Income Taxes

12 Months Ended

Jan. 27, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Fiscal Year Ended
	January 27, 2024		January 28, 2023		January 29, 2022
Current:
Federal	$	65,540	$	24,917	$	(3,323)
Foreign	13		—		(4)
State	18,166		8,460		(495)
	83,719		33,377		(3,822)
Deferred:
Federal	(10,000)		6,094		7,506
Foreign	—		—		—
State	(643)		(1,562)		518
	(10,643)		4,532		8,024
Provision for income taxes	$	73,076	$	37,909	$	4,202

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.

We are currently under IRS audit for fiscal year 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 27, 2024		January 28, 2023		January 29, 2022
Statutory rate applied to pre-tax income	$	61,320	$	37,826	$	11,083
State taxes, net of federal tax benefit	13,466		5,325		1,422
Change in accruals for uncertain tax positions	2,331		3,833		4,493
Compensation limitation	2,788		3,959		1,468
Tax filings for prior periods	—		(2,505)		(4,609)
Tax credits	(4,453)		(5,056)		(3,756)
Federal benefit of vesting and exercise of share-based awards	(2,413)		(3,515)		(2,425)
Deferred tax remeasurements	—		371		(1,355)
Effect of rates other than statutory	241		(203)		71
Non-deductible and non-taxable items, net	1,090		215		70
Change in valuation allowance	(546)		(376)		(12)
Other items, net	(748)		(1,965)		(2,248)
Provision for income taxes	$	73,076	$	37,909	$	4,202

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 27, 2024		January 28, 2023
Deferred tax assets:
Capitalized research expenditures (IRC Section 174)	$	38,689	$	19,498
Insurance and other reserves	25,865		22,866
Leases	19,380		17,096
Stock-based compensation	4,722		3,577
Allowance for doubtful accounts and reserves	3,203		2,984
Net operating loss carryforwards	238		591
Other	3,686		5,080
Total deferred tax assets	95,783		71,692
Valuation allowance	(79)		(634)
Deferred tax assets, net of valuation allowance	$	95,704	$	71,058
Deferred tax liabilities:
Property and equipment	$	86,105	$	77,024
Goodwill and intangibles	38,381		36,132
Leases	19,439		17,178
Other	1,341		929
Deferred tax liabilities	$	145,266	$	131,263
Net deferred tax liabilities	$	49,562	$	60,205

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 state net operating loss carryforwards, which generally begin to expire in fiscal 2025.

Uncertain Tax Positions

As of January 27, 2024 and January 28, 2023, we had total unrecognized tax benefits of $17.6 million and $15.8 million, respectively, resulting from uncertain tax positions. Our effective tax rate will be reduced by $17.1 million during future periods if it is determined these unrecognized tax benefits are realizable. We had approximately $3.7 million and $2.6 million accrued for the payment of interest and penalties as of January 27, 2024 and January 28, 2023, respectively. Interest expense related to unrecognized tax benefits for the Company was not material during fiscal 2024, fiscal 2023 and fiscal 2022.

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

	Fiscal Year Ended
	January 27, 2024		January 28, 2023		January 29, 2022
Balance at beginning of year	$	15,771	$	11,929	$	5,940
Additions based on tax positions related to the fiscal year	1,884		2,042		1,377
Additions based on tax positions related to prior years	587		2,957		4,612
Reductions based on tax positions related to prior years	(636)		—		—
Reductions related to the expiration of statutes of limitation	—		(1,157)		—
Balance at end of year	$	17,606	$	15,771	$	11,929