Note 8 - Income Taxes

The components of income before benefit for income taxes were as follows (in thousands):

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The components of the Company’s benefit for income taxes were as follows (in thousands):

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The Company’s effective tax rate differs from the statutory rates as follows:

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The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):

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Tax Carryforwards

As of December 31, 2024, the Company has federal net operating loss (“NOL”) carryforwards of $15.2 million which have no expiration date. As of December 31, 2024, the Company has federal FICA tip credit carryforwards of $49.4 million which have expiration dates from 2033 through 2045. The Company has various state NOL carryforwards. The determination of the state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. As of December 31, 2024, the Company has $4.1 million in state NOL carryforwards after applying applicable apportionment percentages and tax rates. The state NOLs expire at various dates from 2037 to 2044. The state and local tax credit carryforwards of less than $0.1 million expire at various dates from 2025 through 2030.

In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely than not that the deferred tax assets will be realized. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including current operating results, tax planning strategies and forecasts of future earnings. As of both December 31, 2024 and December 31, 2023, the Company had a valuation allowance of $4.2 million and $0.6 million, respectively. The valuation allowance is related to certain foreign tax credits, state NOL carryforwards and a portion of the FICA tip credit carryforward acquired in the Benihana acquisition. The Company does not expect to have the appropriate source of income from various jurisdictions needed in order to utilize its foreign tax credit and certain state NOL carryforwards. Additionally, the Company projects that a portion of its FICA tip credit carryforward acquired as a result of the Benihana acquisition will be statutorily limited prior to expiration.

Uncertain tax positions

The following table summarizes the activity related to the Company’s uncertain tax positions (in thousands):

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Included in the balance of unrecognized tax benefits as of December 31, 2024 are tax benefits that, if recognized, would result in adjustments to taxes payable. Management believes it is reasonably possible that a nominal amount of the uncertain tax position as of December 31, 2024 will decrease within the next twelve months. There was no unrecognized tax benefit as of December 31, 2023. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, we accrued interest of $0.2 million as of December 31, 2024.

The Company is subject to income taxes in the U.S. federal jurisdiction, and the various states and local jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company’s federal tax filings remain subject to examination for federal tax years 2021 through 2024. The Company’s state and local tax filings remain subject to examination for tax years 2020 through 2023. NOL carryforwards are subject to examination regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized.

The Company’s foreign income tax returns prior to fiscal year 2021 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.