Income Taxes

12 Months Ended

Jan. 28, 2023

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

The provision (benefit) for income taxes for the Fiscal Years 2022, 2021, and 2020 consists of the following (in thousands):

	For the Fiscal Year Ended
	January 28, 2023			January 29, 2022			January 30, 2021
Current
U.S. Federal	$	14,562		$	9,790		$	(30,304	)
State and local		2,582			1,359			(659	)
Total current		17,144			11,149			(30,963	)
Deferred tax benefit
U.S. Federal		(985	)		(1,913	)		(13,922	)
State and local		340			(1,218	)		(3,277	)
Total deferred tax benefit		(645	)		(3,131	)		(17,199	)
Total income tax provision (benefit)	$	16,499		$	8,018		$	(48,162	)

The effective tax rate for the fiscal year ended January 28, 2023 differs from the federal statutory rate of 21% primarily due to the impact of state and local income taxes, the impact of executive compensation limitations, valuation allowance changes and tax return to provision adjustments.

A reconciliation of the federal statutory income tax rate of 21% to the Company’s effective tax rate is as follows for the periods presented:

	For the Fiscal Year Ended
	January 28, 2023			January 29, 2022			January 30, 2021
Federal statutory income tax rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal tax effect		6.1	%		(14.7	)%		4.9	%
Fair market value of warrants and derivative		0.0	%		(59.9	)%		0.0	%
Disallowed officer compensation		2.1	%		(6.0	)%		0.0	%
Goodwill impairment		0.0	%		0.0	%		(2.0	)%
Net operating loss CARES ACT benefit		0.0	%		0.3	%		5.7	%
Valuation allowance		(2.2	)%		14.1	%		(2.9	)%
Equity-based compensation expense		(0.3	)%		4.4	%		(0.2	)%
Charitable contributions		(0.2	)%		0.6	%		0.1	%
Tax return to provision adjustments		1.5	%		(0.2	)%		0.0	%
Other		0.1	%		0.6	%		(0.9	)%
Effective tax rate		28.1	%		(39.8	)%		25.7	%

The components of deferred tax assets (liabilities) were as follows (in thousands):

	January 28, 2023			January 29, 2022
Deferred tax assets
Accrued expenses	$	5,155		$	6,127
State net operating loss carryforward		713			2,514
Start-up costs		409			472
Debt issuance costs		895			1,044
Lease liabilities		40,921			45,724
Total deferred tax assets, gross		48,093			55,881
Less: Deferred tax valuation allowances		(1,350	)		(2,657	)
Total deferred tax assets net of valuation allowances		46,743			53,224
Deferred tax liabilities
Inventory		(1,050	)		(900	)
Lease assets		(30,958	)		(33,976	)
Fixed assets		(5,939	)		(8,466	)
Intangible assets		(18,336	)		(19,976	)
Prepaid expenses		(519	)		(610	)
Total deferred tax liabilities		(56,802	)		(63,928	)
Net deferred tax liabilities	$	(10,059	)	$	(10,704	)

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and concluded that it is more likely than not that the Company will not recognize part of the state deductible differences and net operating losses due to the history of recent losses in Fiscal Years 2021 and 2020. Accordingly, a valuation allowance of $1.4 million as of January 28, 2023 and $2.7 million as of January 29, 2022 has been established against the state deferred tax assets. The valuation allowance decreased by $1.3 million primarily as a result of the increase in net operating loss carryforward utilized in the current year. The Company will continue to evaluate the positive and negative evidence available and may reduce the valuation allowance in the future if the Company’s recent profitability trends continue.

As of January 28, 2023, the Company does not have a federal net operating loss carryforward. The Company has $0.9 million of state net operating loss and interest carryforward benefits, of which a majority expire at various dates between 2031-2041. The Company had no federal or state tax credit carryforwards as of January 28, 2023 and January 29, 2022.

The following table summarizes the changes in the Company’s unrecognized income tax benefits for Fiscal Years 2022, 2021 and 2020 (in thousands):

	For the Fiscal Year Ended
	January 28, 2023		January 29, 2022		January 30, 2021
Balance at the beginning of the period	$	399	$	336	$	—
Increases based on tax positions related to the current period		—		—		336
Increases for tax positions related to prior periods		26		63		—
Balance at the end of the period	$	425	$	399	$	336

The Company had gross unrecognized tax benefits of $0.4 million, $0.4 million and $0.3 million as of January 28, 2023, January 29, 2022 and January 30, 2021, respectively, recorded in Other liabilities on the consolidated balance sheets. The Company will recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. As of January 28, 2023, no significant amount of penalties or interest have been accrued.

For federal and state income tax purposes, the Company’s tax years remain open under statute for Fiscal Year 2015 to present.