Income Taxes

12 Months Ended

Jan. 28, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the provision (benefit) for income taxes were as follows (dollars in thousands):

	Fiscal Year Ended
	January 28, 2023		January 29, 2022		January 30, 2021
Current:
Federal	$	24,917	$	(3,323)	$	42,794
Foreign	—		(4)		(2)
State	8,460		(495)		10,273
	33,377		(3,822)		53,065
Deferred:
Federal	6,094		7,506		(24,380)
Foreign	—		—		—
State	(1,562)		518		(3,805)
	4,532		8,024		(28,185)
Provision for income taxes	$	37,909	$	4,202	$	24,880

Our effective income tax rate differs from the statutory rate primarily due to the difference in income tax rates from state to state where work was performed, non-deductible and non-taxable items, tax credits recognized, the tax effects of the vesting and exercise of share-based awards, impacts of tax filings for prior years, and changes in unrecognized tax benefits. During fiscal 2021 our effective tax rate was impacted by a $53.3 million goodwill impairment charge which was mostly non-deductible for income tax purposes.

During the first quarter of fiscal 2023, we were notified by the Internal Revenue Service that our federal income tax return for fiscal 2016 was selected for examination due to the net operating loss carryback claim filed in fiscal 2021. In addition, fiscal year 2020 was selected for examination in the second quarter of fiscal 2022. We were notified in the fourth quarter of this fiscal year that we have been selected for an income tax audit in Canada for fiscal years 2017 through 2020. We believe our provision for income taxes is adequate; however, any assessment may affect our results of operations and cash flows.

	Fiscal Year Ended
	January 28, 2023		January 29, 2022		January 30, 2021
Statutory rate applied to pre-tax income	$	37,826	$	11,083	$	12,436
State taxes, net of federal tax benefit	5,325		1,422		4,344
Change in accruals for uncertain tax positions	3,833		4,493		1,189
Compensation limitation	3,959		1,468		2,632
Tax filings for prior periods	(2,505)		(4,609)		—
Tax credits	(5,056)		(3,756)		(3,145)
Federal benefit of vesting and exercise of share-based awards	(3,515)		(2,425)		(436)
Deferred tax remeasurements	371		(1,355)		—
Effect of rates other than statutory	(203)		71		(4)
Non-deductible and non-taxable items, net	215		70		808
Change in valuation allowance	(376)		(12)		1
Non-deductible goodwill impairment	—		—		10,411
Tax Reform and related effects	—		—		(2,631)
Other items, net	(1,965)		(2,248)		(725)
Provision for income taxes	$	37,909	$	4,202	$	24,880

Deferred Income Taxes

The deferred tax provision represents the change in the deferred tax assets and the liabilities representing the tax consequences of changes in the amount of temporary differences and changes in tax rates during the year. The significant components of deferred tax assets and liabilities consisted of the following (dollars in thousands):

	January 28, 2023		January 29, 2022
Deferred tax assets:
Insurance and other reserves	$	22,866	$	19,407
Capitalized research expenditures (IRC Section 174)	19,498		—
Leases	17,096		15,718
Stock-based compensation	3,577		2,303
Allowance for doubtful accounts and reserves	2,984		1,356
Net operating loss carryforwards	591		9,183
CARES Act tax deferral	—		4,791
Other	5,080		6,233
Total deferred tax assets	71,692		58,991
Valuation allowance	(634)		(1,131)
Deferred tax assets, net of valuation allowance	$	71,058	$	57,860
Deferred tax liabilities:
Property and equipment	$	77,024	$	63,310
Goodwill and intangibles	36,132		33,221
Leases	17,178		15,822
Other	929		1,181
Deferred tax liabilities	$	131,263	$	113,534
Net deferred tax liabilities	$	60,205	$	55,674

The 2017 Tax Cuts and Jobs Act ("TCJA") amended Internal Revenue Code Section 174 to require taxpayers to capitalize certain research and experimental (R&E) expenditures. This regulatory change is effective for amounts paid or incurred in tax years beginning after December 31, 2021. A new deferred tax asset has been established in relation to this law change and the capitalized Section 174 costs must be amortized over five years.

The valuation allowance above reduces the deferred tax asset balances to the amount that we have determined is more likely than not to be realized. The valuation allowance primarily relates to immaterial foreign net operating loss carryforwards and immaterial state net operating loss carryforwards, which generally begin to expire in fiscal 2024.

Uncertain Tax Positions

As of January 28, 2023 and January 29, 2022, we had total unrecognized tax benefits of $15.8 million and $11.9 million, respectively, resulting from uncertain tax positions. Our effective tax rate will be reduced by $14.7 million during future periods if it is determined these unrecognized tax benefits are realizable. We had approximately $2.6 million and $2.3 million accrued for the payment of interest and penalties as of January 28, 2023 and January 29, 2022, respectively. Interest expense related to unrecognized tax benefits for the Company was not material during fiscal 2023, fiscal 2022, and fiscal 2021.

A summary of unrecognized tax benefits is as follows (dollars in thousands):

	Fiscal Year Ended
	January 28, 2023		January 29, 2022		January 30, 2021
Balance at beginning of year	$	11,929	$	5,940	$	4,742
Additions based on tax positions related to the fiscal year	2,042		1,377		1,075
Additions based on tax positions related to prior years	2,957		4,612		530
Reductions related to the expiration of statutes of limitation	(1,157)		—		(407)
Balance at end of year	$	15,771	$	11,929	$	5,940