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Income Taxes
 12 Months Ended
Dec. 27, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
9. Income Taxes
 
The components of the net deferred tax liability are as follows:
 
 
 
December 27, 2018
 
 
December 28, 2017
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
Accrued employee benefits
 
$
13,381
 
 
$
13,736
 
Depreciation and amortization
 
 
(59,296
)
 
 
(55,466
)
Other
 
 
3,938
 
 
 
3,497
 
Net deferred tax liability
 
$
(41,977
)
 
$
(38,233
)
 
Income tax expense consists of the following:
 
 
 
Year Ended
 
 
 
December 27,

2018
 
 
December 28,

2017
 
 
December 29,

2016
 
 
 
(in thousands)
 
Current:
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
$
7,022
 
 
$
8,707
 
 
$
15,434
 
State
 
 
3,181
 
 
 
1,558
 
 
 
4,667
 
Deferred:
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 
 
2,815
 
 
 
(7,155
)
 
 
3,402
 
State
 
 
109
 
 
 
515
 
 
 
(509
)
 
 
$
13,127
 
 
$
3,625
 
 
$
22,994
 
 
A tax benefit of $1,947,000 is included in the fiscal 2018 current federal income tax amount and a tax benefit of $21,240,000 is included in the fiscal 2017 deferred federal income tax amount, both of which relate to the Tax Cuts and Jobs Act of 2017.
 
The Company’s effective income tax rate, adjusted for earnings from noncontrolling interests, was 19.7%, 5.3% and 37.8% for fiscal 2018, fiscal 2017 and fiscal 2016, respectively. During fiscal 2018, the Company recorded current tax benefits of $1,947,000 related to reductions in deferred tax liabilities related to tax accounting method changes that the Company made subsequent to the Tax Cuts and Jobs Act of 2017. During fiscal 2017, the Company recorded a deferred tax benefit of $21,240,000 related to the reduction of its net deferred tax liability resulting from the reduction in the corporate tax rate enacted in December 2017 under the Tax Cuts and Jobs Act of 2017. Excluding these favorable impacts, the Company’s effective income tax rates for fiscal 2018 and fiscal 2017 were 22.7% and 36.2%, respectively. The Company also recorded current tax benefits in fiscal 2018 related to excess tax benefits on share-based compensation. The Company has not included the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interests in its income tax expense as the entities are considered pass-through entities and, as such, the income tax expense or benefit is attributable to its owners.
 
A reconciliation of the statutory federal tax rate to the effective tax rate on earnings attributable to The Marcus Corporation follows:
 
 
 
Year Ended
 
 
 
December 27,
2018
 
 
December 28,
2017
 
 
December 29,
2016
 
Statutory federal tax rate
 
 
21.0
%
 
 
35.0
%
 
 
35.0
%
Tax benefit from Tax Cuts and Jobs Act of 2017
 
 
(2.9
)
 
 
(30.9
)
 
 
–
 
State income taxes, net of federal income tax benefit
 
 
6.1
 
 
 
4.8
 
 
 
4.8
 
Tax credits, net of federal income tax benefit
 
 
(1.1
)
 
 
(0.8
)
 
 
(0.9
)
Other
 
 
(3.4
)
 
 
(2.8
)
 
 
(1.1
)
 
 
 
19.7
%
 
 
5.3
%
 
 
37.8
%
 
 
In fiscal 2018, net income tax refunds were $
218,000
. Net income taxes paid in fiscal 2017 and fiscal 2016 totaled $
23,691,000
and $
25,017,000
, respectively.
 
During fiscal 2017, the Company was able to make a reasonable estimate of the impact of the Tax Cuts and Jobs Act of 2017, including the reduction in the corporate tax rate and the provisions related to executive compensation and 100% bonus depreciation on qualifying property. Following the guidance of the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin No. 118, any adjustments to the Company’s estimates within a one-year measurement period must be reported as a component of income tax expense in fiscal 2018. The Company did not make any adjustments to the estimates recorded in fiscal 2017.
 
A reconciliation of the beginning and ending gross amounts of unrecognized tax benefit are as follows:
 
 
 
Year Ended
 
 
 
December 27,
2018
 
 
December 28,
2017
 
 
December 29,
2016
 
 
 
(in thousands)
 
Balance at beginning of year
 
$
102
 
 
$
414
 
 
$
414
 
Increases due to:
 
 
 
 
 
 
 
 
 
 
 
 
Tax positions taken in prior years
 
 
–
 
 
 
–
 
 
 
–
 
Tax positions taken in current year
 
 
–
 
 
 
–
 
 
 
–
 
Decreases due to:
 
 
 
 
 
 
 
 
 
 
 
 
Tax positions taken in prior years
 
 
–
 
 
 
–
 
 
 
–
 
Settlements with taxing authorities
 
 
(102
)
 
 
–
 
 
 
–
 
Lapse of applicable statute of limitations
 
 
–
 
 
 
(312
)
 
 
–
 
Balance at end of year
 
$
 
–
 
 
$
102
 
 
$
414
 
 
During fiscal 2018, the Company settled a dispute with a state taxing authority and no longer carries an unrecognized tax benefit as of December 27, 2018. The Company’s total unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate were $67,000 as of December 28, 2017 and December 29, 2016. The Company had no accrued interest or penalties at December 27, 2018, compared to accrued interest of $54,000 and no accrued penalties at December 28, 2017. The Company classifies interest and penalties relating to income taxes as income tax expense. For the year ended December 27, 2018, $68,000 of interest income was recognized in the statement of earnings, compared to $
50,000
of interest expense for the year ended December 28, 2017, and $153,000 of interest expense for the year ended December 29, 2016.
 
During fiscal 2018, the Company settled, with no change, an examination by the Internal Revenue Service of its income tax return for the 31 weeks ended December 31, 2015. The Company’s federal income tax returns are no longer subject to examination prior to fiscal 2016. With certain exceptions, the Company’s state income tax returns are no longer subject to examination prior to the fiscal 2015. At this time, the Company does not expect the results from any income tax audit or appeal to have a significant impact on the Company’s financial statements.
 
The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.