Income Taxes

12 Months Ended

Sep. 25, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Income tax expense (benefit) consists of the following:

(Thousands of Dollars)	2022	2021	2020
Current:
Federal	4,932	(2,431)	8,779
State	142	3,642	(10)
Deferred	(4,376)	6,044	(5,796)
	698	7,255	2,973

Income tax (benefit) expense related to 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 (Loss) Income Before Income Taxes)	2022	2021	2020
Computed “expected” income tax expense	21.0	21.0	21.0
State income tax benefit, net of federal tax benefit	(8.9)	5.6	21.7
Net income of associated companies	(77.2)	(1.8)	(18.3)
Resolution of tax matters	(32.2)	3.2	(30.5)
Remeasurement due to rate changes	(11.2)	0.1	(31.0)
Non-deductible expenses	124.0	0.9	19.4
Provision to return adjustment	70.2	—	—
Valuation allowance	11.9	(6.0)	125.2
Wage credit, net addback	(7.5)	—	—
Warrant valuation	(1.9)	(0.4)	(7.3)
Other	—	—	4.4
	88.2	22.6	104.6

Net deferred income tax liabilities consist of the following components:

(Thousands of Dollars)	September 25 2022	September 26 2021
Deferred income tax liabilities:
Property and equipment	(11,712)	(13,284)
Identified intangible assets	(21,649)	(27,543)
ASC 842 - Leases DTL	(11,308)	(15,813)
Pension and postretirement benefits	—	(6,346)
Investments	(26,489)	(14,823)
	(71,158)	(77,809)
Deferred income tax assets:
Allowance for credit losses	802	237
Pension and postretirement benefits	3,445	—
Long-term debt	161	716
Interest deduction limitation	4,809	—
Operating loss carryforwards	26,224	26,999
ASC 842 - Leases DTA	13,112	15,840
Accrued compensation	1,914	6,630
Accrued expenses	1,663	443
Other	2,964	812
	55,094	51,677
Valuation allowance	(26,655)	(27,631)
Net deferred income tax liabilities	(42,719)	(53,763)

All deferred taxes are categorized as non-current.

A reconciliation of 2022 and 2021 changes in gross unrecognized tax benefits is as follows:

(Thousands of Dollars)	2022	2021
Balance, beginning of year	18,279	27,008
Changes in tax positions for prior years	(307)	1,008
Increases (decrease) in tax positions for the current year	1,887	(8,940)
Lapse in statute of limitations	(1,617)	(797)
Balance, end of year	18,242	18,279

Approximately $11,942,000 and $10,984,000 of the gross unrecognized tax benefit balances for 2022 and 2021, 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 $3,582,000 at September 25, 2022. 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, $1,476,000 at September 25, 2022 and $1,393,000 at September 26, 2021. There were no amounts provided for penalties at September 25, 2022 or September 26, 2021.

At September 25, 2022 and September 26, 2021, we had a deferred tax asset of $4,809,000 and $0, respectively, related to disallowed interest expense.

The company is current undergoing a New York Franchise Tax audit that includes fiscal year periods 2019 through 2021. Certain of the Company's state income tax returns for the year ended September 25, 2016 are open for examination. The Federal and remaining state returns are open beginning with the September 24, 2017 year.

At September 25, 2022, we have state tax benefits of approximately $45,137,000 in net operating loss ("NOL") carryforwards that expire between 2022 and 2040. These NOL carryforwards result in a deferred income tax asset of $35,658,000 at September 25, 2022, a portion of which is offset by a valuation allowance.