Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 25, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income tax expense are as follows:
Fiscal Year Ended
in thousands
December 25,
2025		 December 26,
2024		 December 28,
2023
Current expense:
Federal
 $ 67,320  $ 40,764  $ 29,737 
State
 11,250  8,574  12,092 
Total current expense 78,570  49,338  41,829 
Deferred expense (benefit):
Federal
 (18,160) 1,024  24,792 
State
 (2,396) (2,831) (1,070)
Total deferred (benefit) expense
 (20,556) (1,807) 23,722 
Income tax expense
 $ 58,014  $ 47,531  $ 65,551 
The following is a summary of the differences in amounts and percentages between the federal statutory tax rate of 21% and the Company’s effective tax rate for each of the last three fiscal years:
Fiscal Year Ended
December 25,
2025		 December 26,
2024		 December 28,
2023
dollars in thousands
Amount
Percent
Amount
Percent
Amount
Percent
U.S. federal statutory tax rate $ 55,999  21.0  % $ 53,215  21.0  % $ 65,421  21.0  %
State and local income taxes, net of federal income tax effect (1) (2)
6,995  2.6  4,538  1.8  8,824  2.8 
Tax credits:
Energy-related tax credits
 (4,401) (1.6) (248) (0.1) (257) (0.1)
Other tax credits
 (1,736) (0.7) (2,029) (0.8) (1,762) (0.6)
Nontaxable or nondeductible items:
Share-based payment awards (1,433) (0.5) (10,769) (4.2) (8,748) (2.8)
Other
 2,244  0.8  3,013  1.2  1,714  0.6 
Changes in unrecognized tax benefits
 471  0.2  810  0.3  —  — 
Other adjustments
 (125) —  (999) (0.4) 359  0.1 
Effective tax rate $ 58,014  21.8  % $ 47,531  18.8  % $ 65,551  21.0  %
(1)For fiscal 2025, California, New Jersey, and New York contributed to the majority of the tax effect in this category. For fiscal 2024, California and Texas contributed to the majority of the tax effect in this category. For fiscal 2023, California, Georgia, and Illinois contributed to the majority of the tax effect in this category.
(2)Includes state excess tax benefits related to stock-based compensation awards for fiscal years 2025, 2024, and 2023 of $0.3 million, $2.1 million, and $1.8 million, respectively.
Cash paid for income taxes, net of refunds, consisted of the following:
Fiscal Year Ended
in thousands
 December 25,
2025		 December 26,
2024		 December 28,
2023
Federal
 $ 50,130  $ 33,100  $ 45,405 
State:
California
 2,692  2,313  3,629 
Other
 11,139  7,462  11,993 
Total
 $ 63,961  $ 42,875  $ 61,027 
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and (liabilities) are presented below:
in thousands December 25,
2025		 December 26,
2024
Deferred tax assets:
Lease liabilities $ 454,752  $ 375,909 
Accruals not currently deductible for tax purposes 27,024  24,011 
Inventories 11,519  11,552 
Stock-based compensation 8,805  7,559 
Other intangibles
 2,539  8,292 
Gift card liability 2,286  1,682 
Other
 1,832  1,853 
Total deferred tax assets 508,757  430,858 
Deferred tax liabilities:
Right-of-use assets
 (406,371) (332,596)
Fixed assets (99,707) (116,400)
Intangible assets (27,506) (27,358)
Other (5,354) (5,254)
Total deferred tax liabilities (538,938) (481,608)
Net deferred tax liabilities $ (30,181) $ (50,750)
The Company utilized no tax-effected state net operating losses in fiscal years 2025 and 2024. As of December 25, 2025, approximately $0.8 million of tax-effected state net operating losses were available to reduce future income taxes. The state net operating losses expire in various amounts beginning in fiscal 2034.
Pursuant to provisions under the Inflation Reduction Act, the Company purchased transferable federal tax credits during fiscal 2025. These federal tax credits were purchased at negotiated discounts, resulting in an income tax benefit recorded during the fiscal year ended December 25, 2025. Receivables associated with the transferable federal tax credits are recorded as an adjustment to income taxes payable.
In assessing the realization of deferred tax assets, including net operating losses, management considered whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers taxable income in prior carryback periods, future reversals of existing taxable temporary differences, tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards in making this assessment, and accordingly, has concluded that no valuation allowance is necessary as of December 25, 2025 or December 26, 2024.
The Company files income tax returns with the U.S. Federal government and various state jurisdictions. Prior tax years beginning in fiscal year 2022 remain open to examination by the Internal Revenue Service. Foreign, state, and local income tax returns are generally subject to examination for a period of three to five years after filing of the respective returns.
There was no unrecognized tax benefits activity in fiscal 2023. The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits for the periods presented:
Fiscal Year Ended
in thousands December 25,
2025		 December 26,
2024
Unrecognized tax benefits balance at beginning of fiscal year $ 810  $ — 
Additions based on tax positions related to the current year 471  334 
Additions for tax positions of prior years —  476 
Unrecognized tax benefits balance at end of fiscal year $ 1,281  $ 810 
As of December 25, 2025 and December 26, 2024, there were unrecognized tax benefits of $1.3 million and $0.8 million, respectively, that, if recognized, would affect the Company’s effective tax rate. The Company’s policy is to classify interest and penalties related to unrecognized tax benefits in income tax expense. The Company did not recognize interest expense related to unrecognized tax benefits during fiscal years 2025, 2024, or 2023.
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA contains numerous amendments to federal income tax provisions such as making key elements of the Tax Cuts and Jobs Act permanent, including 100% bonus depreciation and domestic research cost expensing. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in later years. There was no material impact to the Company’s fiscal 2025 effective tax rate or consolidated financial statements. We have realized a reduction in our fiscal 2025 cash tax payments due to the above mentioned provisions.