Income Taxes |
9 Months Ended |
|---|---|
Sep. 26, 2020 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Accounting Standards Codification 740 (“ASC 740”) requires companies to apply their estimated annual effective tax rate on a year-to-date basis in each interim period. These rates are derived, in part, from expected annual pre-tax income or loss. In the thirteen and thirty-nine weeks ended September 26, 2020 and the thirteen and thirty-nine weeks ended September 28, 2019, the Company applied an estimated annual effective tax rate to the interim period pre-tax loss to calculate the income tax benefit or provision.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act provides a stimulus package intended to address the impact of the COVID-19 pandemic on the American economy and provides tax relief for businesses. The Company analyzed the available stimulus provisions and has recognized certain benefits including the deferral of payroll taxes, accelerated Alternative Minimum Tax income tax refunds, and increased business interest deductions.
For the thirteen and thirty-nine weeks ended September 26, 2020, the effective income tax rates were 11.6% and 74.3%, respectively. The Company recorded an income tax (benefit) expense for the thirteen and thirty-nine weeks ended September 26, 2020 of $1,400 and $(9,593), respectively. The effective tax rate for the thirteen weeks ended September 26, 2020 was the result of favorable interest deductions from the CARES Act as well as non-deductible expenses, state and foreign taxes. The effective tax rate for the thirty-nine weeks ended September 26, 2020 is primarily attributable to the increased business interest deduction afforded by the CARES Act. The CARES Act provides the Company a benefit for increased business interest deductions for 2019 and 2020. The Company discretely recorded a $6,700 income tax benefit for the period ended March 28, 2020 related to the increased business interest provision for 2019. The Company is expecting to utilize a portion of prior year interest limitation carryforwards in the 2020 period resulting in favorable impacts to the effective tax rate. The utilization of the interest carryforwards is primarily the result of the increased business interest deduction afforded by the CARES Act as well as the impact of the Company's increasing operational income on the interest limitation. The remaining differences to the effective tax rate for the thirty-nine weeks ended September 26, 2020 are due to non-deductible expenses and state and foreign income taxes.
For the thirteen and thirty-nine weeks ended September 28, 2019, the effective income tax rate was 20.6% and 2.6%, respectively. The Company recorded an income tax benefit for the thirteen and thirty-nine weeks ended September 28, 2019 of $(3,775) and $(1,844), respectively. The effective tax rate for the thirteen and thirty-nine weeks ended September 28, 2019 was primarily the result of the IRC Section 163(j) interest limitation. Consistent with prior periods, the primary impact of the effective tax rate differential for the thirteen weeks ended September 28, 2019 was due to the Company recording a valuation allowance on its interest limitation carryforward. In addition to the interest limitation, the effective income tax rate differed from the federal statutory tax rate for the thirty-nine weeks ended September 28, 2019 due to certain non-deductible expenses, and state and foreign income taxes.
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