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. 29, 2019

The provision for federal and state income taxes for the years ended December 29, 2019, December 30, 2018 and December 31, 2017 consisted of the following:



	2019			2018			2017
Current:
Federal	$	1,151		$	435		$	972
State	1,042			1,048			859
Total current income tax expense	2,193			1,483			1,831
Deferred:
Federal	(4,676		)	(3,643		)	(7,761		)
State	(418		)	(194		)	430
Total deferred income tax benefit	(5,094		)	(3,837		)	(7,331		)
Total income tax benefit	$	(2,901	)	$	(2,354	)	$	(5,500	)

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 as of December 29, 2019 and December 30, 2018 are as follows:



	2019			2018
Deferred tax assets:
Accrued liabilities	$	517		$	13,610
General business tax credits	17,923			16,048
Operating lease liabilities	52,773			—
Stock-based compensation	969			1,005
Other	230			213
Total deferred tax assets	72,412			30,876
Deferred tax liability:
Intangibles	(8,219		)	(7,996		)
Prepaid expenses	(1,330		)	(1,358		)
Property and equipment	(20,526		)	(24,123		)
Operating lease assets	(39,736		)	—
Total deferred tax liabilities	(69,811		)	(33,477		)
Deferred tax assets (liabilities), net	$	2,601		$	(2,601	)

Deferred tax balances were measured using a 21% federal statutory rate. As of December 29, 2019, the Company has general business tax credits of $17.9 million expiring in 2036.

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

The following is a reconciliation of the expected federal income taxes at the statutory rates of 21% for the fiscal year ended December 29, 2019 and December 30, 2018 and 35% for the fiscal year ended December 31, 2017 to the actual provision for income taxes:



	2019			2018			2017
Expected income tax expense	$	696		$	669		$	8,210
State tax expense, net of federal benefit	493			675			838
FICA tip credit	(3,896		)	(3,411		)	(2,250		)
Deferred tax balance adjustment	—			173			(11,696		)
Other	(194		)	(460		)	(602		)
Income tax benefit	$	(2,901	)	$	(2,354	)	$	(5,500	)

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 29, 2019 and December 30, 2018 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.