Income Taxes

12 Months Ended

Mar. 26, 2022

Income Taxes [Abstract]

Income Taxes

Note 9 – Income Taxes

Provision for Income Taxes
(thousands)		2022		2021		2020
Current:
Federal	$	256	$	(1,809)	$	2,783
State		1,442		827		1,994
Total current		1,698		(982)		4,777
Deferred:
Federal		12,602		10,169		11,397
State		1,417		685		76
Total deferred		14,019		10,854		11,473
Total provision	$	15,717	$	9,872	$	16,250

Income Tax Rate Reconciliation	2022		2021		2020
Expected U.S. federal income taxes at statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	3.0		2.9		1.9
Tax adjustments (a)	(4.0)		(1.1)		—
Other	0.3		(0.5)		(1.0)
Effective tax rate	20.3	%	22.3	%	21.9	%

(a)Adjustments reflect benefit due to differences in statutory tax rates from a loss year to years in which such net operating loss may be carried back.

As provided under the CARES Act, a taxpayer must carry net operating losses generated in certain tax years to the earliest tax year in the five-year carryback period. However, these net operating losses are not subject to the 80% of income limitation if they are exhausted during the five-year carryback. Under this provision, Monro has carried back a net operating loss generated in fiscal 2021 to carryback years within the five-year carryback period with a 35% U.S. federal statutory tax rate.

Net Deferred Tax Asset/(Liability)
(thousands)		March 26, 2022		March 27, 2021
Gross deferred tax assets:
Lease liabilities	$	187,559	$	186,168
Other		26,382		26,723
Total gross deferred tax assets		213,941		212,891
Gross deferred tax liabilities:
Leased assets		(147,764)		(148,496)
Goodwill		(66,153)		(56,623)
Property and equipment		(22,251)		(21,032)
Other		(1,180)		(910)
Total deferred tax liabilities		(237,348)		(227,061)
Total net deferred tax liability	$	(23,407)	$	(14,170)

We have $8.7 million of state net operating loss carryforwards available as of March 26, 2022. The state net operating loss carryforwards expire in varying amounts through 2042.

We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of March 26, 2022, we concluded, based on the weight of all available positive and negative evidence, that all our deferred tax assets are more likely than not to be realized.

Changes in Liability for Unrecognized Tax Benefits
(thousands)		2022		2021		2020
Balance at beginning of period	$	5,035	$	5,212	$	6,424
Additions based on tax positions related to the current year		1,271		915		644
Additions for tax positions of prior years		49		—		—
Reductions for tax positions of prior years		—		—		(30)
Settlements		—		—		—
Lapse in statutes of limitation		(1,349)		(1,092)		(1,826)
Balance at end of period	$	5,006	$	5,035	$	5,212

The total amount of unrecognized tax benefits was $5.0 million, $5.0 million, and $5.2 million at March 26, 2022, March 27, 2021, and March 28, 2020, respectively, the majority of which, if recognized, would affect the effective tax rate.

In the normal course of business, Monro provides for uncertain tax positions and the related interest and penalties and adjusts its unrecognized tax benefits and accrued interest and penalties and, accordingly, we had approximately $0.1 million and $0.2 million of interest and penalties associated with uncertain tax benefits accrued as of March 26, 2022 and March 27, 2021, respectively.

We file U.S. federal income tax returns and income tax returns in certain state jurisdictions. Our U.S. federal 2019 – 2021 and various state tax years remain subject to income tax examinations by tax authorities.