Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 7: Income Taxes

Income before income taxes includes income from foreign operations of $12,326,000, $10,092,000 and $8,017,000 for 2021, 2020 and 2019, respectively.

Total income tax expense for 2021, 2020 and 2019 consisted of the following:

	Fiscal Years
(In thousands)	2021			2020			2019
Current
Federal	$	19,800		$	11,553		$	16,498
Foreign		2,252			1,873			1,523
State		8,588			4,597			6,554
		30,640			18,023			24,575
Deferred
Federal		(3,930	)		(2,766	)		(1,727	)
State		(2,075	)		(873	)		(1,118	)
		(6,005	)		(3,639	)		(2,845	)
Total	$	24,635		$	14,384		$	21,730

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)	2021			2020			2019
Tax at federal statutory rate	$	26,426		$	20,357		$	21,880
State taxes, net of federal benefit		5,174			2,942			4,129
Divestiture of foreign subsidiary		—			46			956
Non-deductible officer compensation		997			907			759
Non-deductible expenses		19			118			345
Non-deductible stock-based compensation		13			(14	)		2
Excess tax benefit from equity incentive plans		(7,850	)		(9,725	)		(6,394	)
Difference between statutory rate and foreign effective tax rate		(622	)		(486	)		(341	)
Other		478			239			394
Tax expense	$	24,635		$	14,384		$	21,730
Effective tax rate		19.6	%		14.8	%		20.9	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2021 and January 1, 2021 are presented in the following schedule:

	Fiscal Years
(In thousands)	2021			2020
Deferred tax assets:
Accrued liabilities and allowances	$	17,914		$	16,841
Deferred compensation plan		38,167			31,619
Operating leases		4,298			5,758
Property, equipment and leasehold improvements		120			—
Total deferred tax assets	$	60,499		$	54,218
Deferred tax liabilities:
State taxes	$	(2,062	)	$	(1,969	)
Deductible goodwill		(2,120	)		(2,091	)
Operating leases		(4,298	)		(5,758	)
Property, equipment and leasehold improvements		—			(81	)
Unrealized gain of deferred compensation plan assets		(5,336	)		(3,545	)
Other		(137	)		(235	)
Total deferred tax liabilities		(13,953	)		(13,679	)
Net deferred tax assets	$	46,546		$	40,539

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 2021, 2020 and 2019, the net deduction in tax payable arising from employees’ stock award activity was $10,009,000, $12,258,000 and $8,067,000, 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 2018. The Company is no longer subject to California franchise tax examinations for years prior to 2017. 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 2017.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 3, 2020	$	1,923,000
Additions based on tax positions related to the current year		275,000
Reductions due to lapse of statute of limitations		(325,000	)
Balance at January 1, 2021	$	1,873,000
Additions based on tax positions related to the current year		478,000
Reductions due to lapse of statute of limitations		(402,000	)
Balance at December 31, 2021	$	1,949,000

Unrecognized tax benefits are included in other liabilities in the accompanying balance sheet. To the extent these unrecognized tax benefits are ultimately recognized, they will impact the effective tax rate by $1,571,000 in a future period. There are no uncertain tax positions whose resolution in the next 12 months is expected to materially affect operating results.