Note 13 - Income Taxes

12 Months Ended

Sep. 26, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13   INCOME TAXES

Income tax expense (benefit) consists of the following:

(Thousands of Dollars)	2021			2020			2019
Current:
Federal	(2,431		)	8,779			8,763
State	3,642			(10		)	1,171
Deferred	6,004			(4,665		)	(2,003		)
		7,215			4,104			7,931

Income tax expense (benefit) related to continuing operations differs from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes. The reasons for these differences are as follows:

(Percent of Income (Loss) Before Income Taxes)	2021			2020			2019
Computed “expected” income tax expense	21.0			21.0			21.0
State income tax benefit, net of federal tax benefit	5.6			21.7			1.3
Net income of associated companies	(1.8		)	(18.3		)	(3.9		)
Resolution of tax matters	3.2			(30.5		)	1.7
Remeasurement due to rate changes	—			24.0			—
Non-deductible expenses	0.9			19.4			3.4
Valuation allowance	(6.0		)	110.0			10.8
Warrant valuation	(0.4		)	(7.3		)	(0.6		)
Other	—			4.4			(0.4		)
		22.5			144.4			33.3

Net deferred income tax liabilities consist of the following components:

	September 26			September 27
(Thousands of Dollars)	2021			2020
Deferred income tax liabilities:
Property and equipment		(13,284	)		(18,646	)
Identified intangible assets		(14,032	)		(16,765	)
ASC 842 - Leases DTL		(15,813	)		(18,669	)
Pension and postretirement benefits		(6,346	)		—
Investments		(14,275	)		(6,154	)
		(63,750	)		(60,234	)
Deferred income tax assets:
Allowance for credit losses		237			1,733
Pension and postretirement benefits		—			7,075
Long-term debt		716			350
Interest deduction limitation		—			5,383
Operating loss carryforwards		26,999			28,240
ASC 842 - Leases DTA		15,840			18,675
Accrued compensation		6,630			13,142
Accrued expenses		443			1,673
Other		812			430
		51,677			76,701
Valuation allowance		(28,222	)		(31,675	)
Net deferred income tax liabilities		(40,295	)		(15,208	)

All deferred taxes are categorized as non-current.

A reconciliation of 2021 and 2020 changes in gross unrecognized tax benefits is as follows:

(Thousands of Dollars)	2021			2020
Balance, beginning of year		27,008			18,252
Changes in tax positions for prior years		1,008			(331	)
Increases (decrease) in tax positions for the current year		(8,940	)		9,825
Lapse in statute of limitations		(797	)		(738	)
Balance, end of year		18,279			27,008

Approximately $10,984,000 and $10,319,000 of the gross unrecognized tax benefit balances for 2021 and 2020, respectively, relate to state net operating losses which are netted against deferred taxes on our balance sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $1,033,000 at September 26, 2021. The company does not expect that unrecognized tax benefits will fluctuate significantly in the next twelve months. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was, net of tax, $1,393,000 at  September 26, 2021 and $1,000,000 at September 27, 2020. There were no amounts provided for penalties at  September 26, 2021 or September 27, 2020.

At September 26, 2021 and September 27, 2020, we had a deferred tax asset of $0 and $5,383,000, respectively, related to disallowed interest expense.

No significant income tax audits are currently in progress. Certain of the Company's state income tax returns for the year ended September 28, 2015, are open for examination. The Federal and remaining state returns are open beginning with the September 26, 2016, year.

At September 26, 2021, we have state tax benefits of approximately $45,160,000 in net operating loss ("NOL") carryforwards that expire between 2022 and 2040. These NOL carryforwards result in a deferred income tax asset of $35,676,000 at September 26, 2021, a portion of which is offset by a valuation allowance.