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INCOME TAXES
 12 Months Ended
Sep. 27, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES:
The components of Income Before Income Taxes by source of income are as follows (in thousands):
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
United States$24,683 $254,027 $172,948 
Non-United States7,347 15,703 17,011 
$32,030 $269,730 $189,959 
The Provision for Income Taxes consists of (in thousands):
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
Current:
Federal$22,949 $29,704 $19,663 
State and local3,283 10,126 6,958 
Foreign4,404 2,372 1,056 
30,636 42,202 27,677 
Deferred:
Federal(14,899)10,350 13,070 
State and local(3,019)2,860 3,322 
Foreign(1,658)1,160 4,211 
(19,576)14,370 20,603 
$11,060 $56,572 $48,280 
The Provision for Income Taxes varies from the amount determined by applying the United States Federal statutory rate to Income Before Income Taxes as a result of the following (all percentages are as a percentage of Income Before Income Taxes):
Fiscal Year Ended
September 27, 2024September 29, 2023September 30, 2022
United States statutory income tax rate21.0 %21.0 %21.0 %
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit5.0 3.8 4.2 
Foreign taxes2.6 (0.1)0.9 
Separation related adjustments(2.9)— — 
Permanent book/tax differences3.8 0.3 — 
Nontaxable gain on foreign subsidiary disposition— (4.0)— 
Uncertain tax positions0.7 0.5 0.1 
Deferred tax on foreign investments4.3 — — 
Share-based compensation3.5 — — 
Tax credits & other(3.5)(0.5)(0.8)
Effective income tax rate34.5 %21.0 %25.4 %
As of September 27, 2024 and September 29, 2023, the components of Deferred Income Taxes are as follows (in thousands):
September 27, 2024September 29, 2023
Deferred tax assets:
Accruals and allowances22,777 16,939 
Employee compensation18,485 14,401 
Operating lease right-of-use liability19,924 16,086 
Business interest expense carryforward16,795 — 
Research and development expenses5,622 2,881 
NOL/credit carryforward and other7,290 3,704 
Deferred tax asset 90,893 54,011 
Valuation allowances$(4,662)$— 
Deferred tax asset (net of valuation allowance)86,231 54,011 
Deferred tax liabilities:
Property and equipment59,461 62,295 
Other intangible assets including goodwill83,247 77,603 
Rental merchandise in service78,542 80,579 
Operating lease asset16,746 14,025 
Capitalized contract costs24,541 24,506 
Internally developed software7,846 8,399 
Other$5,752 $4,251 
Deferred tax liability276,135 271,658 
Net deferred tax liability$189,904 $217,647 

Deferred tax assets of $1.6 million and $0 million as of September 27, 2024 and September 29, 2023, respectively, are included in "Other Assets" on the Consolidated and Combined Balance Sheets. Deferred tax liabilities of $191.5 million and $217.6 million as of September 27, 2024 and September 29, 2023, respectively, are included in "Deferred Income Taxes" on the Consolidated and Combined Balance Sheets. In connection with the Separation, the
Company's net deferred tax liabilities decreased by $8.5 million, primarily related to shared-based compensation, inventoriable costs and tax attributes that were not part of the Company while consolidated with Aramark.

As of each reporting date, the Company considers existing evidence, both positive and negative, that could impact the need for valuation allowances against deferred tax assets. As of September 27, 2024, the Company has $4.7 million of United States foreign tax credit carryforwards from periods prior to the Separation. However, the Company maintains a full valuation allowance against these credit carryforwards. The Company assessed the remaining deferred tax assets and believes it is more-likely-than-not that they are realizable.

As of September 27, 2024, the Company had $2 million of tax-effected state net operating loss carryforwards. The earliest expiration of the state net operating loss carryforwards is fiscal 2029 and the Company believes all carryforwards will be utilized prior to expiration.

A reconciliation of the beginning and ending amount of valuation allowances follows (in thousands):

September 27, 2024September 29, 2023September 30, 2022
Balance, beginning of year$— $— $— 
Separation related adjustments4,662 — — 
Balance, end of year$4,662 $— $— 

Under the Tax Matters Agreement, the Company is responsible for income taxes on prior period returns filed on a separate company basis in state, local, and foreign jurisdictions. Prior to the Separation, the Company was included on Aramark’s United States federal and various state consolidated and combined tax returns that remain the responsibility of Aramark. Adjustments to Aramark’s consolidated and combined federal and state tax returns could affect the tax attributes allocated to the Company under the Tax Matters Agreement. While it is often difficult to predict the timing or resolution of a particular tax matter, the Company does not anticipate any adjustments resulting from United States federal, state or foreign tax audits that would result in a material change to the financial condition or results of operations. Currently, none of the Company’s income tax returns are under examination by a taxing authority. With few exceptions, the Company is no longer subject to foreign or state and local tax examinations by tax authorities for fiscal years before 2020.

Undistributed earnings and profits ("E&P") of our foreign subsidiaries amounted to $21.7 million as of September 27, 2024. Currently, $21.7 million of the undistributed E&P of our foreign subsidiaries is considered to be indefinitely reinvested and, accordingly, no deferred income taxes have been provided thereon. Upon distribution of those earnings to the U.S. in the form of dividends or otherwise, the Company could be subject to U.S. state and local taxes and withholding taxes payable in various jurisdictions, which may be partially offset by a U.S. foreign tax credit. The unrecorded withholding tax on undistributed E&P is not significant to the Consolidated and Combined Financial Statements.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate, was approximately $0.4 million, $4.4 million, and $3.0 million as of September 27, 2024, September 29, 2023 and September 30, 2022, respectively. In connection with the Separation, our unrecognized benefits with respect to our uncertain tax positions decreased by $4.2 million as these remained the obligation of Aramark under the Tax Matters Agreement.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows (in thousands):
September 27, 2024September 29, 2023September 30, 2022
Balance, beginning of year$4,392 $2,963 $2,854 
Additions based on tax positions taken in the current year195 554 109 
Additions for tax positions taken in prior years— 875 — 
Separation related adjustments(4,175)— — 
Balance, end of year$412 $4,392 $2,963 
The Company has $0.1 million, $1.1 million and $0.2 million accrued for interest and penalties as of September 27, 2024, September 29, 2023 and September 30, 2022, respectively, in the Consolidated and Combined Balance Sheets. Interest and penalties related to unrecognized tax benefits are recorded in "Provision for Income Taxes" on the Consolidated and Combined Statements of Income. It is reasonably possible that the amount of unrecognized benefits with respect to certain of our unrecognized tax positions will change within the next 12 months. At this time, the Company does not anticipate the amount of gross unrecognized tax positions to decrease within the next 12 months.

During the fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022, the Company paid cash for income taxes, net of refunds received, of $19.1 million, $0.2 million, and $3.5 million, respectively.