Income Taxes

12 Months Ended

Dec. 27, 2020

Income Taxes

Income Taxes

18. Income Taxes

The following table presents the domestic and foreign components of income (loss) before income taxes for 2020, 2019 and 2018 (in thousands):

	2020		2019		2018
Domestic income (loss)	$	48,616	$	(16,065)	$	(9,665)
Foreign income		26,746		21,111		16,362
Total income	$	75,362	$	5,046	$	6,697

Included within the foreign income before income taxes above is $14.7 million, $15.6 million, and $12.1 million of foreign sourced income subject to foreign withholding taxes in 2020, 2019, and 2018, respectively.

A summary of the expense (benefit) for income tax follows (in thousands):

	2020		2019		2018
Current:
Federal	$	16,400	$	(2,734)	$	(5,262)
Foreign		6,047		5,077		4,736
State and local		1,569		810		1,530
Deferred:
Federal		(7,375)		(1,989)		2,256
Foreign		357		(662)		(153)
State and local		(2,250)		(1,113)		(483)
Total income tax expense (benefit)	$	14,748	$	(611)	$	2,624

Significant deferred tax assets (liabilities) follow (in thousands):

	December 27,		December 29,
	2020		2019
Accrued liabilities	$	17,740	$	16,686
Accrued bonuses		6,155		2,308
Other liabilities and asset reserves		18,763		16,244
Equity awards		6,760		7,196
Lease liabilities		32,374		30,756
Other		2,563		2,418
Net operating losses		8,139		8,205
Foreign tax credit carryforwards		14,405		10,049
Total deferred tax assets		106,899		93,862
Valuation allowances		(22,972)		(17,303)
Total deferred tax assets, net of valuation allowances		83,927		76,559
Deferred expenses		(9,623)		(9,521)
Accelerated depreciation		(21,337)		(27,299)
Goodwill		(9,801)		(9,510)
Right-of-use assets		(32,065)		(30,257)
Other		(1,249)		(782)
Total deferred tax liabilities		(74,075)		(77,369)
Net deferred tax assets (liabilities)	$	9,852	$	(810)

The Company had approximately $8.0 million and $6.6 million of state deferred tax assets primarily related to state net operating loss carryforwards as of December 27, 2020 and December 29, 2019, respectively.  Our ability to utilize these state deferred tax assets is dependent on our ability to generate earnings in future years in the respective state jurisdictions.  The Company provided a full valuation allowance of $8.0 million and $6.6 million for these state deferred tax assets as we believe realization based on the more-likely-than-not criteria has not been met as of December 27, 2020 and December 29, 2019, respectively.

The Company had approximately $6.3 million and $6.2 million of foreign net operating loss and capital loss carryovers as of December 27, 2020 and December 29, 2019, respectively.  The Company had approximately $0.6 million and $0.5 million of valuation allowances primarily related to the foreign capital losses as of December 27, 2020 and December 29, 2019, respectively. A substantial majority of our foreign net operating losses do not have an expiration date.  

In addition, the Company had approximately $14.4 million and $10.0 million in foreign tax credit carryforwards as of December 27, 2020 and December 29, 2019, respectively, that expire ten years from inception in years 2025 through 2029.  Our ability to utilize these foreign tax credit carryforwards is dependent on our ability to generate foreign earnings in future years sufficient to claim foreign tax credits in excess of foreign taxes paid in those years.  The Company provided a full valuation allowance of $14.4 million and $10.0 million for these foreign tax credit carryforwards as we believe realization based on the more-likely-than-not criteria has not been met as of December 27, 2020 and December 29, 2019, respectively.

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense (benefit) for the years ended December 27, 2020, December 29, 2019 and December 30, 2018 is as follows in both dollars and as a percentage of income before income taxes ($ in thousands):

	2020				2019				2018
	Income Tax		Income		Income Tax		Income		Income Tax		Income
	Expense		Tax Rate		(Benefit)		Tax Rate		Expense		Tax Rate
Tax at U.S. federal statutory rate	$	15,826	21.0	%	$	1,060	21.0	%	$	1,406	21.0	%
State and local income taxes		1,149	1.5	%		79	1.6	%		150	2.2	%
Foreign income taxes		6,463	8.6	%		5,058	100.2	%		4,879	72.9	%
Income of consolidated partnerships
attributable to noncontrolling interests		(603)	(0.8)	%		(177)	(3.5)	%		(371)	(5.6)	%
Non-qualified deferred compensation plan
(income) loss		(898)	(1.2)	%		(1,260)	(25.0)	%		483	7.2	%
Excess tax (benefits) expense on equity awards		(2,029)	(2.7)	%		(212)	(4.2)	%		447	6.7	%
Preferred stock option mark-to-market adjustment		—	—	%		1,338	26.5	%		—	—	%
Tax credits		(6,002)	(8.0)	%		(6,128)	(121.4)	%		(6,945)	(103.7)	%
Disposition of China		—	—	%		—	—	%		4,118	61.5	%
Other		842	1.1	%		(369)	(7.3)	%		(1,543)	(23.0)	%
Total	$	14,748	19.6	%	$	(611)	(12.1)	%	$	2,624	39.2	%

Cash for income taxes paid (received) were $19.3 million in 2020, ($6.2) million in 2019 and $14.0 million in 2018.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company, with few exceptions, is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2016. The Company is currently undergoing examinations by various tax authorities. The Company anticipates that the finalization of these current examinations and other issues could result in a decrease in the liability for unrecognized tax benefits (and a decrease of income tax expense) of approximately $140,000 during the next 12 months.

The Company had $1.0 million of unrecognized tax benefits at December 27, 2020 which, if recognized, would affect the effective tax rate. A reconciliation of the beginning and ending liability for unrecognized tax benefits excluding interest and penalties is as follows, which is recorded as an other long-term liability (in thousands):

Balance at December 30, 2018	$	2,023
Additions for tax positions of prior years		179
Reductions for tax positions of prior years		(623)
Reductions for lapse of statute of limitations		—
Balance at December 29, 2019		1,579
Additions for tax positions of prior years		60
Reductions for tax positions of prior years		(426)
Reductions for lapse of statute of limitations		(183)
Balance at December 27, 2020	$	1,030

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. The Company’s 2020 and 2019 income tax expense (benefit) includes interest benefit of ($18,000) and ($11,000), respectively. The Company has accrued approximately $136,000 and $154,000 for the payment of interest and penalties as of December 27, 2020 and December 29, 2019, respectively.