Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.2
Income Taxes
 12 Months Ended
Sep. 25, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income TaxesThe provision for income tax expense (benefit) consists of the following:
  Fiscal Year Ended
  September 25, 2021 September 26, 2020 September 28, 2019
  (in thousands)
Current:
Federal $ 49,941  $ 33,775  $ 17,048 
State 6,193  5,063  2,728 
Foreign 645  (5) 169 
Total 56,779  38,833  19,945 
Deferred:
Federal (14,740) (6,019) 4,278 
State (690) (582) 2,380 
Foreign 686  (14) 1 
Total (14,744) (6,615) 6,659 
Total $ 42,035  $ 32,218  $ 26,604 
A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:
  Fiscal Year Ended
  September 25, 2021 September 26, 2020 September 28, 2019
Statutory federal income tax rate 21.0  % 21.0  % 21.0  %
State income taxes, net of federal benefit 2.2  2.3  4.3 
Other permanent differences 0.1  —  0.7 
Adjustment of prior year accruals (0.1) (0.2) (0.6)
Credits (0.4) (0.6) (0.9)
Stock based compensation (1.4) (1.4) (1.6)
Other 0.2  (0.1) (0.6)
Effective income tax rate 21.6  % 21.0  % 22.3  %
The tax effect of temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows:
  September 25, 2021 September 26, 2020
  Deferred
Tax
Assets		 Deferred
Tax
Liabilities		 Deferred
Tax
Assets		 Deferred
Tax
Liabilities
(in thousands)
Allowance for doubtful accounts $ 6,991  $ —  $ 6,618  $ — 
Inventory write-downs 10,377  —  8,624  — 
Prepaid expenses —  1,928  —  1,603 
Nondeductible reserves 9,532  —  9,484  — 
State taxes 105  —  505  — 
Employee benefits 15,831  —  12,913  — 
Depreciation and amortization —  104,829  —  85,302 
Equity loss 179  —  2,047  — 
State net operating loss carryforward 7,155  —  5,652  — 
Stock based compensation 7,003  —  4,743  — 
State credits 2,764  —  2,732  — 
Other 1,034  —  1,774  — 
Valuation allowance (7,031) —  (7,124) — 
Total $ 53,940  $ 106,757  $ 47,968  $ 86,905 
The Company has a federal net operating loss of $22.1 million from its acquisition of Green Garden, all of which will be carried back for a refund. The Company also has state tax net operating losses of $104 million, which expire at various times between 2021 and 2041, and foreign losses of $4.1 million, which do not expire.
The Company has state income tax credits of $3.4 million, which expire at various times beginning in 2021 through 2041. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including past operating results, future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against any deferred tax assets. The Company has determined there will be insufficient future separate state and foreign taxable income for the separate parent company and foreign subsidiaries to realize the deferred tax assets. Therefore, valuation allowances of $7.0 million and $7.1 million (net of federal impact) at September 25, 2021 and September 26, 2020, respectively, have been provided to reduce state deferred tax assets to amounts considered recoverable.
The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. The Company recognizes interest and/or penalties related to income tax matters as a component of pretax income. As of September 25, 2021 and September 26, 2020, accrued interest was less than $0.1 million and no penalties were accrued related to uncertain tax positions.
The following table summarizes the activity related to the Company’s unrecognized tax benefits for fiscal years ended September 25, 2021 and September 26, 2020:  
(in thousands)
Balance as of September 28, 2019 $ 483 
Increases related to prior year tax positions — 
Increases related to current year tax positions 80 
Decreases related to prior year tax positions — 
Settlements — 
Decreases related to lapse of statute of limitations (236)
Balance as of September 26, 2020 $ 327 
Increases related to prior year tax positions 47 
Increases related to current year tax positions 85 
Decreases related to prior year tax positions — 
Settlements (43)
Decreases related to lapse of statute of limitations (74)
Balance as of September 25, 2021 $ 342 
As of September 25, 2021, unrecognized income tax benefits totaled approximately $0.3 million and all of the unrecognized tax benefits would, if recognized, impact the Company’s effective income tax rate.
The Company is principally subject to taxation by the United States and various states within the United States. The Company’s tax filings in major jurisdictions are open to examination by tax authorities by the Internal Revenue Service from fiscal year ended 2017 forward and in various state taxing authorities generally from fiscal year ended 2016 forward.
The Company believes there is a reasonable chance that its unrecognized tax benefits will decrease by less than $0.1 million within the next twelve months.