Income Taxes

12 Months Ended

Dec. 26, 2021

Income Taxes

Income Taxes

17. Income Taxes

The following table presents the domestic and foreign components of income (loss) before income taxes for 2021, 2020 and 2019 (in thousands):

	2021		2020		2019
Domestic income (loss)	$	115,221	$	48,616	$	(16,065)
Foreign income		35,727		26,746		21,111
Total income	$	150,948	$	75,362	$	5,046

Included within the foreign income before income taxes above is $22.4 million, $14.7 million, and $15.6 million of foreign sourced income subject to foreign withholding taxes in 2021, 2020, and 2019, respectively.

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

	2021		2020		2019
Current:
Federal	$	10,591	$	16,400	$	(2,734)
Foreign		8,812		6,047		5,077
State and local		2,837		1,569		810
Deferred:
Federal		2,430		(7,375)		(1,989)
Foreign		769		357		(662)
State and local		554		(2,250)		(1,113)
Total income tax expense (benefit)	$	25,993	$	14,748	$	(611)

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense (benefit) for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 is as follows in both dollars and as a percentage of income before income taxes ($ in thousands):

	2021				2020				2019
	Income Tax		Income		Income Tax		Income		Income Tax		Income
	Expense		Tax Rate		Expense		Tax Rate		(Benefit)		Tax Rate
Tax at U.S. federal statutory rate	$	31,699	21.0	%	$	15,826	21.0	%	$	1,060	21.0	%
State and local income taxes		2,317	1.5	%		1,149	1.5	%		79	1.6	%
Foreign income taxes		9,144	6.1	%		6,463	8.6	%		5,058	100.2	%
Income of consolidated partnerships
attributable to noncontrolling interests		(1,110)	(0.7)	%		(603)	(0.8)	%		(177)	(3.5)	%
Non-qualified deferred compensation plan
(income)		(911)	(0.6)	%		(898)	(1.2)	%		(1,260)	(25.0)	%
Excess tax (benefits) on equity awards		(3,697)	(2.5)	%		(2,029)	(2.7)	%		(212)	(4.2)	%
Preferred stock option mark-to-market adjustment		—	—	%		—	—	%		1,338	26.5	%
Tax credits		(8,830)	(5.9)	%		(6,002)	(8.0)	%		(6,128)	(121.4)	%
Other		(2,619)	(1.7)	%		842	1.1	%		(369)	(7.3)	%
Total	$	25,993	17.2	%	$	14,748	19.6	%	$	(611)	(12.1)	%

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

	December 26,		December 27,
	2021		2020
Accrued liabilities	$	14,802	$	17,740
Accrued bonuses		6,404		6,155
Other liabilities and asset reserves		14,583		18,763
Equity awards		7,323		6,760
Lease liabilities		41,999		32,374
Other		2,712		2,563
Net operating losses		8,127		8,139
Foreign tax credit carryforwards		18,611		14,405
Total deferred tax assets		114,561		106,899
Valuation allowances		(28,598)		(22,972)
Total deferred tax assets, net of valuation allowances	$	85,963	$	83,927
Deferred expenses	$	(7,087)	$	(9,623)
Accelerated depreciation		(23,858)		(21,337)
Goodwill		(10,052)		(9,801)
Right-of-use assets		(39,814)		(32,065)
Other		(254)		(1,249)
Total deferred tax liabilities		(81,065)		(74,075)
Net deferred tax assets	$	4,898	$	9,852

The following table summarizes changes in the Company’s valuation allowance on deferred tax:

Balance as of December 29, 2019	$	17,303
Charged to costs and expenses		5,647
Other		22
Balance as of December 27, 2020	$	22,972
Charged to costs and expenses		5,658
Other		(32)
Balance as of December 26, 2021	$	28,598

The Company had approximately $8.8 million and $8.0 million of state deferred tax assets primarily related to state net operating loss carryforwards as of December 26, 2021 and December 27, 2020, 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 $8.8 million and $8.0 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 26, 2021 and December 27, 2020, respectively.

The Company had approximately $4.5 million and $6.3 million of foreign net operating loss and capital loss carryovers as of December 26, 2021 and December 27, 2020, respectively.  The Company had approximately $1.2 million and $0.6 million of valuation allowances primarily related to the foreign capital losses as of December 26, 2021 and December 27, 2020, respectively. A substantial majority of our foreign net operating losses do not have an expiration date.  

In addition, the Company had approximately $18.6 million and $14.4 million in foreign tax credit carryforwards as of December 26, 2021 and December 27, 2020, respectively, that expire ten years from inception in years 2025 through 2031.  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 $18.6 million and $14.4 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 26, 2021 and December 27, 2020, respectively.

Cash for income taxes paid (received) were $32.6 million in 2021, $19.3 million in 2020 and ($6.2) million in 2019.

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 2017. 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 $49,000 during the next 12 months.

The Company had $0.9 million of unrecognized tax benefits at December 26, 2021 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 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
Additions for tax positions of prior years		81
Reductions for tax positions of prior years		(215)
Balance at December 26, 2021	$	896

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. The Company has accrued approximately $132,000 and $136,000 for the payment of interest and penalties as of December 26, 2021 and December 27, 2020, respectively.