Income Taxes (Tables)

12 Months Ended

Jan. 01, 2019

Income Taxes

Schedule of provision for income taxes

The provision for income taxes consisted of the following (in thousands):

	Fiscal Year
	2018		2017(1)		2016
Income before income taxes	$	107,411	$	146,466	$	191,768
Income tax provision/(benefit):
Current:
Federal	$	5,082	$	7,148	$	42,665
State		8,804		7,106		10,614
Total current		13,886		14,254		53,279
Deferred:
Federal		(4,549)		(24,570)		(564)
State		(961)		(610)		(441)
Total deferred		(5,510)		(25,180)		(1,005)
Total provision/(benefit)	$	8,376	$	(10,926)	$	52,274

(1) The Tax Act, which was enacted on December 22, 2017, made significant changes to how corporations are taxed in the U.S., the most prominent of which affecting us was to lower the U.S. corporate tax rate from 35% to 21%. In addition to the benefit of a lower rate in future years, the enactment of the Tax Act caused us to revalue our deferred tax assets and liabilities to reflect the new rate, resulting in a benefit to our fiscal 2017 income tax provision of $38.5 million.

Schedule of reconciliation between U.S. federal statutory rate and effective tax rate

	Fiscal Year
	2018		2017		2016
U.S. federal statutory rate	21.0	%	35.0	%	35.0	%
State and district income taxes, net of federal benefit	6.1		3.3		3.5
Credit for FICA taxes paid on tips	(16.5)		(9.4)		(7.0)
Other credits and incentives	(2.5)		(1.9)		(1.3)
Manufacturing deduction	—		(2.3)		(2.5)
Deferred compensation	0.8		(1.5)		(0.5)
Equity compensation	(1.5)		(4.5)		—
Impact of statutory rate change on deferred taxes	—		(26.3)		—
Other	0.4		0.1		0.1
Effective tax rate	7.8	%	(7.5)	%	27.3	%

Schedule of deferred tax assets and liabilities

Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):

	January 1, 2019		January 2, 2018
Deferred tax assets:
Staff member benefits	$	22,925	$	22,626
Insurance reserves		15,165		14,027
Accrued rent		10,870		12,523
Deferred income		17,288		11,607
Stock-based compensation		8,628		8,710
Tax credit carryforwards		1,880		2,308
Other		1,265		738
Subtotal		78,021		72,539
Less: Valuation allowance		(792)		(455)
Total	$	77,229	$	72,084
Deferred tax liabilities:
Property and equipment	$	(107,513)	$	(111,324)
Prepaid expenses		(7,929)		(9,120)
Inventory		(6,893)		(6,724)
Other		(5,420)		(2,132)
Total	$	(127,755)	$	(129,300)
Net deferred tax liability	$	(50,526)	$	(57,216)

Schedule of reconciliation of our uncertain tax positions

A reconciliation of the beginning and ending amount of our uncertain tax positions is as follows (in thousands):

	Fiscal Year
	2018		2017		2016
Balance at beginning of year	$	843	$	829	$	1,067
Additions related to current period tax positions		104		168		139
Reductions related to settlements with taxing authorities and lapses of statutes of limitations		(117)		(154)		(377)
Balance at end of year	$	830	$	843	$	829