Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 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 Company is taxed as a Corporation for U.S. income tax purposes and similar sections of the state income tax laws. The Company’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 Company’s provision for income taxes consists of provisions for federal, state, and foreign income taxes.
The provision for income taxes for the years ended December 31, 2022, January 1, 2022 and December 26, 2020 includes amounts related to entities within the Company 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 December 31, 2022, January 1, 2022 and December 26, 2020, the Company recorded a total income tax provision of approximately $37,558 and $6,481 and $2,114 on pre-tax income of approximately $145,211 and $50,282 and $58,951 resulting in an effective tax rate of 25.9%, 12.9% and 3.6%, respectively. The effective tax rates for the year ended December 31, 2022 were primarily impacted by statutory rate differentials, changes in estimated tax rates, valuation allowance, and certain income tax credits and for the year ended January 1, 2022 were primarily impacted by the change in tax status of the Company from a partnership to a 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 Company being a partnership and permanent differences.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For the years ended December 31, 2022, January 1, 2022 and December 26, 2020, income (loss) from continuing operations before taxes consist of the following:
Year Ended
December 31, 2022 January 01, 2022 December 26, 2020
US operations $ 140,702  $ 54,066  $ 56,019 
Foreign operations 4,509  (3,784) 2,932 
Total $ 145,211  $ 50,282  $ 58,951 
Income tax expense (benefit) attributable to income from continuing operations consists of (in thousands):

Current Deferred Total
Year ended December 31, 2022:
U.S. federal $ 19,419  $ 9,811  $ 29,230 
State and local 3,388  3,592  6,980 
Foreign jurisdiction 1,225  123  1,348 
Total $ 24,032  $ 13,526  $ 37,558 
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 $37,558, $6,481 and $2,114 for the years ended December 31, 2022, 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 (in thousands):
Year Ended
December 31, 2022 January 01, 2022 December 26, 2020
Income before taxes $ 145,211  $ 50,282  $ 58,951 
Computed “expected” tax expense 30,494  10,559  — 
Increase (reduction) in income taxes resulting from:
Statutory rate differential 401  (5,606) 1,281 
Permanent difference 30  1,776  697 
State income taxes, net of federal benefit 5,958  1,284  519 
Change in tax rates 1,156  (1,342) (421)
Change in estimate 848  175  (146)
Change in valuation allowance (256) (938) — 
Other, net (1,073) 573  184 
Total $ 37,558  $ 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 December 31, 2022 and January 1, 2022 are presented below (in thousands):
December 31, January 1,
2022 2022
Deferred tax assets
Allowance for doubtful accounts $ 103  $ 101 
Other accrued expenses 625  863 
Inventories 263  210 
Leases 566  3 
Tax credits carryforward 508  113 
Intangibles 48,138  61,465 
Net operating loss carryforward 20  1,095 
Stock compensation 810  — 
Interest expense carryforward 234  — 
Other 97  17 
Total gross deferred tax assets 51,364  63,867 
Less: valuation allowance —  (256)
Net deferred tax assets 51,364  63,611 
Deferred tax liabilities
Property and equipment (5,694) (4,360)
Prepaids (715) (816)
Other (281) (270)
Total gross deferred liabilities (6,690) (5,446)
Net deferred tax asset (liability) $ 44,674  $ 58,165 

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 years ended December 31, 2022, 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 $667 from the utilization of state 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 December 31, 2022 and January 1, 2022, the Company had no net operating loss carryforwards for Federal income tax purposes which would be available to offset future federal taxable income, if any, and would not be subject to expiration. At December 31, 2022 and January 1, 2022, the Company has net operating loss carryforwards for state income tax purposes of $4,635 and $5,382 which are available to offset future state taxable income, of which $753 and $326 are subject to expiration beginning in 2024 and 2029, 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 December 31, 2022, the Company removed its valuation allowance against state net operating losses in the amount of $256 due to losses incurred in a subsidiary which does not generate operating income, because the Company reorganized certain entities and state tax filings and now believes a tax benefit is more likely than not to be realized for that subsidiary’s state net operating losses.
ASC 740 clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attributes for financial statement disclosure of income tax positions taken or expected to be taken on an income tax return. As of December 31, 2022 and January 1, 2022 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 December 31, 2022 and January 1, 2022. 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 2018, the Company is no longer subject to U.S. federal tax examinations, and for the years before 2017, the Company is no longer subject to U.S. 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.