Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for federal and state income taxes consisted of the following:
Year Ended
December 31, 2023 December 25, 2022 December 26, 2021
Current:
Federal $ 2,138  $ 949  $ 759 
State 1,729  962  917 
Total current income tax expense 3,867  1,911  1,676 
Deferred:
Federal 1,679  143  2,009 
State (136) 299  397 
Total deferred income tax expense 1,543  442  2,406 
Total income tax expense $ 5,410  $ 2,353  $ 4,082 
Temporary differences between tax and financial reporting basis of assets and liabilities which give rise to the deferred income tax assets (liabilities) and their related tax effects are as follows:
Year Ended
December 31, 2023 December 25, 2022
Deferred tax assets:
Accrued liabilities $ 1,311  $ 803 
General business tax credits 25,448  26,977 
Operating lease liabilities 43,195  45,329 
Stock-based compensation 791  740 
Other 529  455 
Total deferred tax assets 71,274  74,304 
Deferred tax liability:
Intangibles (9,708) (9,724)
Prepaid expenses (1,330) (1,269)
Property and equipment (24,477) (24,378)
Operating lease assets (32,344) (33,975)
Total deferred tax liabilities (67,859) (69,346)
Deferred tax assets, net $ 3,415  $ 4,958 
As of December 31, 2023, the Company has general business tax credits of $25.4 million expiring from 2038 through 2044.
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 December 31, 2023, the Company believes that it will realize all of its deferred tax assets. Therefore, no valuation allowance has been recorded.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) temporarily restored the ability to carryback net operating losses (“NOL”) originating in 2018, 2019 and 2020 to offset taxable income in the five preceding years
and eliminated the 80% taxable income limitation on such net operating loss deductions if utilized before 2021. Additionally, the CARES Act included an administrative correction of the depreciation recovery period for qualified improvement property ("QIP"), including certain restaurant leasehold improvement costs, that resulted in the acceleration of depreciation on these assets retroactive to 2018. The Company filed for a refund of overpaid taxes with regards to credits carried back to those years. The Company received the refund related to the 2015 Form 1120X of $0.24 million in August 2023 and the refund related to the 2016 Form 1120X refund of $0.45 million refund remains outstanding.
The following is a reconciliation of the expected federal income taxes at the statutory rates of 21% for the fiscal year ended December 31, 2023, December 25, 2022 and December 26, 2021 to the actual provision for income taxes:
Year Ended
  December 31, 2023 December 25, 2022 December 26, 2021
Expected income tax expense $ 7,753  $ 4,874  $ 7,194 
State tax expense, net of federal benefit 1,259  1,003  1,039 
FICA tip credit (3,880) (3,678) (3,361)
Officers' compensation 311  230  536 
Stock compensation (357) (116) (1,275)
Other 324  40  (51)
Income tax expense $ 5,410  $ 2,353  $ 4,082 
The Internal Revenue Service ("IRS") audited our tax return for the fiscal year 2016. In August 2020, the IRS issued a Notice of Proposed Adjustment ("NOPA") to the Company asserting that the tenant allowances paid to us under our operating leases should be recorded as taxable income for years 2016 and prior. The Company disagreed with this position based on the underlying facts and circumstances as well as standard industry practice. The Company accepted an assessment of $0.18 million which will be netted against the 2016 Form 1120X refund discussed above resulting in an outstanding refund to the Company of $0.27 million for fiscal year 2016. On December 1, 2023, the Company received confirmation from the IRS Independent Office of Appeals noting approval of the settlement and closure of the fiscal year 2016 tax audit. In accordance with the provisions of FASB Accounting Standards Codification Subtopic 740-10, Accounting for Uncertainty in Income Taxes, the Company believes that it is more likely than not that the Company's position will ultimately be sustained upon further examination of open tax years, including the resolution of the IRS's appeal or litigation processes, if any. As of December 31, 2023 and December 25, 2022, the Company recognized no liability for uncertain tax positions.
It is the Company’s policy to include any penalties and interest related to income taxes in its income tax provision. However, the Company currently has no penalties or interest related to income taxes.
The tax years 2022, 2021 and 2020 remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.