14. Income Taxes

The income tax expense (benefit) differs from the amount that would have resulted from applying the combined Canadian federal and provincial statutory income tax rate to earnings (loss) from continuing operations before income taxes due to the following:

	December 30, 2023		December 31, 2022		January 1, 2022
	$		$		$
Earnings (loss) from continuing operations before income taxes	(18,641	)	4,777		689
Canadian statutory rate	26.5%		26.5%		26.5%
Income tax expense (benefit) at statutory rate	(4,940	)	1,266		183
Stock-based compensation	(778	)	1,054		(4,714	)
Change in valuation allowance	5,911		(471	)	975
Disallowed executive compensation	2,372		367		135
Foreign tax rate differential	107		(156	)	(73	)
Change in enacted tax rates	90		(9	)	17
Other	507		(1,155	)	(1,377	)
Income tax expense (benefit)	3,269		896		(4,854	)

The components of earnings (loss) from continuing operations before income taxes are shown below:

	December 30, 2023		December 31, 2022		January 1, 2022
	$		$		$
Canada	(9,202	)	(11,455	)	(10,522	)
U.S.	(9,439	)	16,232		11,211
Earnings (loss) from continuing operations before income taxes	(18,641	)	4,777		689

The components of income tax expense (benefit) are shown below:

	December 30, 2023		December 31, 2022		January 1, 2022
	$		$		$
Current income tax expense (benefit):
Canada	(32	)	84		(9	)
U.S.	(677	)	1,108		(283	)
	(709	)	1,192		(292	)

Deferred income tax expense (benefit):
Canada	-		-		299
U.S.	3,978		(296	)	(4,861	)
	3,978		(296	)	(4,562	)
Income tax expense (benefit)	3,269		896		(4,854	)

Deferred income taxes of the Company are comprised of the following:

	December 30, 2023		December 31, 2022
	$		$
Loss and credit carryovers	43,871		20,201
Lease liabilities	29,395		23,609
Interest expense limitation (163j)	15,906		9,464
Inventory basis differences	3,723		1,805
Stock-based compensation	1,255		2,160
Right-of-use lease assets	(28,285	)	(23,071	)
Property, plant and equipment and intangible assets	(18,537	)	(28,088	)
Other	2,623		2,458
	49,951		8,538
Less: valuation allowance	50,456		4,826
Deferred income tax asset (liability)	(505	)	3,712

The components of the deferred income tax asset (liability) are shown below:

	December 30, 2023		December 31, 2022
	$		$
Canada	(325	)	(325	)
U.S.	-		3,978
Other	(180	)	59
Deferred income tax asset (liability)	(505	)	3,712

The components of the deferred income tax valuation allowance are as follows:

	December 30, 2023	December 31, 2022
	$	$
Balance, beginning of year	4,826	5,267
Increase (decrease) in valuation allowance	45,630	(441	)
Balance, end of year	50,456	4,826

The following table details the Company's tax attributes as at December 30, 2023, primarily related to net operating losses, tax credits and capital losses for which it has recorded deferred tax assets:

		Gross attribute amount		Net attribute amount	Expiration years
Tax Attributes
Net operating losses - Canada	$	2,123	$	563	2040-2041
Net operating losses - U.S. Federal		145,989		30,658	2037 and indefinite
Net operating losses - U.S. State		103,009		5,613	2027-2043 and indefinite
Net operating losses - Other		167		50	2028
Federal credits - Canada		-		255	N/A
Federal credits - U.S.		-		2,833	2031-2043
State credits - U.S.		-		211	2024-2026
Federal capital loss - Canada		27,838		3,688	N/A
Total			$	43,871

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determinations, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on this evaluation, as at December 30, 2023, a valuation allowance of $50.5 million (December 31, 2022 - $4.8 million) had been recorded against certain assets to reduce the net benefit recorded in the consolidated financial statements.

As the undistributed earnings of the Company's non-Canadian affiliates and associated companies are considered to be indefinitely reinvested, no provision for deferred taxes has been provided thereon.

For the years ended December 30, 2023, December 31, 2022 and January 1, 2022, the Company did not identify any material uncertain tax positions or recognize any related tax benefits. The Company believes it has adequately examined its tax positions taken or expected to be taken in a tax return; however, amounts asserted by taxing authorities could differ from the Company's positions. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Consistent with its historical financial reporting, the Company has classified interest and penalties related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations, and with the related liability on the consolidated balance sheets.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions are the U.S. (including multiple states) and Canada (Ontario). The Company's 2019 through 2022 tax years (and any tax year for which available non-capital loss carryforwards were generated up to the amount of non-capital loss carryforward) remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes, and tax years 2016 through 2022 remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing audits in various other jurisdictions that are not considered material to the Company's consolidated financial statements.