Chuy's Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 27, 2015

The provision for federal and state income taxes for the years ended December 27, 2015, December 28, 2014 and December 29, 2013 consisted of the following:



	2015		2014		2013
Current income tax expense:
Federal	$	1,724	$	—	$	—
State	945		713		775
Total current income tax expense	2,669		713		775
Deferred income tax expense:
Federal	2,903		3,506		3,216
State	171		118		205
Total deferred income tax expense	3,074		3,624		3,421
Total income tax expense	$	5,743	$	4,337	$	4,196

Temporary difference between tax and financial reporting basis of assets and liabilities that give rise to the deferred income tax assets (liabilities) and their related tax effects as of December 27, 2015 and December 28, 2014 are as follows:



	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	—		$	643
Accrued liabilities	588			536
General business tax credits	8,135			10,121
Stock-based compensation	1,121			856
Other	309			168
Total deferred tax assets	10,153			12,324
Deferred tax liability:
Intangibles	(9,523		)	(8,157		)
Prepaid expenses	(1,371		)	(590		)
Property and equipment	(9,540		)	(10,784		)
Total deferred tax liabilities	(20,434		)	(19,531		)
Deferred tax liabilities, net	$	(10,281	)	$	(7,207	)

The Company’s net operating loss carry forward of $0.6 million at December 28, 2014 was utilized during 2015. We have approximately $93,100 and $1,700,000 of tax benefits ($34,000 and $609,000 net of tax, respectively) related to excess stock compensation which were recorded to additional paid-in-capital during the fiscal years ended December 27, 2015 and December 28, 2014, respectively. Under the "tax law ordering" method, as described in ASC 740, these amounts were also used as a tax deductions and reduced taxable income and the amount of net operating loss carry forward utilized during the fiscal years ended December 27, 2015 and December 28, 2014, respectively. As of December 27, 2015, the Company has general business tax credits of $8.1 million expiring in 2033.

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 are 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. The Company believes that it will realize all of the deferred tax assets. Therefore, no valuation allowance has been recorded.

The effective income tax expense differs from the federal statutory tax expense of 35% for the fiscal year ended December 27, 2015, and 34% for the fiscal years ended December 28, 2014 and December 29, 2013 as follows:



	2015			2014			2013
Expected income tax expense	$	6,524		$	5,382		$	5,191
State tax expense, net of federal benefit	725			548			647
FICA tip credit	(1,986		)	(1,676		)	(1,381		)
Other	480			83			(261		)
Income tax expense	$	5,743		$	4,337		$	4,196

Federal tax standards require that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e. a likelihood of more than 50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The standards also require that changes in judgment that result in subsequent recognition, derecognition or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) be recognized as a discrete item in the interim period in which the change occurs. As of December 27, 2015 and December 28, 2014 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.