INCOME TAXES

9 Months Ended

Nov. 09, 2019

INCOME TAXES

INCOME TAXES

10. INCOME TAXES

The effective income tax rate was 35.6% in the third quarter of 2019, compared to 22.8% in the third quarter of 2018.  The effective income tax rate was 25.0% for the first three quarters of 2019, compared to 22.8% for the first three quarters of 2018. The effective income tax rate for the third quarter and the first three quarters of 2019 differed from the federal statutory rate primarily due to the portion of the impairment of Lucky’s Market attributable to the minority interest, which reduces pre-tax income, but does not impact tax expense. The impact of this item on the effective income tax rate is approximately 12% for the third quarter and 2% for the first three quarters of 2019. The difference from the statutory rate is also impacted by the effect of state income taxes, partially offset by the utilization of tax credits and deductions.  Refer to Note 11 for information about the impairment of Lucky’s Market.  The effective income tax rate for the third quarter and first three quarters of 2018 differed from the federal statutory rate primarily due to the effect of state income taxes and an IRS audit that resulted in a reduction of prior year tax deductions at pre-Tax Reform rates and an increase in future tax deductions at post-Tax Reform rates, partially offset by the utilization of tax credits and deductions and favorable provision to return adjustments. Additionally, the rate for the first three quarters of 2018 benefitted from favorable settlements of certain state tax items.