|9 Months Ended|
Sep. 30, 2021
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
Effective tax rates for the thirteen and thirty-nine weeks ended September 30, 2021 and September 24, 2020 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within each period. The Company’s effective income tax rate was 9.3% and 10.4% for the thirteen weeks ended September 30, 2021 and September 24, 2020, respectively. The Company’s effective income tax rate was 14.9% and 2.5% for the thirty-nine weeks ended September 30, 2021 and September 24, 2020, respectively. For each period, the effective income tax rate was lower than the statutory federal income tax rate of 21.0% primarily due to the recognition of income tax benefits from tax deductions in excess of book expense related to stock option exercises and other discrete items. Additionally, the thirty-nine weeks ended September 24, 2020 included income tax benefits resulting from the enactment of the CARES Act.
The Company recognizes discrete expense for loss contingencies related to uncertain tax positions, including estimated interest and penalties. The Company recognized no expense related to uncertain tax positions during the thirteen and thirty-nine weeks ended September 30, 2021. The Company recognized a $0.3 million benefit and $2.2 million expense related to uncertain tax positions during the thirteen and thirty-nine weeks ended September 24, 2020, respectively.
The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax basis of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in the period that includes the enactment date of such a change.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. On a quarterly basis, the Company evaluates whether it is more likely than not that its deferred tax assets will be realized in the future and concludes whether or not a valuation allowance must be established.
The Company accounts for uncertain tax positions in accordance with ASC 740, Income Taxes. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements using a two-step process for evaluating tax positions taken, or expected to be taken, on a tax return. The Company may only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. In addition, the Company recognizes a loss contingency for uncertain tax positions when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The amounts recognized for uncertain tax positions require that management make estimates and judgments based on provisions of the tax law, which may be subject to change or varying interpretations. The Company includes estimated interest and penalties related to uncertain tax position accruals within accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets and within income tax expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides for, among other things, the temporary deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit for 50% of wages and health benefits paid to employees not providing services due to the COVID-19 pandemic. In December 2020, the Consolidated Appropriations Act, 2021 was signed into law and generally extended and expanded the availability of the CARES Act employee retention credit through June 30, 2021. Subsequently, the American Rescue Plan Act of 2021, enacted in March 2021, generally extended and expanded the availability of the CARES Act employee retention credit through December 31, 2021.
As of September 30, 2021, the Company has deferred $12.1 million of employer social security taxes under the CARES Act, of which 50% are required to be deposited by December 2021 and the remaining 50% by December 2022. Of the deferred employer social security taxes outstanding as of September 30, 2021, approximately $6.1 million is included in accrued expenses and other current liabilities and $6.0 million is included in other liabilities within the Condensed Consolidated Balance Sheets.During the thirty-nine weeks ended September 30, 2021 and September 24, 2020, the Company recognized employee retention credits totaling $1.0 million and $1.4 million, respectively. No employee retention credits were recognized during the thirteen weeks ended September 30, 2021, while the Company recognized $0.3 million of employee retention credits during the thirteen weeks ended September 24, 2020. Within the Condensed Consolidated Statements of Operations and Comprehensive Income, employee retention credits recorded during the periods presented were recognized as a reduction to selling and store operating expenses with the exception of $0.2 million of such credits that were recognized as an offset to general and administrative expenses during the thirty-nine weeks ended September 24, 2020
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef