Income Taxes

12 Months Ended

Jul. 28, 2023

Income Taxes [Abstract]

Income Taxes

12. Income Taxes

The components of the provision for income taxes for each of the three years were as follows:

	2023			2022			2021
Current:
Federal	$	6,925		$	16,462		$	(13,505	)
State		3,573			1,188			2,405
Deferred:
Federal		(4,902	)		(4,543	)		57,580
State		(1,035	)		(1,604	)		9,558
Total provision for income taxes	$	4,561		$	11,503		$	56,038

A reconciliation of the Company’s provision for income taxes and income taxes based on the statutory U.S. federal rate of 21.0% in 2023, 2022 and 2021 was as follows:

	2023			2022			2021
Provision computed at federal statutory income tax rate	$	21,758		$	30,110		$	65,216
State and local income taxes, net of federal benefit		2,069			1,452			10,589
Federal net operating loss benefit		—			—			(5,402	)
Employer tax credits for FICA taxes paid on employee tip income		(16,772	)		(15,395	)		(12,323	)
Other employer tax credits		(3,673	)		(4,929	)		(3,234	)
Tax audit settlement		—			(1,939	)		—
Other-net		1,179			2,204			1,192
Total provision for income taxes	$	4,561		$	11,503		$	56,038

The decrease in the Company’s provision for income taxes in 2023 as compared to 2022 is primarily due to the decrease in income before income taxes. The decrease in the Company’s provision for income taxes in 2022 as compared to 2021 is primarily due to the decrease in income before income taxes and the benefit of higher income tax credits.

Significant components of the Company’s net deferred tax liability consisted of the following at:

	July 28, 2023		July 29, 2022
Deferred tax assets:
Compensation and employee benefits	$	6,406	$	7,329
Accrued liabilities		15,843		15,770
Operating lease liabilities		186,813		193,794
Insurance reserves		7,360		7,115
Inventory		3,204		3,002
Deferred tax credits and carryforwards		30,720		24,896
Other		11,057		13,875
Deferred tax assets	$	261,403	$	265,781
Deferred tax liabilities:
Property and equipment	$	100,185	$	101,268
Inventory		6,028		5,517
Operating lease right-of-use asset		221,882		232,914
Other		7,564		6,275
Deferred tax liabilities		335,659		345,974
Net deferred tax liability	$	74,256	$	80,193

The Company has a deferred tax asset of $20,508 reflecting federal income tax credit carryforwards that expire in 2043. The Company has state income tax net operating loss carryforwards (“NOL”) of $84,630 and has recorded a deferred tax asset of $4,762 reflecting this benefit. These state NOLs generally expire in years beginning 2037 and after.

The Company believes that adequate amounts of tax, interest and penalties have been provided for potential tax uncertainties; these amounts are included in other long-term liabilities in the Consolidated Balance Sheets. As of July 28, 2023 and July 29, 2022, the Company’s gross liability for uncertain tax positions, exclusive of interest and penalties, was $9,675 and $10,858, respectively.

Summarized below is a tabular reconciliation of the beginning and ending balance of the Company’s total gross liability for uncertain tax positions exclusive of interest and penalties:

	July 28, 2023			July 29, 2022			July 30, 2021
Balance at beginning of year	$	10,858		$	14,477		$	17,835
Tax positions related to the current year: Additions		710			1,152			1,596
Reductions		—			—			—
Tax positions related to the prior year: Additions		52			17			—
Reductions		(298	)		(1,241	)		(1,045	)
Settlements		—			(1,942	)		(1,786	)
Expiration of statute of limitations		(1,647	)		(1,605	)		(2,123	)
Balance at end of year	$	9,675		$	10,858		$	14,477

If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would be a tax benefit to the Company and impact the effective tax rate.  The following table highlights the amount of uncertain tax positions, exclusive of interest and penalties, which, if recognized, would affect the effective tax rate for each of the three years:

	2023		2022		2021
Uncertain tax positions	$	7,644	$	8,578	$	11,437

The Company had $7,896, $7,133, and $7,755 in interest and penalties accrued as of July 28, 2023, July 29, 2022, and July 30, 2021, respectively.

The Company recognized accrued interest and penalties related to unrecognized tax benefits of $764, $(622) and $545 in its provision for income taxes on July 28, 2023, July 29, 2022 and July 30, 2021, respectively.

In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities.  Based on the outcome of these examinations or as a result of the expiration of the statutes of limitations for specific taxing jurisdictions, it is reasonably possible that the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company’s financial statements at July 28, 2023 by approximately $3,000 to $5,000 within the next twelve months.  At July 28, 2023, the Company was subject to income tax examinations for its U.S. federal income taxes after 2018 and for state and local income taxes generally after 2018.