14. Income Taxes

The income tax expense (benefit) differs from the amount that would have resulted from applying the combined Canadian federal and provincial statutory income tax rate to earnings (loss) from continuing operations before income taxes due to the following:

		December 30, 2023			December 31, 2022			January 1, 2022
		$			$			$
Earnings (loss) from continuing operations before income taxes		(18,641	)		4,777			689
Canadian statutory rate		26.5%			26.5%			26.5%
Income tax expense (benefit) at statutory rate		(4,940	)		1,266			183
Stock-based compensation		(778	)		1,054			(4,714	)
Change in valuation allowance		5,911			(471	)		975
Disallowed executive compensation		2,372			367			135
Foreign tax rate differential		107			(156	)		(73	)
Change in enacted tax rates		90			(9	)		17
Other		507			(1,155	)		(1,377	)
Income tax expense (benefit)		3,269			896			(4,854	)

The components of earnings (loss) from continuing operations before income taxes are shown below:

The components of income tax expense (benefit) are shown below:

		December 30, 2023			December 31, 2022
		$			$
Loss and credit carryovers		43,871			20,201
Lease liabilities		29,395			23,609
Interest expense limitation (163j)		15,906			9,464
Inventory basis differences		3,723			1,805
Stock-based compensation		1,255			2,160
Right-of-use lease assets		(28,285	)		(23,071	)
Property, plant and equipment and intangible assets		(18,537	)		(28,088	)
Other		2,623			2,458
		49,951			8,538
Less: valuation allowance		50,456			4,826
Deferred income tax asset (liability)		(505	)		3,712

The components of the deferred income tax asset (liability) are shown below:

		December 30, 2023			December 31, 2022
		$			$
Canada		(325	)		(325	)
U.S.		-			3,978
Other		(180	)		59
Deferred income tax asset (liability)		(505	)		3,712

The components of the deferred income tax valuation allowance are as follows:

		December 30, 2023			December 31, 2022
		$			$
Balance, beginning of year		4,826			5,267
Increase (decrease) in valuation allowance		45,630			(441	)
Balance, end of year		50,456			4,826

The following table details the Company's tax attributes as at December 30, 2023, primarily related to net operating losses, tax credits and capital losses for which it has recorded deferred tax assets:

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determinations, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on this evaluation, as at December 30, 2023, a valuation allowance of $50.5 million (December 31, 2022 - $4.8 million) had been recorded against certain assets to reduce the net benefit recorded in the consolidated financial statements.

As the undistributed earnings of the Company's non-Canadian affiliates and associated companies are considered to be indefinitely reinvested, no provision for deferred taxes has been provided thereon.

For the years ended December 30, 2023, December 31, 2022 and January 1, 2022, the Company did not identify any material uncertain tax positions or recognize any related tax benefits. The Company believes it has adequately examined its tax positions taken or expected to be taken in a tax return; however, amounts asserted by taxing authorities could differ from the Company's positions. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

Consistent with its historical financial reporting, the Company has classified interest and penalties related to income tax liabilities, when applicable, as part of interest expense in its consolidated statements of operations, and with the related liability on the consolidated balance sheets.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions are the U.S. (including multiple states) and Canada (Ontario). The Company's 2019 through 2022 tax years (and any tax year for which available non-capital loss carryforwards were generated up to the amount of non-capital loss carryforward) remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes, and tax years 2016 through 2022 remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing audits in various other jurisdictions that are not considered material to the Company's consolidated financial statements.