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Income Taxes | 12 Months Ended
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Jan. 03, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before income taxes is set forth below:
| Year Ended
| 2020 |  | 2019 |  | 2018
Domestic | $ | 149,046 |  |  | $ | 160,474 |  |  | $ | 560,776 |
Foreign (a) | 3,749 |  |  | 11,007 |  |  | 14,140 |
| $ | 152,795 |  |  | $ | 171,481 |  |  | $ | 574,916 |
_______________ (a)Excludes foreign income of domestic subsidiaries. The (provision for) benefit from income taxes is set forth below:
| Year Ended
| 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
U.S. federal | $ | (16,176) |  |  | $ | (18,421) |  |  | $ | (109,078) |
State | (3,723) |  |  | (6,093) |  |  | (2,661) |
Foreign | (4,798) |  |  | (9,190) |  |  | (9,630) |
Current tax provision | (24,697) |  |  | (33,704) |  |  | (121,369) |
Deferred: |  |  |  |  |
U.S. federal | (6,707) |  |  | 1,585 |  |  | 5,071 |
State | (3,185) |  |  | (2,449) |  |  | 441 |
Foreign | (374) |  |  | 27 |  |  | 1,056 |
Deferred tax (provision) benefit | (10,266) |  |  | (837) |  |  | 6,568 |
Income tax provision | $ | (34,963) |  |  | $ | (34,541) |  |  | $ | (114,801) |
Deferred tax assets (liabilities) are set forth below:
| Year End
| January 3, 2021 |  | December 29, 2019
Deferred tax assets: |  |  |
Operating and finance lease liabilities | $ | 365,005 |  |  | $ | 345,173 |
Net operating loss and credit carryforwards | 62,210 |  |  | 59,597 |
Unfavorable leases | 23,511 |  |  | 26,020 |
Deferred revenue | 24,303 |  |  | 23,907 |
Accrued compensation and related benefits | 16,443 |  |  | 18,477 |
Accrued expenses and reserves | 7,673 |  |  | 13,786 |
Deferred rent | — |  |  | 492 |
Other | 5,869 |  |  | 3,757 |
Valuation allowances | (49,968) |  |  | (45,183) |
Total deferred tax assets | 455,046 |  |  | 446,026 |
Deferred tax liabilities: |  |  |
Operating and finance lease assets | (332,515) |  |  | (313,803) |
Intangible assets | (301,969) |  |  | (311,596) |
Fixed assets | (63,826) |  |  | (60,788) |
Other | (37,491) |  |  | (30,598) |
Total deferred tax liabilities | (735,801) |  |  | (716,785) |
| $ | (280,755) |  |  | $ | (270,759) |
The amounts and expiration dates of net operating loss and tax credit carryforwards are as follows:
| Amount |  | Expiration
Tax credit carryforwards: |  |  |
U.S. federal foreign tax credits | $ | 13,681 |  |  | 2022-2030
State tax credits | 708 |  |  | 2021-2023
Foreign tax credits of non-U.S. subsidiaries | 4,125 |  |  | Not applicable
Total | $ | 18,514 |  |  |
Net operating loss carryforwards: |  |  |
State and local net operating loss carryforwards | $ | 1,182,774 |  |  | 2021-2035
Foreign net operating loss carryforwards | 1,044 |  |  | Not applicable
Total | $ | 1,183,818 |  |  |
The Company’s valuation allowances of $49,968 and $45,183 as of January 3, 2021 and December 29, 2019, respectively, relate to foreign and state tax credit and net operating loss carryforwards. Valuation allowances increased $4,785 and $3,008 during 2020 and 2019, respectively, and decreased $5,120 during 2018. The relative presence of Company-operated restaurants in various states impacts expected future state taxable income available to utilize state net operating loss carryforwards. Major Tax Legislation On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that affects 2017 and subsequent years, including but not limited to (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, (2) bonus depreciation that will allow for full expensing of qualified property, (3) reducing the U.S. federal corporate tax rate from 35% to 21% in years 2018 and forward, (4) a tax on global intangible low-taxed income (“GILTI”) and (5) limitations on the deductibility of certain executive compensation. In 2018, we recorded a net tax expense of $2,159 related to the Tax Act consisting of $2,454 related to the impact of the corporate rate reduction on our net deferred tax liabilities and state taxes and a net expense of $991 related to the limitations on the deductibility of certain executive compensation, partially offset by $1,286 for the net benefit of foreign tax credits. _______________ The current portion of refundable income taxes was $5,399 and $13,555 as of January 3, 2021 and December 29, 2019, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of January 3, 2021 and December 29, 2019. The reconciliation of income tax computed at the U.S. federal statutory rate of 21% to reported income tax is set forth below:
| Year Ended
| 2020 |  | 2019 |  | 2018 (a)
Income tax provision at the U.S. federal statutory rate | $ | (32,087) |  |  | $ | (36,011) |  |  | $ | (120,732) |
State income tax provision, net of U.S. federal income tax effect | (4,664) |  |  | (6,470) |  |  | (221) |
Prior years’ tax matters (b) | 1,761 |  |  | 6,135 |  |  | (9,970) |
Excess federal tax benefits from share-based compensation | 5,338 |  |  | 5,841 |  |  | 10,250 |
Foreign and U.S. tax effects of foreign operations | (397) |  |  | 250 |  |  | (856) |
Valuation allowances | (4,593) |  |  | (2,833) |  |  | 5,120 |
Non-deductible goodwill (c) | — |  |  | — |  |  | (41) |
Tax credits | 1,901 |  |  | 879 |  |  | 1,089 |
Non-deductible executive compensation | (1,973) |  |  | (1,925) |  |  | (1,098) |
Unrepatriated earnings | (283) |  |  | (402) |  |  | (326) |
Non-deductible expenses and other | 34 |  |  | (5) |  |  | 1,984 |
| $ | (34,963) |  |  | $ | (34,541) |  |  | $ | (114,801) |
_______________ (a)2018 includes the following impacts associated with the Tax Act: (1) a net expense of $2,426 related to the impact of the corporate rate reduction on our net deferred tax liabilities, (2) a net expense of $991 related to the limitations on the deductibility of certain executive compensation, (3) a net expense of $28 of state income tax and (4) a net benefit of $1,286 related to foreign tax credits. (b)2019 primarily relates to a reduction in unrecognized tax benefits due to a lapse of statute of limitations. 2018 includes expense of $9,542 related to the Tax Act, which was partially offset by a $7,535 benefit reported in “Valuation allowances.” (c)Substantially all of the goodwill included in the net gain (loss) on sales of restaurants in 2018 under our system optimization initiative was non-deductible for tax purposes. See Note 3 for further information. The Company participates in the Internal Revenue Service (the “IRS”) Compliance Assurance Process (“CAP”). As part of CAP, tax years are examined on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return. As such, our tax returns for fiscal years 2009 through 2018 have been settled. The statute of limitations for the Company’s state tax returns vary, but generally the Company’s state income tax returns from its 2017 fiscal year and forward remain subject to examination. We believe that adequate provisions have been made for any liabilities, including interest and penalties that may result from the completion of these examinations. Unrecognized Tax Benefits As of January 3, 2021, the Company had unrecognized tax benefits of $20,973, which, if resolved favorably would reduce income tax expense by $16,601. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
| Year End
| January 3, 2021 |  | December 29, 2019 |  | December 30, 2018
Beginning balance | $ | 22,323 |  |  | $ | 27,632 |  |  | $ | 28,848 |
Additions: |  |  |  |  |
Tax positions of current year | 322 |  |  | 1,356 |  |  | 3,874 |
Tax positions of prior years | — |  |  | — |  |  | 2,598 |
Reductions: |  |  |  |  |
Tax positions of prior years | (1,183) |  |  | (227) |  |  | (7,553) |
Settlements | (119) |  |  | — |  |  | (21) |
Lapse of statute of limitations | (370) |  |  | (6,438) |  |  | (114) |
Ending balance | $ | 20,973 |  |  | $ | 22,323 |  |  | $ | 27,632 |
The reductions in unrecognized tax benefits in 2020 was primarily related to decreases as a result of settlements with various taxing jurisdictions. The additions in unrecognized tax benefits in 2019 was primarily related to the uncertainty of the income tax consequences of a cash settlement related to a previously held investment. The addition of unrecognized tax benefits in 2018 was primarily related to the sale of our ownership interest in Inspire Brands, and the reduction of unrecognized benefits in 2018 was primarily related to settlements with various taxing jurisdictions, including amended returns that were filed in 2017. During 2021, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $220 due primarily to the lapse of statutes of limitations and expected settlements. During 2020, 2019 and 2018, the Company recognized $159, $(489) and $(12) of expense (income) for interest and $81, $81 and $309 of income for penalties, respectively, related to uncertain tax positions. The Company has $873 and $946 accrued for interest and $37 and $118 accrued for penalties as of January 3, 2021 and December 29, 2019, respectively.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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