Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.20.2
Income Taxes
 6 Months Ended
Jun. 28, 2020
Income Tax Disclosure [Abstract]  
Income Tax Disclosure Income Taxes
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. The CARES Act includes provisions that allow net operating losses in 2018, 2019 and 2020 to be carried back for up to five years and eliminates the 80% taxable income limitation on such net operating loss deductions if utilized before 2021. Additionally, the CARES Act includes an administrative correction of the depreciation recovery period for qualified improvement property ("QIP"), including certain restaurant leasehold improvement costs that will result in the acceleration of depreciation on these assets retroactive to 2018. As a result, we estimate we will receive federal tax refunds for a total of approximately $2.5 million.
The following is a reconciliation of the expected federal income taxes at the statutory rates of 21% for the thirteen and twenty-six weeks ended June 28, 2020 and June 30, 2019:
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
June 28, 2020

 
June 30, 2019

 
June 28, 2020

 
June 30, 2019

Expected income tax (benefit) expense
820

 
1,327

 
(2,943
)
 
2,027

State tax expense, net of federal benefit
197

 
328

 
(108
)
 
495

FICA tip credit
(540
)
 
(1,499
)
 
(1,792
)
 
(2,476
)
Deferred tax balance adjustment (a)
(1,103
)
 
—

 
(1,636
)
 
—

Other
25

 
(78
)
 
366

 
147

Income tax (benefit) expense
(601
)
 
78

 
(6,113
)
 
193

(a) Reflects the tax benefit recorded in the quarter associated with a carryback of federal net operating losses due to the CARES Act administrative correction of the deprecation recovery period for QIP.
Deferred tax assets were $8.5 million and $2.6 million as of June 28, 2020 and June 30, 2019, respectively.
Deferred tax assets are reduced by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred taxes will not be realized. Both positive and negative evidence is considered in forming management’s judgment as to whether a valuation allowance is appropriate, and more weight is given to evidence that can be objectively verified. The tax benefits relating to any reversal of the valuation allowance on the deferred tax assets would be recognized as a reduction of future income tax expense. As of June 28, 2020 the Company believes that it will realize all of the deferred tax assets. Therefore, no valuation allowance has been recorded.