to Summit Inc. multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate applicable to a corporate resident in New York, New York.

For the years ended January 2, 2021 and December 28, 2019, Summit Holdings did not pay any tax distributions and paid tax distributions totaling $0.1 million, respectively, to holders of its LP Units, other than Summit Inc.
 
C Corporation Subsidiaries — The effective income tax rate for the C corporations differ from the statutory federal rate primarily due to (1) tax depletion expense (benefit) in excess of the expense recorded under U.S. GAAP, (2) state income taxes and the effect of graduated tax rates, (3) various other items such as limitations on meals and entertainment and other costs and (4) unrecognized tax benefits. The effective income tax rate for the Canadian subsidiary is not significantly different from its historical effective tax rate.
 
No material interest or penalties were recognized in income tax expense during the years ended January 2, 2021, December 28, 2019 or December 29, 2018. Tax years from 2014 to 2018 remain open and subject to audit by federal, Canadian, and state tax authorities.
Summit Materials, LLC  
Income Taxes [Line Items]  
Income Taxes Income Taxes
Summit LLC is a limited liability company and passes its tax attributes for federal and state tax purposes to its member and is generally not subject to federal or state income tax. However, certain subsidiaries, or subsidiary groups, file federal, state, and Canadian income tax returns due to their status as C corporations or laws within that jurisdiction. The provision for income taxes is primarily composed of federal, state and local income taxes for the subsidiary entities that have C corporation status.

For the years ended January 2, 2021, December 28, 2019 and December 29, 2018, income taxes consisted of the following:
 
 202020192018
Provision for income taxes:  
Current$3,827 $69 $463 
Deferred(2,764)6,316 9,810 
Income tax expense (benefit)$1,063 $6,385 $10,273 
    
The effective tax rate on pre-tax income differs from the U.S. statutory rate of 21% for 2020, 2019 and 2018, respectively, due to the following:
 
 202020192018
Income tax expense (benefit) at federal statutory tax rate$25,577 $19,947 $15,563 
Less: Income tax benefit at federal statutory tax rate for LLC entities(17,647)(15,387)(13,863)
State and local income taxes2,073 1,680 1,614 
Permanent differences2,479 13 (1,194)
Effective tax rate change681 (725)(1,148)
Unrecognized tax benefits(11,525)5,038 6,487 
Valuation allowance— (2,478)2,586 
Other(575)(1,703)228 
Income tax benefit$1,063 $6,385 $10,273 
 
The following table summarizes the components of the net deferred income tax asset (liability) as January 2, 2021 and December 28, 2019:
 
 20202019
Deferred tax (liabilities) assets:  
Accelerated depreciation$(70,588)$(60,216)
Net operating loss26,929 18,036 
Investment in limited partnership(18,931)(17,686)
Net intangible assets(3,264)(2,554)
Mining reclamation reserve1,652 723 
Working capital (e.g., accrued compensation, prepaid assets)1,590 1,366 
Interest expense limitation carryforward— 2,691 
Net deferred tax liabilities(62,612)(57,640)
Less valuation allowance(1,675)(1,675)
Net deferred tax liability$(64,287)$(59,315)
 
The net deferred income tax liability as of January 2, 2021 and December 28, 2019, are included in other noncurrent liabilities on the consolidated balance sheets. As of January 2, 2021, Summit LLC had federal net operating loss carryforwards of $120.3 million, which expire between 2030 and 2037. 

Valuation Allowance—The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible (including the effect of available carryback and carryforward periods) and tax-planning strategies. The deferred income tax asset related to net operating losses resides with two separate tax paying subsidiaries (or subsidiary groups) of Summit LLC. These tax payers have historically generated taxable income and forecast to continue generating taxable income; however, the use of a portion of the net operating may be limited.
20202019
Valuation Allowance:
Beginning balance$(1,675)$(4,261)
Loss carryforwards— — 
Current year decreases (increases) from operations— 2,586 
Release of valuation allowance and other— — 
Ending balance$(1,675)$(1,675)

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was enacted. Among other things, the TCJA, beginning January 1, 2018, reduced the federal statutory rate from 35% to 21% and extended bonus depreciation provisions. In addition, the TCJA prescribes the application of net operating loss carryforwards generated in 2018 and beyond will be limited, 100% asset expensing will be allowed through 2022 and begin to phase out in 2023, and the amount of interest expense we are able deduct may also be limited in future years. The TCJA contains many provisions which continue to be clarified through new regulations. As permitted by Staff Accounting Bulletin 118 issued by the SEC on December 22, 2017, we completed our accounting of the impacts of the TCJA. We have completed our analysis within 2018 consistent with the guidance of SAB 118 and any adjustments during the measurement period have been included in net earnings from continuing operations as an adjustment to income tax expense. As such, in the fourth quarter of 2018, the Company recorded additional tax expense of
$2.6 million resulting from the IRS interpretative guidance of TCJA. As of January 2, 2021 and December 28, 2019, a $1.7 million and $1.7 million, respectively, valuation allowance has been recorded on net deferred tax assets where realization of our net operating losses are not more likely than not.
The Company has recognized a reserve against the deferred tax assets for unrecognized tax benefits in the amount of $0.0 million and $11.6 million as of January 2, 2021 and December 28, 2019, respectively. The Company records interest and penalties as a component of the income tax provision. No material interest or penalties were recognized in income tax expense during the years ended January 2, 2021 and December 28, 2019.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Unrealized Tax Benefits
Balance—December 29, 2018$6,487 
Additions based on tax position in 20185,132 
Balance—December 28, 2019$11,619 
Reductions based on new regulations(11,619)
Balance—January 2, 2021$— 
Tax years from 2014 to 2019 remain open and subject to audit by federal, Canadian, and state tax authorities. No income tax expense or benefit was recognized in other comprehensive loss in 2019, 2018 or 2017.
 
Tax Distributions  – The holders of Summit Holdings’ LP Units, including Summit Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of Summit Holdings provides for pro rata cash distributions (“tax distributions”) to the holders of the LP Units in an amount generally calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. In general, these tax distributions are computed based on Summit Holdings’ estimated taxable income allocated to Summit Inc. multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate applicable to a corporate resident in New York, New York. No material distributions were made in the years ended January 2, 2021 and December 28, 2019.