Income Taxes

12 Months Ended

Aug. 27, 2022

Income Tax Disclosure [Abstract]

Income Taxes

4. Income Taxes

The provision / (benefit) for income taxes consists of the following (in thousands):

Fiscal year	2022		2021			2020
Current:
Federal	$	7,655	$	35,267		$	40,084
Foreign		1,839		1,714			1,589
State		3,701		9,873			12,865
Total current	$	13,195	$	46,854		$	54,538
Deferred:
Federal	$	13,883	$	(1,421	)	$	(8,522	)
Foreign		180		848			(599	)
State		3,663		(521	)		(3,299	)
Total deferred	$	17,726	$	(1,094	)	$	(12,420	)
Total	$	30,921	$	45,760		$	42,118

The following table reconciles the provision for income taxes using the statutory federal income tax rate to the actual provision for income taxes:

Fiscal year	2022			2021			2020
Income taxes at the statutory federal income tax rate		21.0	%		21.0	%		21.0	%
State income taxes		4.7			4.2			4.4
Adjustments to Tax Reserve		(2.1	)		(0.3	)		(0.9	)
Other		(0.6	)		(1.7	)		(0.8	)
Total		23.0	%		23.2	%		23.7	%

The components of deferred income taxes included on the consolidated balance sheets are as follows (in thousands):

	August 27, 2022		August 28, 2021
Deferred Tax Assets
Payroll and benefit related	$	14,923	$	21,893
Insurance related		15,035		14,042
Environmental		8,212		8,408
Accrued expenses		8,170		10,134
Operating lease liabilities		11,471		9,214
Other		9,841		8,127
Total deferred tax assets	$	67,652	$	71,818
Deferred Tax Liabilities
Payroll and benefit related	$	20,588	$	19,474
Tax in excess of book depreciation		40,016		40,725
Purchased intangible assets		39,747		36,183
Rental merchandise in service		55,287		45,432
Operating lease right-of-use assets		11,111		8,984
Other		232		157
Total deferred tax liabilities		166,981		150,955
Net deferred tax liability	$	99,329	$	79,137

The Company regularly reviews deferred tax assets for recoverability based upon projected future taxable income and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets will be realized.

Effective tax rate

The Company’s effective tax rate for the fiscal year ended August 27, 2022 was 23.0% as compared to 23.2% for the corresponding period in the prior year. The decrease in the effective tax rate was primarily due to the tax benefit related to the release of existing tax reserves in fiscal 2022 compared to fiscal 2021.

Foreign tax effect

As of August 27, 2022, unremitted foreign earnings, have been retained by the Company’s foreign subsidiaries for indefinite reinvestment. If the Company were to repatriate those earnings, in the form of dividends or otherwise, the Company could be subject to immaterial withholding taxes payable to the various foreign countries.

Uncertain tax positions

As of August 27, 2022 and August 28, 2021, there was $6.4 million and $9.3 million, respectively, of unrecognized tax benefits, of which $5.7 million and $8.7 million, respectively, would favorably impact the Company’s effective tax rate, if recognized. The Company recognized interest and penalties related to uncertain tax positions as a component of income tax expense which is consistent with the recognition of these items in prior reporting periods. As of August 27, 2022 and August 28, 2021, the Company had accrued a total of a nominal amount and $0.1 million, respectively, in interest and penalties, in its long-term accrued liabilities. For the years ended August 27, 2022, August 28, 2021 and August 29, 2020 the Company recognized a nominal expense in its Consolidated Statement of Income related to interest and penalties.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at August 29, 2020	$	6,330
Additions based on tax positions related to the current year		637
Additions for tax positions of prior years		3,552
Reduction for tax positions of prior years		(287	)
Statute expirations		(911	)
Balance at August 28, 2021		9,321
Additions based on tax positions related to the current year		489
Additions for tax positions of prior years		107
Reduction for tax positions of prior years		(3,013	)
Statute expirations		(487	)
Balance at August 27, 2022	$	6,417

The Company has a significant portion of its operations in the United States and Canada. It is required to file federal income tax returns as well as state income tax returns in a majority of the U.S. states and also in a number of Canadian provinces. At times, the Company is subject to audits in these jurisdictions, which typically are complex and can require several years to resolve. The final resolution of any such tax audits could result in either a reduction in the Company’s accruals or an increase in its income tax provision, both of which could have a material impact on the consolidated results of operations in any given period.

All U.S. and Canadian federal income tax statutes have lapsed for filings up to and including fiscal years 2017 and 2014, respectively. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2018. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.