Income Taxes

12 Months Ended

Dec. 29, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 7. Income Taxes

The components of the provision for income taxes are as follows:

	Fiscal Year Ended
	December 29, 2023		December 30, 2022
(In thousands)
Current taxes:
Federal	$	—	$	1,030
State		—		244
Total current taxes		—		1,274
Deferred taxes:
Federal		—		—
State		—		—
Total deferred taxes		—		—
Provision for income taxes	$	—	$	1,274

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax (benefit) expense are summarized as follows:

	Fiscal Year Ended
	December 29, 2023			December 30, 2022
(In thousands)
Expected income tax (benefit) expense at federal statutory rate	$	(480	)	$	1,070
State income taxes, net of federal income tax benefit		27			790
Return to provision true-up		1,774			—
Permanent items		562			72
Contingent consideration		—			1,987
Change in valuation allowance		5,248			(2,645	)
State rate change		(7,131	)		—
Reported provision for income taxes	$	—		$	1,274
Effective tax rate		0	%		25	%

Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:

	December 29, 2023			December 30, 2022
(In thousands)
Deferred tax liabilities:
Depreciation and amortization	$	(10,598	)	$	(12,682	)
Right-of-use asset		(6,654	)		(6,169	)
Total deferred tax liabilities	$	(17,252	)	$	(18,851	)
Deferred tax assets:
Intangible assets	$	34,457		$	35,818
Contract loss reserve		11,143			17,687
Investment in partnerships		16,453			25,645
Lease liability		6,586			6,132
Stock compensation		1,428			804
Accrued expenses and reserves		5,895			9,409
Section 382 limitation		39,622			30,070
Net operating loss carryforwards		24,629			11,003
Other deferred tax assets		715			711
Total deferred tax assets	$	140,928		$	137,279
Net deferred tax assets before valuation allowance		123,676			118,428
Less: Valuation allowance		(123,676	)		(118,428	)
Net deferred tax assets	$	—		$	—

As of December 29, 2023 and December 30, 2022, gross deferred tax assets were $141 million and $137 million, respectively. The Company has recorded a valuation allowance of $124 million and $118 million as of December 29, 2023 and December 30, 2022, respectively. The Company has performed an assessment of positive and negative evidence, including the nature, frequency, and severity of cumulative financial reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant carryforward periods, taxable income in carry-back years if carry- back is permitted under tax law, and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire. The $6 million increase in the valuation allowance is attributed to the full valuation allowance being recorded on all increases in deferred tax assets in the current period.

The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.

At December 29, 2023, the Company had U.S. federal and state net operating loss (“NOL”) carryforwards of $89 million and $87 million, respectively. The U.S. federal NOL carryforward does not expire and can be carried forward indefinitely, but can only offset up to 80% of taxable income in future years. The state NOL carryforwards have both indefinite and limited carryforward periods, depending on state jurisdictions, and expire beginning in 2036 through 2042. At December 29, 2023, the Company had a full valuation allowance related to the tax-effected amount of these net operating losses. The Company had no unrecognized tax benefits recorded at December 29, 2023.

The Company files income tax returns in numerous tax jurisdictions, including the U.S. and multiple U.S. states. The statute of limitations generally ranges from three to five years for major jurisdictions in which the Company operates. Prior to the acquisition, Shimmick filed as a subsidiary of their parent company, AECOM. In connection with the separation, the Company entered into a tax matters agreement. Under the tax matters agreement, AECOM is generally responsible for all taxes associated with consolidated federal and state filings imposed on AECOM and its subsidiaries (including Shimmick) with respect to taxable periods ended on or prior to January 1, 2021. Also, pursuant to this agreement, AECOM is generally responsible for all taxes associated with separately filed state and local tax filings imposed on Shimmick and its subsidiaries with respect to taxable periods ended on or prior to January 1, 2021. Under these circumstances, Shimmick is only liable for tax periods filed on a standalone basis following the acquisition date.