INCOME TAXES

3 Months Ended

Jan. 01, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXESWe calculate our interim income tax provision in accordance with ASC Topic 270, Interim Reporting and ASC Topic 740, Accounting for Income Taxes. At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary year to date earnings. In addition, the tax effects of unusual or infrequently occurring items including changes in judgment about valuation allowances and effects of changes in enacted tax laws are recognized discretely in the interim period in

which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating (loss) income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained, or the tax environment changes.

On March 27, 2020, the CARES Act was enacted to provide economic relief to those impacted by the COVID-19 pandemic. In addition to the PPP loans, the CARES Act made various tax law changes including among other things (i) modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 tax years to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes, (ii) enhanced recoverability of AMT tax credit carryforwards, (iii) increased the limitation under Internal Revenue Code ("IRC") Section 163(j) for 2019 and 2020 to permit additional expensing of interest, and (iv) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k).

On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP loans as fully deductible for tax purposes and therefore, the forgiveness of any PPP loans is not taxable. Any income recorded for financial reporting purposes is considered an unusual or infrequent event and the tax effect is recorded discretely in the quarter in which the loans were forgiven. No PPP Loans were forgiven during the 13 weeks ended January 1, 2022 and January 2, 2021.

As a result of the CARES Act and the CAA, the Company carried back taxable losses from fiscal year 2020 and is expected to carryback taxable losses from fiscal 2021 to generate a refund of previously paid income taxes. For the 13-week period ended January 2, 2021, the Company recorded income tax benefits as the taxable losses from fiscal 2020 and the projected taxable losses from fiscal 2021 are being carried back to tax years in which the Company was subject to a higher federal corporate income tax rate. The adjustment related to the fiscal 2020 carryback was recorded as a discrete item during the 13-week period ended January 2, 2021 and the carryback of the projected taxable losses from fiscal 2021 was recorded as a component of the estimated annual effective tax rate for the 13-week period ended January 2, 2021.

The provision for income taxes for the 13-week period ended January 1, 2022 was $309,000. The effective tax rate for the 13-week period ended January 1, 2022 of 11.3% differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits and operating income attributable to non-controlling interests that is not taxable to the Company.

The income tax benefit for the 13-week period ended January 2, 2021 was $(2,919,000). The effective tax rate for the 13-week period ended January 2, 2021 of -80.7% differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits, the carryback of the projected fiscal 2021 taxable losses to prior years when the Federal corporate tax rate was 34% and operating income attributable to non-controlling interests that is not taxable to the Company. The effective tax rate also includes a discrete benefit of $(352,000) primarily related to an adjustment of the estimated fiscal year 2020 carryback claim.

The Company’s overall effective tax rate in the future will be affected by factors such as changes in tax law, the utilization of state and local net operating loss carryforwards, the generation of FICA tax credits, additional forgiveness of PPP Loans and the mix of earnings by state taxing jurisdictions as Nevada does not impose a state income tax, as compared to the other major state and local jurisdictions in which the Company has operations. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from current estimates.