Income Taxes

9 Months Ended

Oct. 29, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 6—Income Taxes

Effective Tax Rate

The effective income tax rate for the third quarter of fiscal 2023 was 27.1%, an income tax benefit on a pre-tax book loss, compared to the rate for the third quarter of fiscal 2022, which was 23.5%, an income tax provision on pre-tax book income. The effective income tax rate for the first thirty-nine weeks of fiscal 2023 was 27.7%, an income tax benefit on a pre-tax book loss, compared to the rate for the first thirty-nine weeks of fiscal 2022, which was 22.2%, an income tax provision on pre-tax book income. The effective tax rate increased from the third quarter and first thirty-nine weeks of fiscal 2022 to the third quarter and first thirty-nine weeks of fiscal 2023, respectively, because there was a pre-tax loss in fiscal 2023 and pre-tax income in fiscal 2022. The Company's favorable permanent book-tax differences decrease the effective tax rate when applied to pre-tax income, while these favorable permanent book-tax differences increase the effective tax rate when there is a pre-tax loss.

The effective tax rate is subject to change based on the mix of income from different state jurisdictions, which tax at different rates, as well as the change in status or outcome of uncertain tax positions. The Company evaluates its effective tax rate on a quarterly basis and updates its estimate of the full-year effective rate as necessary.

Reserves for Uncertain Tax Positions

At the end of the third quarter of fiscal 2023, unrecognized tax benefits were $1.2 million, of which $0.9 million would affect the effective tax rate, if recognized. The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The total amount of interest and penalties accrued at the end of the third quarter of both fiscal 2023 and fiscal 2022 was $0.1 million. Within the next 12 months, it is reasonably possible that uncertain tax positions could be reduced by approximately $0.4 million resulting from resolution or closure of tax examinations. Any increase in the amount of uncertain tax positions within the next 12 months is expected to be insignificant.