Income Taxes

12 Months Ended

Sep. 24, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Income tax expense (benefit) consists of the following:

(Thousands of Dollars)	2023	2022	2021
Current:
Federal	4,528	4,932	(2,431)
State	(336)	142	3,642
Deferred	(4,541)	(4,376)	6,044
	(349)	698	7,255

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)	2023	2022	2021
Computed “expected” income tax expense	21.0	21.0	21.0
State income tax benefit, net of federal tax benefit	(5.4)	(8.9)	5.6
Net income of associated companies	31.2	(77.2)	(1.8)
Resolution of tax matters	69.7	(32.2)	3.2
Remeasurement due to state rate changes	(84.0)	(11.2)	0.1
Non-deductible expenses	(28.5)	124.0	0.9
Provision to return adjustment	(0.5)	70.2	—
Valuation allowance	16.0	11.9	(6.0)
Wage credit, net addback	—	(7.5)	—
Warrant valuation	—	(1.9)	(0.4)
Interest and penalties	(9.0)	—	—
Other	0.8	—	—
	11.3	88.2	22.6

Net deferred income tax liabilities consist of the following components:

(Thousands of Dollars)	September 24 2023	September 25 2022
Deferred income tax liabilities:
Property and equipment	(8,461)	(11,712)
Identified intangible assets	(18,705)	(21,649)
ASC 842 - Leases DTL	(9,890)	(11,308)
Other	(615)	—
Investments	(31,296)	(26,489)
	(68,967)	(71,158)
Deferred income tax assets:
Allowance for credit losses	1,655	802
Pension and postretirement benefits	1,102	3,445
Long-term debt	159	161
Interest deduction limitation	9,828	4,809
Operating loss carryforwards	25,749	26,224
ASC 842 - Leases DTA	11,037	13,112
Accrued compensation	2,341	1,914
Accrued expenses	1,510	1,663
Other	—	2,964
	53,381	55,094
Valuation allowance	(25,765)	(26,655)
Net deferred income tax liabilities	(41,351)	(42,719)

All deferred taxes are categorized as non-current.

A reconciliation of 2023 and 2022 changes in gross unrecognized tax benefits is as follows:

(Thousands of Dollars)	2023	2022
Balance, beginning of year	18,242	18,279
Changes in tax positions for prior years	(687)	(307)
Increases (decrease) in tax positions for the current year	(347)	1,887
Lapse in statute of limitations	(2,294)	(1,617)
Balance, end of year	14,914	18,242

Approximately $10.7 million and $11.9 million of the gross unrecognized tax benefit balances for 2023 and 2022, respectively, relate to state net operating losses which are netted against deferred taxes on our Consolidated Balance Sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $2.5 million at September 24, 2023. 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, $1.2 million at September 24, 2023 and $1.5 million at September 25, 2022. There were no amounts provided for penalties at September 24, 2023 or September 25, 2022.

At September 24, 2023 and September 25, 2022, we had a deferred tax asset of $9.8 million and $4.8 million, 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 24, 2023, we have state tax benefits of approximately $43.3 million in net operating loss ("NOL") carryforwards that expire between 2022 and 2040. These NOL carryforwards result in a deferred income tax asset of $34.2 million at September 24, 2023, a portion of which is offset by a valuation allowance.