Income Taxes Income Taxes (Notes)

12 Months Ended

Apr. 29, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 13. Income Taxes - Continuing Operations

For Fiscal 2023, Fiscal 2022 and Fiscal 2021, we had no material revenue or expense in jurisdictions outside the United States other than India.

Impact of U.S. Tax Reform

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (The “CARES Act”) was enacted. We have analyzed the provisions, which provide for a technical correction to allow for full expensing of qualified leasehold improvements, modifications to charitable contribution and net operating loss limitations (“NOLs”), modifications to the deductibility of business interest expense, as well as Alternative Minimum Tax (“AMT”) credit acceleration. The most significant impact of the legislation for the Company was an income tax benefit of $7,164 for the carryback of NOLs to higher tax rate years, recorded in Fiscal 2021. As of April 29, 2023, we recognized a current income tax receivable for NOL carrybacks in prepaid and other current assets on the consolidated balance sheet. We received a $7,841 refund in Fiscal 2022, a $15,774 refund in Fiscal 2023 and expect to receive additional refunds of approximately $10,019.

Income tax benefits for Fiscal 2023, Fiscal 2022 and Fiscal 2021 are as follows:

	52 weeks ended
	April 29, 2023		April 30, 2022		May 1, 2021
Current:
Federal	$	—	$	(1,900)	$	(35,130)
State	301		444		(524)
International	252		266		147
Total Current	553		(1,190)		(35,507)
Deferred:
Federal	458		(12,075)		(5,803)
State	—		4,113		(1,970)
International	—		—		—
Total Deferred	458		(7,962)		(7,773)
Total US tax provision	$	1,011	$	(9,152)	$	(43,280)

Reconciliation between the effective income tax rate and the federal statutory income tax rate is as follows:

	52 weeks ended
	April 29, 2023		April 30, 2022		May 1, 2021
Federal statutory income tax rate (a)	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	3.6		4.6		4.4
Permanent book / tax differences	(1.2)		(0.8)		(1.0)
CARES Act NOL Carryback	—		—		4.1
Valuation allowance	(24.6)		(12.3)		(4.2)
Other, net	0.1		0.4		0.2
Effective income tax rate	(1.1)	%	12.9	%	24.5	%

The effective tax rate for Fiscal 2023 is significantly lower as compared to the prior year comparable period due to the valuation allowance benefit of changing the tax fiscal year in the prior year.

One percentage point on our Fiscal 2023 effective tax rate is approximately $891. The permanent book / tax differences are principally comprised of non-deductible officer's compensation, and non-deductible stock compensation.

We account for income taxes using the asset and liability method. Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards.

The significant components of our deferred taxes consisted of the following:

	As of
	April 29, 2023		April 30, 2022
Deferred tax assets:
Estimated accrued liabilities	$	5,840	$	7,141
Inventory	19,426		16,113
Stock-based compensation	1,145		1,879
Insurance liability	347		374
Operating lease liabilities	65,471		75,950
Tax credits	886		440
Goodwill	8,314		9,214
Net operating losses	70,503		53,149
Interest carryforwards	7,246		2,390
Other	2,456		2,620
Gross deferred tax assets	181,634		169,270
Valuation allowance	(56,962)		(33,209)
Net deferred tax assets	124,672		136,061
Deferred tax liabilities:
Intangible asset amortization	(23,555)		(27,160)
Operating lease right-of-use assets	(63,201)		(73,035)
LIFO inventory valuation	(33,999)		(29,917)
Property and equipment	(5,755)		(7,379)
Gross deferred tax liabilities	(126,510)		(137,491)
Net deferred tax liability	$	(1,838)	$	(1,430)

As of April 29, 2023, we had $0 of unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at May 2, 2020	$	52
Additions for tax positions of the current period	—
Additions for tax positions of prior periods	—
Reductions due to settlements	—
Other reductions for tax positions of prior periods	(52)
Balance at May 1, 2021	$	—
Additions for tax positions of the current period	—
Additions for tax positions of prior periods	—
Reductions due to settlements	—
Other reductions for tax positions of prior periods	—
Balance at April 30, 2022	$	—
Additions for tax positions of the current period	—
Additions for tax positions of prior periods	—
Reductions due to settlements	—
Other reductions for tax positions of prior periods	—
Balance at April 29, 2023	$	—

Our policy is to recognize interest and penalties related to income tax matters in income tax expense. As of both April 29, 2023 and April 30, 2022, we had accrued $0 for net interest and penalties. 

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. In evaluating our ability to utilize our deferred tax assets, we considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis. As of April 29, 2023, we recorded a valuation allowance of $56,962 compared to $33,209 as of April 30, 2022.

As of April 29, 2023, we had state net operating loss carryforwards (“NOLs”) of approximately $407,294 which will begin to expire in 2026, state tax credit carryforwards totaling $230 which will begin to expire in 2024, federal tax credit carryforward of $886 which will begin to expire in 2040 and federal NOLs of approximately $234,951 which have an indefinite carryforward period.

As of April 29, 2023, we recorded $201 of foreign withholding tax related to repatriations of earnings from certain foreign subsidiaries. If additional earnings in these foreign subsidiaries were repatriated in the future, additional income and withholding tax expense would be incurred. Additional income and withholding tax expense on any future repatriated earnings is estimated to be less than $100.

We are subject to U.S. federal income tax, as well as income tax in jurisdictions of each state having an income tax. The tax years that remain subject to examination are primarily Fiscal 2018 and forward. Some earlier years remain open for a small minority of states.