Income Taxes

12 Months Ended

Dec. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 7: Income Taxes

Income before income taxes includes income from foreign operations of $10,646,000, $12,326,000 and $10,092,000 for 2022, 2021 and 2020, respectively.

Total income tax expense for 2022, 2021 and 2020 consisted of the following:

	Fiscal Years
(In thousands)	2022			2021			2020
Current
Federal	$	24,411		$	19,800		$	11,553
Foreign		1,973			2,252			1,873
State		10,883			8,588			4,597
		37,267			30,640			18,023
Deferred
Federal		(4,910	)		(3,930	)		(2,766	)
State		(2,453	)		(2,075	)		(873	)
		(7,363	)		(6,005	)		(3,639	)
Total	$	29,904		$	24,635		$	14,384

The Company’s effective tax rate differs from the statutory federal tax rate of 21% as shown in the following schedule:

	Fiscal Years
(In thousands)	2022			2021			2020
Tax at federal statutory rate	$	27,769		$	26,426		$	20,357
State taxes, net of federal benefit		6,726			5,174			2,942
Divestiture of foreign subsidiary		—			—			46
Non-deductible officer compensation		1,160			997			907
Non-deductible expenses		52			19			118
Non-deductible stock-based compensation		12			13			(14	)
Excess tax benefit from equity incentive plans		(4,533	)		(7,850	)		(9,725	)
Difference between statutory rate and foreign effective tax rate		(693	)		(622	)		(486	)
Other		(589	)		478			239
Tax expense	$	29,904		$	24,635		$	14,384
Effective tax rate		22.6	%		19.6	%		14.8	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 30, 2022 and December 31, 2021 are presented in the following schedule:

	Fiscal Years
(In thousands)	2022			2021
Deferred tax assets:
Accrued liabilities and allowances	$	20,740		$	17,914
Deferred compensation plan		36,819			38,167
Operating leases		5,386			4,298
Unrealized loss on trading securities		453			—
Property, equipment and leasehold improvements		212			120
Other		88			—
Total deferred tax assets	$	63,698		$	60,499
Deferred tax liabilities:
State taxes	$	(2,265	)	$	(2,062	)
Deductible goodwill		(2,138	)		(2,120	)
Operating leases		(5,386	)		(4,298	)
Unrealized gain of deferred compensation plan assets		—			(5,336	)
Other		—			(137	)
Total deferred tax liabilities		(9,789	)		(13,953	)
Net deferred tax assets	$	53,909		$	46,546

Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets.

The Company is entitled to a deduction for federal and state tax purposes with respect to employees’ stock award activity. The net deduction in taxes otherwise payable arising from that deduction has been recorded as an income tax benefit. For 2022, 2021 and 2020, the net deduction in tax payable arising from employees’ stock award activity was $5,829,000, $10,009,000 and $12,258,000, respectively.

The Company and its subsidiaries file income tax returns in the United States federal jurisdiction, California and various other state and foreign jurisdictions. The Company is no longer subject to United States federal income tax examination for years prior to 2019. The Company is no longer subject to California franchise tax examinations for years prior to 2018. With few exceptions, the Company is no longer subject to state and local or non-United States income tax examination by tax authorities for years prior to 2018.

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

Balance at January 1, 2021	$	1,873
Additions based on tax positions related to the current year		478
Reductions due to lapse of statute of limitations		(402	)
Balance at December 31, 2021	$	1,949
Additions based on tax positions related to the current year		630
Reductions due to lapse of statute of limitations		(532	)
Balance at December 30, 2022	$	2,047

Unrecognized tax benefits are included in other liabilities in the accompanying consolidated balance sheets. To the extent these unrecognized tax benefits are ultimately recognized, they will impact the effective tax rate by $1,648,000 in a future period. There are no uncertain tax positions whose resolution in the next 12 months is expected to materially affect operating results.