Income Taxes

12 Months Ended

Aug. 26, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesIncome tax expense consisted of the following:

(in millions)	2023		2022		2021
Current
Federal	$	38.2	$	105.9	$	71.6
State	8.8		24.9		16.2
Total	47.0		130.8		87.8
Deferred
Federal	15.9		(5.6)		0.7
State	0.4		(1.1)		(2.9)
Total	16.3		(6.7)		(2.2)
Provision for income taxes	$	63.3	$	124.1	$	85.6

As of August 26, 2023, $10.7 million of U.S. federal income taxes receivable was included in prepaid expenses and other current assets on the Consolidated Balance Sheets. Comparatively, as of August 27, 2022, $0.7 million of U.S. federal income taxes payable was included in income taxes payable on the Consolidated Balance Sheets.

A reconciliation of the U.S. statutory income tax rate to our effective income tax rate is as follows:

	2023		2022		2021
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	3.1	%	3.5	%	3.3	%
Income tax credits	(1.1)	%	(0.5)	%	(0.6)	%
Nondeductible compensation	1.1	%	0.9	%	0.5	%
Tax-free and dividend income	(0.1)	%	(0.1)	%	(0.1)	%
Uncertain tax position settlements and adjustments	0.1	%	(0.1)	%	(0.1)	%
Other items	(1.4)	%	(0.6)	%	(0.7)	%
Effective tax provision rate	22.7	%	24.1	%	23.3	%

Our effective tax rate decreased to 22.7% in Fiscal 2023 compared to 24.1% in Fiscal 2022 primarily due to both an increase in tax credits year-over-year over decreased income in the current year and favorable return to provision adjustments.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the U.S. Among other provisions, the IRA includes a 15% corporate minimum tax rate applied to certain large corporations and a 1% excise tax on corporate stock repurchases made after December 31, 2022. We do not expect the IRA to have a material impact on our consolidated financial statements. The amount of excise tax on Fiscal 2023 stock repurchases was not significant to our consolidated financial statements.

The tax effects of temporary differences that give rise to deferred income taxes were as follows:

(in millions)	August 26, 2023		August 27, 2022
Warranty reserves	$	23.5	$	30.7
Deferred compensation	2.4		3.0
Self-insurance reserve	5.1		4.9
Stock-based compensation	4.2		5.5
Leases	13.8		12.9
Convertible notes	5.8		—
Capitalized research and development costs	11.1		—
Other	13.9		9.1
Total deferred tax assets	79.8		66.1
Convertible notes	—		2.0
Intangibles	50.5		39.5
Depreciation	28.7		19.0
Leases	12.3		11.7
Total deferred tax liabilities	91.5		72.2
Total deferred income tax liabilities, net	$	11.7	$	6.1

Changes in the unrecognized tax benefits are as follows:

(in millions)	2023		2022		2021
Balance at beginning of year	$	5.0	$	5.5	$	5.8
Gross decreases-tax positions in a prior year	(1.5)		(1.1)		(0.9)
Gross increases-tax positions in a prior year	1.0		—		—
Gross increases-current year tax positions	1.0		0.6		0.6
Balance at end of year	5.5		5.0		5.5
Accrued interest and penalties	0.6		0.7		1.0
Total unrecognized tax benefits	$	6.1	$	5.7	$	6.5

The amount of unrecognized tax benefits is not expected to change materially within the next 12 months. If the remaining uncertain tax positions are ultimately resolved favorably, $5.7 million of unrecognized tax benefits would have a favorable impact on our effective tax rate. It is our policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense.We file a U.S. Federal tax return, as well as returns in various international and state jurisdictions. Although certain years are no longer subject to examination by the Internal Revenue Service ("IRS") and various state taxing authorities, net operating loss carryforwards generated in those years may still be adjusted upon examination by the IRS or state taxing authorities. As of August 26, 2023, our federal returns from Fiscal 2020 to present are subject to review by the IRS. With limited exception, state returns from Fiscal 2019 to present continue to be subject to review by state taxing jurisdictions. We are currently under review by certain U.S. state tax authorities for Fiscal 2019 through Fiscal 2021. Several years may lapse before an uncertain tax position is audited and finally resolved and it is difficult to predict the outcome of such audits. We believe we have adequately reserved for our exposure to potential additional payments for uncertain tax positions in our liability for unrecognized tax benefits.