Income Taxes

12 Months Ended

Dec. 25, 2022

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

The following table presents the domestic and foreign components of income before income taxes for 2022, 2021 and 2020 (in thousands):

	2022		2021		2020
Domestic income	$	65,434	$	115,221	$	48,616
Foreign income	18,335		35,727		26,746
Total income	$	83,769	$	150,948	$	75,362

Included within the foreign income before income taxes above is $23.6 million, $22.4 million, and $14.7 million of foreign sourced income subject to foreign withholding taxes in 2022, 2021, and 2020, respectively.

A summary of the expense (benefit) for income tax follows (in thousands):

	2022		2021		2020
Current:
Federal	$	3,496	$	10,591	$	16,400
Foreign	5,335		8,812		6,047
State and local	2,791		2,837		1,569
Deferred:
Federal	4,243		2,430		(7,375)
Foreign	(1,152)		769		357
State and local	(293)		554		(2,250)
Total income tax expense	$	14,420	$	25,993	$	14,748

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 is as follows in both dollars and as a percentage of income before income taxes (dollars in thousands):

	2022				2021				2020
	Income Tax Expense (Benefit)		Income Tax Rate		Income Tax Expense (Benefit)		Income Tax Rate		Income Tax Expense (Benefit)		Income Tax Rate
Tax at U.S. federal statutory rate	$	17,591	21.0	%	$	31,699	21.0	%	$	15,826	21.0	%
State and local income taxes	1,422		1.7	%	2,317		1.5	%	1,149		1.5	%
Foreign income taxes	4,672		5.6	%	9,144		6.1	%	6,463		8.6	%
Income of consolidated partnerships attributable to noncontrolling interests	(355)		(0.4)	%	(1,110)		(0.7)	%	(603)		(0.8)	%
Non-qualified deferred compensation plan expense (income)	1,278		1.5	%	(911)		(0.6)	%	(898)		(1.2)	%
Excess tax (benefits) on equity awards	(3,902)		(4.7)	%	(3,697)		(2.5)	%	(2,029)		(2.7)	%
Tax credits	(8,981)		(10.7)	%	(8,830)		(5.9)	%	(6,002)		(8.0)	%
Non-deductible executive compensation	2,450		2.9	%	2,636		1.7	%	1,314		1.7	%
Foreign-derived intangible income	(1,452)		(1.7)	%	(1,519)		(1.0)	%	(924)		(1.2)	%
US deferred offset on foreign deferreds	1,183		1.4	%	238		0.2	%	—		—	%
Other	514		0.6	%	(3,974)		(2.6)	%	452		0.6	%
Total	$	14,420	17.2	%	$	25,993	17.2	%	$	14,748	19.5	%

Significant deferred tax assets (liabilities) follow (in thousands):

	December 25, 2022		December 26, 2021
Accrued liabilities	$	17,424	$	14,802
Accrued bonuses	351		6,404
Other liabilities and asset reserves	14,607		14,583
Equity awards	7,905		7,323
Lease liabilities	45,646		41,999
Other	2,904		2,712
Net operating losses	11,738		8,127
Foreign tax credit carryforwards	20,198		18,611
Total deferred tax assets	120,773		114,561
Valuation allowances	(32,052)		(28,598)
Total deferred tax assets, net of valuation allowances	88,721		85,963
Deferred expenses	(5,756)		(7,087)
Accelerated depreciation	(31,098)		(23,858)
Goodwill	(7,690)		(10,052)
Right-of-use assets	(41,892)		(39,814)
Other	(365)		(254)
Total deferred tax liabilities	(86,801)		(81,065)
Net deferred tax assets	$	1,920	$	4,898

The following table summarizes changes in the Company’s valuation allowances on deferred tax (in thousands):

Balance at December 27, 2020	$	22,972
Charged to costs and expenses	5,658
Other	(32)
Balance at December 26, 2021	$	28,598
Charged to costs and expenses	3,454
Balance at December 25, 2022	$	32,052

The Company had approximately $10.2 million and $8.8 million of state deferred tax assets primarily related to state net operating loss carryforwards as of December 25, 2022 and December 26, 2021, respectively. Our ability to utilize these state deferred tax assets is dependent on our ability to generate earnings in future years in the respective state jurisdictions. The Company provided a full valuation allowance of $10.2 million and $8.8 million for these state deferred tax assets as we believe realization based on the more-likely-than-not criteria has not been met as of December 25, 2022 and December 26, 2021, respectively.

The Company had approximately $2.0 million and $1.4 million of state deferred tax assets related to state income tax credit carryforwards as of December 25, 2022 and December 26, 2021, respectively. Our ability to fully utilize these deferred tax assets related to state income tax credit carryforwards is dependent on our ability to generate earnings in future years in the respective state jurisdictions. In 2022, the Company provided a partial valuation allowance of $0.5 million against these state deferred tax assets as we believe that a portion of these state income tax credit carryforwards would not be realizable before expiration.

The Company had approximately $8.7 million and $4.5 million of foreign net operating loss and capital loss carryovers as of December 25, 2022 and December 26, 2021, respectively. The Company had approximately $1.2 million of valuation allowances primarily related to the foreign capital losses at both December 25, 2022 and December 26, 2021. A substantial majority of our foreign net operating losses do not have an expiration date.

In addition, the Company had approximately $20.2 million and $18.6 million in foreign tax credit carryforwards as of December 25, 2022 and December 26, 2021, respectively, that expire ten years from inception in years 2026 through 2032. Our ability to utilize these foreign tax credit carryforwards is dependent on our ability to generate foreign earnings in future years sufficient to claim foreign tax credits in excess of foreign taxes paid in those years. The Company provided a full valuation allowance of $20.2 million and $18.6 million for these foreign tax credit carryforwards as we believe realization based on the more-likely-than-not criteria has not been met as of December 25, 2022 and December 26, 2021, respectively.

Cash for income taxes paid were $11.7 million in 2022, $32.6 million in 2021 and $19.3 million in 2020.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company, with few exceptions, is no longer subject to U.S. federal, state and local, or non-US income tax examinations by tax authorities for years before 2018. The Company is currently undergoing examinations by various tax authorities. The Company anticipates that the finalization of these current examinations and other issues could result in a decrease in the liability for unrecognized tax benefits (and a decrease of income tax expense) of approximately $68,000 during the next 12 months.

The Company had $1.2 million of unrecognized tax benefits at December 25, 2022 which, if recognized, would affect the effective tax rate. A reconciliation of the beginning and ending liability for unrecognized tax benefits excluding interest and penalties is as follows, which is recorded in Other long-term liabilities in the Consolidated Balance Sheets (in thousands):

Balance at December 27, 2020	$	1,030
Additions for tax positions of prior years	81
Reductions for tax positions of prior years	(215)
Balance at December 26, 2021	$	896
Additions for tax positions of prior years	331
Reductions for tax positions of prior years	(65)
Balance at December 25, 2022	$	1,162

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. The Company has accrued approximately $146,000 and $132,000 for the payment of interest and penalties as of December 25, 2022 and December 26, 2021, respectively.