Entity information:

• Entity registrant name: Ruths Hospitality Group, Inc.
• CIK: 0001324272
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1324272/000156459018005966/0001564590-18-005966-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1324272/000156459018005966/ruth-20171231.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1324272/000156459018005966/ruth-20171231.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001324272
• Generator: Donnelley Financial Solutions
• Total assets: 242,096,000
• Income tax expense (benefit): 15,669,000
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

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(16) Income Taxes

Total income tax expense (benefit) for fiscal years 2017, 2016, and 2015 was (in thousands):

 

 

Income tax expense from continuing operations consists of the following:

 

 

Income tax expense differs from amounts computed by applying the federal statutory income tax rate to income from continuing operations before income taxes as follows (in thousands):

 

 

The Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law on December 22, 2017. The 2017 Tax Act significantly revises existing U.S. tax law, and includes many changes that impact the Company, most notably a reduction of the statutory corporate tax rate from 35% to 21%, and the curtailment or elimination of certain deductions. The Company recorded income tax expense of $1.1 million related to the remeasurement of its net deferred tax assets, resulting from the permanent reduction of the U.S. statutory corporate tax rate from 35% to 21%.  The SEC has issued Staff Accounting Bulletin (“SAB”) No. 118 which permits registrants to record provisional amounts related to the 2017 Tax Act to the extent that the information needed to account for the income tax impacts of the legislation is not available, has not been prepared, or has not been analyzed in sufficient detail. In recognizing the income tax effects of the 2017 Tax Act, the Company has not identified items it considers to be provisional, for which relief under SAB No. 118 would be sought.  The remeasurement of the Company’s net deferred tax assets incorporates assumptions based upon the Company’s current interpretation of the 2017 Tax Act, particularly as it relates to the future deductibility of executive compensation items. As such, these assumptions may change as clarification and guidance is provided by the appropriate taxing authorities.

The Company utilizes the federal FICA tip credit to reduce its periodic federal income tax expense.  A restaurant company employer may claim a credit against the company’s federal income taxes for FICA taxes paid on certain tip wages (the FICA tip credit). The credit against income tax liability is for the full amount of eligible FICA taxes. Employers cannot deduct from taxable income the amount of FICA taxes taken into account in determining the credit.  The Other line in the effective tax rate schedule above primarily represents non-deductible compensation in fiscal years 2017 and 2016.

Income taxes applicable to discontinued operations are comprised of (a) taxes calculated at the composite federal and state statutory tax rate times the pre-tax loss plus (b) the FICA tip credit benefit attributable to the restaurant sales of the Mitchell’s Restaurants. A reconciliation of the U.S. statutory tax rate to the effective tax rate applicable to discontinued operations for fiscal years 2016, 2015 and 2014 follows (in thousands):

 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented below (in thousands):  

 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of 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 the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment.  Gross deferred assets were reduced by a valuation allowance of $1.4 million and $762 thousand in 2017 and 2016, respectively, related to certain state net operating loss and state tax credit carryforwards that are not likely to be offset by future state taxable income.  Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of the net deferred tax assets.

As of December 31, 2017, the Company has state net operating loss carry-forwards of $61.6 million and state tax credit carry-forwards of $642 thousand, which are available to offset federal and state taxable income with the last of such benefit expiring in 2037.

As of December 31, 2017, the Company’s gross unrecognized tax benefits totaled approximately $666 thousand, of which $526 thousand, if recognized, would impact the effective tax rate. The Company does not anticipate there will be any material changes in the unrecognized tax benefits within the next 12 months. Our continuing practice is to recognize interest and penalties related to uncertain tax positions in income tax expense.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (amounts in thousands):

 

 

The Company files consolidated and separate income tax returns in the United States Federal jurisdiction and many state jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal or state and local income tax examinations for fiscal years before 2013.