Income Taxes

12 Months Ended

Dec. 29, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 7: Income Taxes

Income before income taxes includes income from foreign operations of $10,353,000, $10,646,000 and $12,326,000 for 2023, 2022 and 2021, respectively.

Total income tax expense for 2023, 2022 and 2021 consisted of the following:

	Fiscal Years
(In thousands)	2023			2022			2021
Current
Federal	$	23,193		$	24,411		$	19,800
Foreign		2,254			1,973			2,252
State		10,025			10,883			8,588
		35,472			37,267			30,640
Deferred
Federal		(775	)		(4,910	)		(3,930	)
State		860			(2,453	)		(2,075	)
		85			(7,363	)		(6,005	)
Total	$	35,557		$	29,904		$	24,635

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)	2023			2022			2021
Tax at federal statutory rate	$	28,538		$	27,769		$	26,426
State taxes, net of federal benefit		8,587			6,726			5,174
Non-deductible officer compensation		870			1,160			997
Non-deductible expenses		456			52			19
Non-deductible stock-based compensation		12			12			13
Excess tax benefit from equity incentive plans		(2,844	)		(4,533	)		(7,850	)
Difference between statutory rate and foreign effective tax rate		(264	)		(693	)		(622	)
Other		202			(589	)		478
Tax expense	$	35,557		$	29,904		$	24,635
Effective tax rate		26.2	%		22.6	%		19.6	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 29, 2023 and December 30, 2022 are presented in the following schedule:

	Fiscal Years
(In thousands)	2023			2022
Deferred tax assets:
Accrued liabilities and allowances	$	21,235		$	20,740
Deferred compensation plan		40,280			36,819
Operating leases		7,853			5,386
Unrealized loss on trading securities		—			453
Property, equipment and leasehold improvements		—			212
Other		—			88
Total deferred tax assets	$	69,368		$	63,698
Deferred tax liabilities:
State taxes	$	(2,255	)	$	(2,265	)
Deductible goodwill		(2,071	)		(2,138	)
Operating leases		(7,853	)		(5,386	)
Unrealized gain of deferred compensation plan assets		(1,652	)		—
Property, equipment and leasehold improvements		(1,695	)		—
Other		(18	)		—
Total deferred tax liabilities		(15,544	)		(9,789	)
Net deferred tax assets	$	53,824		$	53,909

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 2023, 2022 and 2021, the net deduction in tax payable arising from employees’ stock award activity was $3,620,000, $5,829,000 and $10,009,000, 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 2020. The Company is no longer subject to California franchise tax examinations for years prior to 2019. 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 2019.

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

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
Additions based on tax positions related to the current year		571
Reductions due to lapse of statute of limitations		(473	)
Balance at December 29, 2023	$	2,145

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 $1,695,000 in a future period. There are no uncertain tax positions whose resolution in the next 12 months is expected to materially affect operating results.