Income Taxes

12 Months Ended

Mar. 25, 2023

Income Taxes [Abstract]

Income Taxes

Note 8 – Income Taxes

Provision for Income Taxes
(thousands)		2023		2022		2021
Current:
Federal	$	11,174	$	256	$	(1,809)
State		2,703		1,442		827
Total current		13,877		1,698		(982)
Deferred:
Federal		1,855		12,602		10,169
State		2,387		1,417		685
Total deferred		4,242		14,019		10,854
Total provision	$	18,119	$	15,717	$	9,872

Income Tax Rate Reconciliation	2023		2022		2021
Expected U.S. federal income taxes at statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	4.9		3.0		2.9
Tax adjustments (a)	5.3		(4.0)		(1.1)
Other	0.5		0.3		(0.5)
Effective tax rate	31.7	%	20.3	%	22.3	%

(a)The 2023 adjustments reflect expense due to the sale of our wholesale tire locations and tire distribution assets as well as the revaluation of deferred tax balances due to changes in the mix of pre-tax income in various U.S. state jurisdictions because of the sale. The 2022 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 Coronavirus Aid, Relief and Economic Security 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 25, 2023		March 26, 2022
Gross deferred tax assets:
Lease liabilities	$	174,055	$	187,559
Other		25,958		26,382
Total gross deferred tax assets		200,013		213,941
Gross deferred tax liabilities:
Leased assets		(136,057)		(147,764)
Goodwill		(70,145)		(66,153)
Property and equipment		(20,631)		(22,251)
Other		(878)		(1,180)
Total deferred tax liabilities		(227,711)		(237,348)
Total net deferred tax liability	$	(27,698)	$	(23,407)

We have $8.0 million of state net operating loss carryforwards available as of March 25, 2023. The state net operating loss carryforwards expire in varying amounts through 2043.

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 25, 2023, 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)		2023		2022		2021
Balance at beginning of period	$	5,006	$	5,035	$	5,212
Additions based on tax positions related to the current year		97		1,271		915
Additions for tax positions of prior years		—		49		—
Reductions for tax positions of prior years		(224)		—		—
Lapse in statutes of limitation		(1,170)		(1,349)		(1,092)
Balance at end of period	$	3,709	$	5,006	$	5,035

The total amount of unrecognized tax benefits was $3.7 million, $5.0 million, and $5.0 million at March 25, 2023, March 26, 2022, and March 27, 2021, 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 of interest and penalties associated with uncertain tax benefits accrued as of March 25, 2023 and March 26, 2022.

We file U.S. federal income tax returns and income tax returns in certain state jurisdictions. Our U.S. federal income tax returns for 2020 – 2022 and various state tax years remain subject to income tax examinations by tax authorities.