INCOME TAXES

9 Months Ended

Apr. 02, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Effective Tax Rate

The effective tax rates for the third quarter and first 39 weeks of fiscal 2022 were 21.31% and 23.18%, respectively. As compared to the company’s statutory tax rate, the higher effective tax rate for the third quarter and first 39 weeks of fiscal 2022 was favorably impacted by the excess tax benefits of equity-based compensation that totaled $7.9 million and $10.8 million, respectively, and the impact of non-taxable corporate-owned life insurance policies that totaled $0.4 million and $1.4 million, respectively. For the first 39 weeks of fiscal 2022, these were partially offset by the increase in our reserve for uncertain tax positions of $12.0 million recognized in the first quarter of fiscal 2022. The effective tax rates for the third quarter and first 39 weeks of fiscal 2021 were 13.54% and 15.72%, respectively. As compared to the company’s statutory tax rate, the lower effective tax rate for the third quarter and first 39 weeks of fiscal 2021 was impacted by the favorable impact of excess tax benefits of equity-based compensation that totaled $6.0 million and $12.6 million, respectively. The first 39 weeks of fiscal 2021 were also favorably impacted by the $7.6 million tax benefit attributable to the sale of the stock of Cake Corporation and the impact of changes in tax law in the U.K. of $5.5 million, both of which occurred in the first quarter of fiscal 2021.

Uncertain Tax Positions

As of April 2, 2022, the gross amount of unrecognized tax benefit and related accrued interest was $32.4 million and $5.4 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months. At this time, an estimate of the range of the reasonably possible change cannot be made.

Other

The determination of the company’s provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Tax law changes, increases or decreases in permanent book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.