Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Jan. 01, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Prior to June 7, 2021, the Company was a limited liability company taxed as a partnership for U.S. federal income tax purposes. The Company was generally not directly subject to income taxes under the provisions of the Internal Revenue Code and most applicable state laws. Therefore, taxable income or loss was reported to the members for inclusion in their respective income tax returns.

After June 7, 2021, the Group is taxed as a Corporation for U.S. income tax purposes and similar sections of the state income tax laws. The Group’s effective tax rate is based on pre-tax earnings, enacted U.S. statutory tax rates, non-deductible expenses, and certain tax rate differences between U.S. and foreign jurisdictions. The foreign subsidiaries file income tax returns in the United Kingdom, France, Australia, and Singapore as necessary. For tax reporting purposes, the taxable income or loss with respect to the 45% ownership in the joint venture operating in Mexico will be reflected in the income tax returns filed under that country’s jurisdiction. The Group’s provision for income taxes consists of provisions for federal, state, and foreign income taxes.

The provision for income taxes for the years ended January 1, 2022 and December 26, 2020 includes amounts related to entities within the group taxed as corporations in the United States, United Kingdom, France, Australia, and Singapore. The Company determines its provision for income taxes for interim periods and annual periods using an estimate of its annual effective tax rate on year to date ordinary income and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. Additionally, the income tax effects of significant unusual or infrequently occurring items are recognized entirely within the period in which the event occurs.

During the years ended January 1, 2022 and December 26, 2020, the Company recorded a total income tax provision of approximately $6,481 and $2,114 on pre-tax income of approximately $50,283 and $58,951 resulting in an effective tax rate of 12.9% and 3.6%, respectively. The effective tax rates for the year ended January 1, 2022 were primarily impacted by the change in tax status of the Group from partnership to corporation, statutory rate differentials, changes in estimated tax rates, valuation allowances and permanent differences and for the year ended December 26, 2020, were primarily impacted by the tax status of the Group being a partnership and permanent differences.

For the years ended January 1, 2022 and December 26, 2020, income (loss) from continuing operations before taxes consist of the following:

Year Ended
January 01, 2022 December 26, 2020
US operations $ 54,067  $ 56,019 
Foreign operations (3,784) 2,932 
Total $ 50,283  $ 58,951 

Income tax expense (benefit) attributable to income from continuing operations consists of:
Current Deferred Total
Year ended January 1, 2022:
U.S. federal $ 629  $ 4,376  $ 5,005 
State and local 1,529  10  1,539 
Foreign jurisdiction (526) 463  (63)
Total $ 1,632  $ 4,849  $ 6,481 

Current Deferred Total
Year ended December 26, 2020:
U.S. federal $ (2) $ 823  $ 821 
State and local 612  (473) 139 
Foreign jurisdiction 1,155  (1) 1,154 
Total $ 1,765  $ 349  $ 2,114 

Income tax expense (benefit) attributable to income from continuing operations was approximately $6,481 and $2,114 for the years ended January 1, 2022 and December 26, 2020, respectively, and differed from the amounts computed by applying the partnership’s U.S. federal income tax rate of zero for the year ended December 26, 2020 and for the partial period up to the Business Combination date of June 7, 2021, presented to pretax income from continuing operations as a result of the following:

Year Ended
January 1, 2022 December 26, 2020
Income before taxes $ 50,283  $ 58,951 
Computed “expected” tax expense 10,559  — 
Increase (reduction) in income taxes resulting from:
Statutory rate differential (5,606) 1,281 
Permanent difference 1,776  697 
State income taxes, net of federal benefit 1,284  519 
Change in tax rates (1,342) (421)
Change in estimate 175  (146)
Change in valuation allowance (938) — 
Other, net 573  184 
Total $ 6,481  $ 2,114 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 1, 2022 and December 26, 2020 are presented below:
January 1, December 26,
2022 2020
Deferred tax assets
Allowance for doubtful accounts $ 101  $ 15 
Other accrued expenses 863  222 
Inventories 210  66 
Leases 3  9 
Tax incentives 113  — 
Intangibles 61,465  — 
Net operating loss carryforward 1,095  1,670 
Other 17  83 
Total gross deferred tax assets 63,867  2,065 
Less: valuation allowance (256) — 
Net deferred tax assets 63,611  2,065 
Deferred tax liabilities
Intangibles —  (15,200)
Property and equipment (4,360) (2,134)
Prepaids (816) — 
Other (269) — 
Total gross deferred liabilities (5,445) (17,334)
Net deferred tax asset (liability) $ 58,166  $ (15,269)

The difference between income tax expense recorded in our consolidated statements of operations and comprehensive income and income taxes computed by applying the corporate statutory federal income tax rate (21% for the year ended January 1, 2022 and December 26, 2020) to income before income tax expense is due to the fact that the majority of our income was not subject to federal income tax due to our status as a limited liability company prior to June 7, 2021. In general, only the corporate entities in our structure are subject to federal tax at 21%. The Company realized a current tax benefit of $6,901 from the utilization of net operating loss carryforwards. We record a tax provision related to the amount of undistributed earnings of our foreign subsidiaries expected to be repatriated.

At January 1, 2022 and December 26, 2020, the Company has net operating loss carryforwards for Federal income tax purposes of $0 and $6,901, respectively, which are available to offset future federal taxable income, if any, and are not subject to expiration. At January 1, 2022 and December 26, 2020, the Company has net operating loss carryforwards for state income tax purposes of $5,382 and $4,961 which are available to offset future state taxable income, of which $2,018 and $1,950 are subject to expiration beginning in 2024 and 2036, respectively.

In evaluating its ability to realize its net deferred tax assets, the Company considered all available positive and negative evidence, including its past operating results, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. As of January 1, 2022, the Company has set up a valuation allowance against state net operating loss in the amount of $256 due to losses incurred in a subsidiary which does not generate operating income, thus the Company does not believe a tax benefit is more likely than not to be realized for that subsidiary’s state net operating losses.

The Company recognizes accrued interest associated with unrecognized tax benefits as part of interest expense and penalties associated with unrecognized tax benefits as part of other expenses. As of January 1, 2022 and December 26, 2020 there were no accrued interest and penalties associated with unrecognized tax benefits. Management believes there are no material amounts of tax positions for which there is uncertainty as of January 1, 2022 and December 26, 2020. There are no changes expected in the next 12 months.

Management of Janus is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states. For the years before 2017, the Company is no longer subject to U.S. federal or state income tax examinations. For the years before 2017, the Company is no longer subject to examination by the United Kingdom, French, Australia, and Singapore taxing authorities in those jurisdictions.