Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

The following table presents the domestic and foreign components of income before income taxes for 2023, 2022 and 2021 (in thousands):

	2023		2022		2021
Domestic income	$	91,218	$	65,434	$	115,221
Foreign income	12,455		18,335		35,727
Total income	$	103,673	$	83,769	$	150,948

Included within the foreign income before income taxes above is $24.1 million, $23.6 million, and $22.4 million of foreign sourced income subject to foreign withholding taxes in 2023, 2022, and 2021, respectively.

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

	2023		2022		2021
Current:
Federal	$	20,742	$	3,496	$	10,591
Foreign	3,916		5,335		8,812
State and local	2,207		2,791		2,837
Deferred:
Federal	(4,115)		4,243		2,430
Foreign	(558)		(1,152)		769
State and local	(1,318)		(293)		554
Total income tax expense	$	20,874	$	14,420	$	25,993

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense for the years ended December 31, 2023, December 25, 2022 and December 26, 2021 is as follows in both dollars and as a percentage of income before income taxes (dollars in thousands):

	2023				2022				2021
	Income Tax Expense (Benefit)		Income Tax Rate		Income Tax Expense (Benefit)		Income Tax Rate		Income Tax Expense (Benefit)		Income Tax Rate
Tax at U.S. federal statutory rate	$	21,771	21.0	%	$	17,591	21.0	%	$	31,699	21.0	%
State and local income taxes	1,866		1.8	%	1,422		1.7	%	2,317		1.5	%
Foreign income taxes	5,159		4.9	%	4,672		5.6	%	9,144		6.1	%
Income of consolidated partnerships attributable to noncontrolling interests	(159)		(0.2)	%	(355)		(0.4)	%	(1,110)		(0.7)	%
Non-qualified deferred compensation plan expense (income)	(752)		(0.7)	%	1,278		1.5	%	(911)		(0.6)	%
Excess tax (benefits) on equity awards	(539)		(0.5)	%	(3,902)		(4.7)	%	(3,697)		(2.5)	%
Tax credits	(7,003)		(6.8)	%	(8,981)		(10.7)	%	(8,830)		(5.9)	%
Non-deductible executive compensation	1,341		1.3	%	2,450		2.9	%	2,636		1.7	%
Foreign-derived intangible income	(1,263)		(1.2)	%	(1,452)		(1.7)	%	(1,519)		(1.0)	%
US deferred offset on foreign deferreds	270		0.3	%	1,183		1.4	%	238		0.2	%
Other	183		0.2	%	514		0.6	%	(3,974)		(2.6)	%
Total	$	20,874	20.1	%	$	14,420	17.2	%	$	25,993	17.2	%

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

	December 31, 2023		December 25, 2022
Accrued liabilities	$	12,735	$	17,424
Accrued bonuses	2,284		351
Other liabilities and asset reserves	15,315		14,607
Equity awards	7,988		7,905
Lease liabilities	45,550		45,646
Other	2,825		2,904
Net operating losses	13,759		11,738
Foreign tax credit carryforwards	23,888		20,198
Total deferred tax assets	124,344		120,773
Valuation allowances	(37,609)		(32,052)
Total deferred tax assets, net of valuation allowances	86,735		88,721
Deferred expenses	(5,719)		(5,756)
Accelerated depreciation	(23,012)		(31,098)
Goodwill	(7,881)		(7,690)
Right-of-use assets	(41,513)		(41,892)
Other	(1,071)		(365)
Total deferred tax liabilities	(79,196)		(86,801)
Net deferred tax assets	$	7,539	$	1,920

The following table summarizes changes in the Company’s valuation allowances on deferred tax (in thousands):

Balance at December 26, 2021	$	28,598
Charged to costs and expenses	3,454
Balance at December 25, 2022	$	32,052
Charged to costs and expenses	5,470
Other	87
Balance at December 31, 2023	$	37,609

The Company had approximately $10.3 million and $10.2 million of state deferred tax assets in separate company jurisdictions primarily related to state net operating loss carryforwards as of December 31, 2023 and December 25, 2022, 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 $10.3 million and $10.2 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 31, 2023 and December 25, 2022, respectively.

The Company had approximately $3.0 million and $2.0 million of state deferred tax assets related to state income tax credit carryforwards as of December 31, 2023 and December 25, 2022, respectively. Our ability to fully utilize these deferred tax assets related to state income tax credit carryforwards is dependent on our ability to generate earnings in future years in the respective state jurisdictions. The Company provided a partial valuation allowance of $0.7 million and $0.5 million against these state deferred tax assets at December 31, 2023 and December 25, 2022, respectively. We believe that a portion of these state income tax credit carryforwards would not be realizable before expiration.

The Company had approximately $4.6 million and $2.2 million of foreign net operating loss and capital loss carryovers as of December 31, 2023 and December 25, 2022, respectively. The Company had approximately $2.7 million and $1.2 million of valuation allowances primarily related to the foreign net operating losses, foreign capital losses and foreign deferred tax assets at both December 31, 2023 and December 25, 2022. A substantial majority of our foreign net operating losses do not have an expiration date.

In addition, the Company had approximately $23.9 million and $20.2 million in foreign tax credit carryforwards as of December 31, 2023 and December 25, 2022, respectively, that expire ten years from inception in years 2027 through 2033. 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 $23.9 million and $20.2 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 31, 2023 and December 25, 2022, respectively.

Cash for income taxes paid were $12.5 million in 2023, $11.7 million in 2022 and $32.6 million in 2021.

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-US income tax examinations by tax authorities for years before 2019. The Company is currently undergoing examinations by various tax authorities.

The Company had $1.1 million of unrecognized tax benefits at December 31, 2023 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 in Other long-term liabilities in the Consolidated Balance Sheets (in thousands):

Balance at December 26, 2021	$	896
Additions for tax positions of prior years	331
Reductions for tax positions of prior years	(65)
Balance at December 25, 2022	$	1,162
Additions for tax positions of prior years	217
Reductions for tax positions of prior years	(321)
Balance at December 31, 2023	$	1,058

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. The Company has accrued approximately $0.1 million for the payment of interest and penalties as of December 31, 2023 and December 25, 2022.