Income Taxes

12 Months Ended

Dec. 28, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provisions for (benefits from) income taxes were as follows:

	Fiscal Year Ended
	December 28, 2022		December 29, 2021		December 30, 2020
	(In thousands)
Current:
Federal	$	6,128	$	12,997	$	(3,497)
State and local	2,160		3,105		(109)
Foreign	1,152		862		667
Deferred:
Federal	11,043		6,826		393
State and local	3,689		7,271		3,588
Increase (decrease) of valuation allowance	546		(5,031)		(3,041)
Total provision for (benefit from) income taxes	$	24,718	$	26,030	$	(1,999)

The reconciliation of income taxes at the U.S. federal statutory tax rate to our effective tax rate was as follows: 

	December 28, 2022		December 29, 2021		December 30, 2020
Statutory provision rate	21	%	21	%	21	%
State, foreign and local taxes, net of federal income tax benefit	6		5		(11)
Change in state valuation allowance	—		(1)		(1)
General business credits generated	(1)		(2)		9
Foreign tax credits generated	(1)		1		2
Carryback of net operating loss rate differential	—		—		12
Section 162(m) and share-based compensation	—		1		(11)
Insurance premiums	—		—		5
Other	—		—		2
Effective tax rate	25	%	25	%	28	%

For 2022, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits.

For 2021, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes and the generation of employment credits. The 2021 rate was also impacted by an expense of $1.3 million from disallowed compensation deductions. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law as a response to the economic impacts of the COVID-19 pandemic. As a result of the CARES Act, during 2021 the Company carried back 2020’s net operating loss to years 2015 and forward, to obtain $1.5 million in federal income tax refunds. See Note 16 for a discussion of other items related to the CARES Act.

For 2020, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes and the generation of employment credits. The 2020 rate was also impacted by a $0.9 million benefit from the statutory rate differential due to a net operating loss carryback to a prior year and an expense of $1.0 million from disallowed compensation deductions.

The following table represents the approximate tax effect of each significant type of temporary difference that resulted in deferred income tax assets or liabilities.  

	December 28, 2022		December 29, 2021
	(In thousands)
Deferred tax assets:
Self-insurance accruals	$	2,094	$	2,594
Finance lease liabilities	1,230		1,281
Operating lease liabilities	33,028		35,545
Accrued exit costs	21		19
Interest rate swaps	—		13,221
Pension, other retirement and compensation plans	11,239		11,259
Deferred income	4,396		4,675
Other accruals	918		—
General business and foreign tax credit carryforwards - state and federal	2,387		2,218
Net operating loss carryforwards - state	1,157		1,429
Total deferred tax assets before valuation allowance	56,470		72,241
Less: valuation allowance	(2,738)		(2,192)
Total deferred tax assets	53,732		70,049
Deferred tax liabilities:
Intangible assets	(15,706)		(14,874)
Contract assets	(1,360)		—
Deferred finance costs	(250)		(313)
Operating lease right-of-use assets	(29,822)		(32,198)
Fixed assets	(9,291)		(10,134)
Interest rate swaps	(4,722)		—
Other accruals	—		(1,028)
Total deferred tax liabilities	(61,151)		(58,547)
Net deferred tax asset (liability)	$	(7,419)	$	11,502

The Company’s state net operating loss tax asset of approximately $1.2 million includes $0.9 million related to Pennsylvania and South Carolina.

Of the $2.7 million valuation allowance, $0.6 million relates to Pennsylvania and South Carolina net operating loss carryforwards, $1.2 million relates to California enterprise zone credits and $0.9 million relates to foreign tax credit carryforwards, all of which may never be utilized, prior to their expiration.

It is more likely than not that we will be able to utilize all of our existing temporary differences and most of our remaining state tax net operating losses and state credit tax carryforwards, net of existing valuation allowance, prior to their expiration.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	December 28, 2022		December 29, 2021
	(In thousands)
Balance, beginning of year	$	1,047	$	1,047
Decreases related to prior year tax positions	(178)		—
Balance, end of year	$	869	$	1,047

There was no interest expense associated with unrecognized tax benefits for the years ended December 28, 2022 and December 29, 2021.

We file income tax returns in the U.S. federal jurisdictions and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019. We remain subject to examination for U.S. federal taxes for 2019-2022, and in the following major state jurisdictions: California (2017-2022), Florida (2019-2022) and Texas (2018-2022).