INCOME TAXES

12 Months Ended

Sep. 28, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP Loans as fully deductible for tax purposes. During the years ended September 28, 2024 and September 30, 2023, the Company recorded income of $285,000 and $272,000, respectively, for financial reporting purposes related to the forgiveness of its PPP Loans. The forgiveness of these amounts is not taxable.

The benefit for income taxes consists of the following:

	Year Ended
	September 28, 2024		September 30, 2023
	(in thousands)
Current provision (benefit):
Federal	$	85	$	319
State and local	161		237
	246		556
Deferred provision (benefit):
Federal	(617)		(237)
State and local	(444)		(383)
	(1,061)		(620)
	$	(815)	$	(64)

The effective tax rate differs from the U.S. income tax rate as follows:

	Year Ended
	September 28, 2024		September 30, 2023
	(in thousands)
Provision at federal statutory rate (21%)	$	(958)	$	(1,139)
State and local income taxes, net of tax benefits	231		(241)
Goodwill impairment	—		419
Gain on forgiveness of PPP Loans	(60)		(57)
Tax credits	(943)		(961)
Loss attributable to non-controlling interest	(32)		(120)
Changes in tax rates	5		49
Change in valuation allowance	963		1,866
Other	(21)		120
	$	(815)	$	(64)

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

	September 28, 2024		September 30, 2023
	(in thousands)
Deferred tax assets:
State net operating loss carryforwards	$	4,670	$	5,170
Lease liabilities	20,349		22,072
Deferred compensation	257		376
Tax credits	3,376		2,483
Other	392		511
Deferred tax assets, before valuation allowance	29,044		30,612
Valuation allowance	(4,236)		(3,273)
Deferred tax assets, net of valuation allowance	24,808		27,339
Deferred tax liabilities:
Depreciation and amortization	(19,636)		(23,065)
Partnership investments	—		(188)
Prepaid expenses	(373)		(348)
Deferred tax liabilities	(20,009)		(23,601)
Net deferred tax assets	$	4,799	$	3,738

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including reversal of existing taxable temporary differences, forecasts of future earnings and the duration of statutory carryforward periods. The Company recorded a valuation allowance of $4,236,000 and $3,273,000 as of September 28, 2024 and September 30, 2023, respectively, attributable to certain federal tax credits and state and local net operating loss carryforwards which are not realizable on a more-likely-than-not basis. During the years ended September 28, 2024 and September 30, 2023, the Company’s valuation allowance increased by approximately $963,000 and $1,866,000, respectively, primarily related to certain general business credit carryforwards that are not expected to be realized on a more-likely-than-not basis.

As of September 28, 2024, the Company had General Business Credit carryforwards of approximately $3,376,000 which expire through fiscal 2044. In addition, as of September 28, 2024, the Company has New York State net operating loss carryforwards of approximately $27,471,000 and New York City net operating loss carryforwards of approximately $25,268,000 that expire through fiscal 2044.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits excluding interest and penalties is as follows:

	September 28, 2024		September 30, 2023
	(in thousands)
Balance at beginning of year	$	185	$	159
Additions based on tax positions taken in current and prior years	25		26
Decreases based on tax positions taken in prior years	—		—
Balance at end of year	$	210	$	185

The entire amount of unrecognized tax benefits if recognized would reduce our annual effective tax rate. For the years ended September 28, 2024 and September 30, 2023, there are no amounts accrued for the payment of interest and penalties. The Company does not expect a significant change to its unrecognized tax benefits within the next 12 months.

The Company files tax returns in the U.S. and various state and local jurisdictions with varying statutes of limitations. The 2021 through 2024 fiscal years remain subject to examination by the Internal Revenue Service and most state and local tax authorities.