Income Taxes

12 Months Ended

Oct. 02, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12—Income Taxes

The provision for income taxes consists of the following (in thousands):

	Year Ended
	October 2, 2021		October 3, 2020			September 28, 2019
Current:
Federal	$	25,914	$	8,188		$	14,072
State		7,733		2,262			1,537
Total Current		33,647		10,450			15,609
Deferred:
Federal		2,633		(5,844	)		(418	)
State		215		(1,979	)		(336	)
Total Deferred		2,848		(7,823	)		(754	)
Total income tax provision	$	36,495	$	2,627		$	14,855

A reconciliation of the provision for income taxes to the amount computed at the federal statutory rate is as follows (in thousands):

	Year Ended
	October 2, 2021			October 3, 2020			September 28, 2019
Federal income tax at statutory rate	$	34,257		$	12,851		$	3,198
Equity-based compensation		(2,360	)		375			447
Section 162(m) limitation		2,826			—			—
Permanent differences		564			89			100
Change in valuation allowance		(5,425	)		(11,373	)		11,060
State taxes, net of federal benefit		7,072			2,503			54
Other		(439	)		(1,818	)		(4	)
Total income tax provision	$	36,495		$	2,627		$	14,855

Our effective rate for fiscal 2021 was 22.4% as compared to 4.3% in fiscal 2020. During the first quarter of fiscal 2021, we released a $5.4 million valuation allowance for our interest limitation carryforward as a result of our IPO and subsequent paydown of debt. During fiscal 2020, the tax provision reflects a decrease in the valuation allowance for our interest limitation carryforward due to favorable provisions of the CARES Act.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are summarized below (in thousands):

	October 2, 2021			October 3, 2020
Deferred tax assets:
Compensation accruals	$	5,674		$	5,433
Inventory		—			1,053
Interest limitation		—			6,919
Lease liabilities		54,489			46,644
Equity-based compensation		1,646			—
Reserves and other accruals		1,138			354
Total deferred tax assets		62,947			60,403
Deferred tax liabilities:
Property, plant, and equipment		(1,392	)		(611	)
Intangibles		(3,849	)		(3,258	)
Lease assets		(52,264	)		(44,014	)
Deferred financing cost		(399	)		(512	)
Other		(1,309	)		—
Total deferred tax liabilities		(59,213	)		(48,395	)
Valuation allowance					(5,425	)
Deferred tax assets (liabilities), net	$	3,734		$	6,583

Valuation Allowance consists of the following (in thousands):

	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions			Balance at End of Period
2021	$	5,425	$	—	$	(5,425	)	$	—
2020	$	16,798	$	—	$	(11,373	)	$	5,425

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. The interest expense limitation passed in the CARES Act created a deferred tax asset for the fiscal year ended October 3, 2020 that we did not anticipate realizing in the immediate future; as a result, a valuation allowance was recorded. The valuation allowance was removed during the first quarter of fiscal 2021 due to the Company’s paydown of debt with proceeds from the IPO, which decreased interest expense.

We are subject to United States federal and state taxes in the normal course of business and our income tax returns are subject to examination by the relevant tax authorities. We are no longer subject to United States federal examinations by taxing authorities for calendar years before 2018 and are no longer subject to state examinations for calendar years before 2017.

We have not identified any material uncertain tax positions.