Income Taxes

12 Months Ended

Dec. 26, 2020

Income Tax Disclosure [Abstract]

Income Taxes

K. Income Taxes

Significant components of the provision for income taxes are as follows:

	2020		2019			2018
	(in thousands)
Current:
Federal	$	25,115	$	18,510		$	4,471
State		9,455		8,084			4,894
Total current		34,570		26,594			9,365
Deferred:
Federal		16,363		8,081			12,860
State		1,337		(346	)		1,398
Total deferred		17,700		7,735			14,258
Total provision for income taxes	$	52,270	$	34,329		$	23,623

 The Company’s reconciliations to statutory rates are as follows:

	2020			2019			2018
Statutory rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal benefit		4.4			4.6			4.6
Deduction relating to excess stock based compensation		(4.3	)		(3.2	)		(3.6	)
Non-deductable meals & entertainment		0.2			0.7			1.1
Accounting method changes		—			—			(3.9	)
Change in valuation allowance		0.1			0.4			0.7
Other		—			0.3			0.4
		21.4	%		23.8	%		20.3	%

Due to a change of tax accounting methods for depreciation of certain property, plant and equipment for the fiscal year-ended December 30, 2017, the Company experienced a one-time income tax benefit of $4.5 million for the tax year ended December 29, 2018.

Significant components of the Company’s deferred tax assets and liabilities are as follows at:

	December 26, 2020			December 28, 2019
	(in thousands)
Deferred tax assets:
Lease Liabilities	$	17,951		$	15,567
Inventory		2,525			5,868
Stock-based compensation expense		5,568			5,818
Accrued expenses		3,171			3,232
Other		2,212			1,914
Total deferred tax assets		31,427			32,399
Valuation allowance		(2,022	)		(1,866	)
Total deferred tax assets net of valuation allowance		29,405			30,533
Deferred tax liabilities:
Property, plant and equipment		(88,947	)		(78,232	)
Right-of-use Assets		(15,695	)		(14,203	)
Amortization		(12,900	)		(10,899	)
Prepaid expenses		(4,528	)		(2,209	)
Total deferred tax liabilities		(122,070	)		(105,543	)
Net deferred tax liabilities	$	(92,665	)	$	(75,010	)

The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. Interest and penalties included in the provision for income taxes amounted to $0.0 million, $0.0 million, and $0.1 million for fiscal years

2020, 2019, and 2018, respectively. Accrued interest and penalties amounted to $0.2  million and $0.1 million at December 26, 2020 and December 28, 2019, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2020			2019
	(in thousands)
Balance at beginning of year	$	811		$	836
Increases related to current year tax positions		—			101
Increases (decreases) related to prior year tax positions		13			(63	)
Decreases related to lapse of statute of limitations		(12	)		(63	)
Balance at end of year	$	812		$	811

Included in the balance of unrecognized tax benefits at December 26, 2020 and December 28, 2019 are potential net benefits of $0.8 million and $0.8 million, respectively, that would favorably impact the effective tax rate if recognized. Unrecognized tax benefits are included in accrued expenses in the accompanying consolidated balance sheets and adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.

In September 2017, the Internal Revenue Service (“IRS”) commenced an examination of the Company’s 2015 consolidated corporate income tax return. The examination was completed in July 2018 resulting in a no change report. As of December 26, 2020, the Company’s 2017, 2018, and 2019 federal income tax returns remain subject to examination by IRS. The Company’s state income tax returns remain subject to examination for three or four years depending on the state’s statute of limitations. The Company is being audited by one state as of December 26, 2020. In addition, the Company is generally obligated to report changes in taxable income arising from federal income tax audits.

It is reasonably possible that the Company’s unrecognized tax benefits may increase or decrease in 2020 if there are changes as a result of potential income tax audits; however, the Company cannot estimate the range of such possible changes. The Company does not expect that any potential changes would have a material impact on the Company’s financial position, results of operations or cash flows.

As of December 26, 2020, the Company’s deferred tax assets included a capital loss carryforward totaling $1.1 million. If unused, the capital loss carryforward will expire in fiscal year 2021.