XML 40 R27.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

17. Income Taxes

Income Tax Provision

The income tax provision consists of the following:

 

 

 

Year Ended

 

 

 

December 31, 2023

 

 

January 1, 2023

 

 

January 2, 2022

 

U.S. Federal—current

 

$

67,898

 

 

$

66,398

 

 

$

60,329

 

U.S. Federal—deferred

 

 

(5,927

)

 

 

1,028

 

 

 

(1,663

)

U.S. Federal—total

 

 

61,971

 

 

 

67,426

 

 

 

58,666

 

State—current

 

 

21,902

 

 

 

19,823

 

 

 

19,715

 

State—deferred

 

 

1,011

 

 

 

900

 

 

 

(146

)

State—total

 

 

22,913

 

 

 

20,723

 

 

 

19,569

 

Total provision

 

$

84,884

 

 

$

88,149

 

 

$

78,235

 

 

Tax Rate Reconciliation

Income tax provision differed from the amounts computed by applying the U.S. federal income tax rate to pre-tax income as a result of the following:

 

 

 

Year Ended

 

 

 

December 31, 2023

 

 

January 1, 2023

 

 

January 2, 2022

 

Federal statutory rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

Increase (decrease) in income taxes resulting from:

 

 

 

 

 

 

 

 

 

State income taxes, net of federal benefit

 

 

5.4

 

 

 

4.7

 

 

 

4.8

 

Enhanced charitable contribution impact

 

 

(1.0

)

 

 

(0.9

)

 

 

(1.5

)

Non-deductible Executive Compensation

 

 

1.4

 

 

 

0.9

 

 

 

0.3

 

Benefit of federal tax credit

 

 

(0.7

)

 

 

(0.5

)

 

 

(0.4

)

Excess tax benefits from share based payments

 

 

(1.2

)

 

 

(0.4

)

 

 

(0.1

)

Other, net

 

 

(0.2

)

 

 

0.4

 

 

 

0.2

 

Effective income tax rate

 

 

24.7

%

 

 

25.2

%

 

 

24.3

%

 

 

The effective income tax rate decreased to 24.7% in 2023 from 25.2% in 2022 primarily due to excess tax benefits related to the exercise or vesting of share-based awards partially offset by an increase in nondeductible executive compensation The effective income tax rate increased to 25.2% in 2022 from 24.3% in 2021 primarily due to decreased charitable contribution deductions in 2022 from the lapsing of benefits initially provided for in the CARES Act.

Excess tax benefits or detriments associated with share-based payment awards are recognized as income tax benefits or expense in the income statement. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. The income tax benefit resulting from share-based awards was $5.0 million, $1.7 million and $0.2 million for 2023, 2022 and 2021, respectively, and is reflected as a reduction to the 2023, 2022 and 2021 income tax provision.

Deferred Taxes

Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows:

 

 

 

As Of

 

 

 

December 31, 2023

 

 

January 1, 2023

 

Deferred tax assets

 

 

 

 

 

 

Employee benefits

 

$

18,329

 

 

$

16,052

 

Tax credits

 

 

105

 

 

 

166

 

Operating leases

 

 

392,168

 

 

 

329,154

 

Other lease related

 

 

6,137

 

 

 

5,740

 

Other accrued liabilities

 

 

4,320

 

 

 

4,004

 

Charitable contribution carryforward

 

 

3,343

 

 

 

2,819

 

Inventories and other

 

 

2,905

 

 

 

2,605

 

Total gross deferred tax assets

 

 

427,307

 

 

 

360,540

 

Less: Valuation Allowance

 

 

(3,343

)

 

 

(917

)

Total deferred tax assets, net of valuation allowance

 

 

423,964

 

 

 

359,623

 

Deferred tax liabilities

 

 

 

 

 

 

Depreciation and amortization

 

 

(80,765

)

 

 

(83,091

)

Intangible assets

 

 

(64,668

)

 

 

(52,413

)

Operating leases

 

 

(339,973

)

 

 

(284,377

)

Asset retirement obligations

 

 

(939

)

 

 

(865

)

Total gross deferred tax liabilities

 

 

(486,345

)

 

 

(420,746

)

Net deferred tax liability

 

$

(62,381

)

 

$

(61,123

)

 

A valuation allowance is established for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits, or that the realization of future deductions is uncertain.

Management performs an assessment over future taxable income to analyze whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

The valuation allowance was $3.3 million and $0.9 million as of December 31, 2023 and January 1, 2023, respectively, related to contribution carryforwards that management does not believe will ultimately be realized.

The Company has evaluated all available positive and negative evidence and believes it is probable that all other the deferred tax assets will be realized and has not recorded any other valuation allowance against the Company’s deferred tax assets as of December 31, 2023 and January 1, 2023.

The Company applies the authoritative accounting guidance under ASC 740 for the recognition, measurement, classification and disclosure of uncertain tax positions taken or expected to be taken in a tax return.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

 

 

 

As Of

 

 

 

December 31, 2023

 

 

January 1, 2023

 

 

January 2, 2022

 

Beginning balance

 

$

1,119

 

 

$

1,770

 

 

$

1,803

 

Additions based on tax positions related to the
   current year

 

 

58

 

 

 

43

 

 

 

16

 

Additions based on tax positions related to prior years

 

 

 

 

 

 

 

 

31

 

Reductions for settlements with taxing authorities

 

 

 

 

 

(694

)

 

 

 

Reduction due to lapse of applicable statute of limitations

 

 

(700

)

 

 

 

 

 

 

Reductions for tax positions for prior years

 

 

 

 

 

 

 

 

(80

)

Ending balance

 

$

477

 

 

$

1,119

 

 

$

1,770

 

 

The Company had unrecognized tax benefits (tax effected) of $0.5 million and $1.1 million as of December 31, 2023 and January 1, 2023, respectively. These would impact the effective tax rate if recognized.

The Company’s policy is to recognize accrued interest and penalties as a component of income tax expense.

The Company anticipates a decrease in the total amount of unrecognized tax benefits in the amount of $0.2 million during the next twelve months related to the passing of the applicable statute of limitations for a tax position taken for executive compensation.

The Company files income tax returns with federal and state tax authorities within the United States. The general statute of limitations for income tax examinations remains open for federal tax returns for tax years 2017 through 2022 and state tax returns for the tax years 2018 through 2022.