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Income Taxes | 9 Months Ended
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Sep. 29, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes
| THIRTEEN WEEKS ENDED |  | THIRTY-NINE WEEKS ENDED
(dollars in thousands) | SEPTEMBER 29, 2024 |  | SEPTEMBER 24, 2023 |  | SEPTEMBER 29, 2024 |  | SEPTEMBER 24, 2023
Income (loss) before (benefit) provision for income taxes | $ | 1,032 |  |  | $ | 45,373 |  |  | $ | (39,959) |  |  | $ | 230,047 |
(Benefit) provision for income taxes | $ | (6,509) |  |  | $ | (58) |  |  | $ | 5,159 |  |  | $ | 21,186 |
Effective income tax rate | (NM) |  | (0.1) | % |  | (12.9) | % |  | 9.2 | %
________________ NM Not meaningful. For the thirteen weeks ended September 29, 2024, the benefit for income taxes includes: (i) the impact of changes to the estimate of forecasted annual pre-tax book income relative to the prior quarter in 2024, (ii) the benefit of FICA tax credits on certain tipped wages and (iii) the temporary reduction in the Brazilian income tax rate from 34% to 0% under the new Brazil tax legislation. For the thirteen weeks ended September 24, 2023, the benefit for income taxes includes the benefits of Brazil tax legislation, that included a temporary reduction in the Brazilian income tax rate from 34% to 0%, as well as the income tax exemption on Brazil state value added tax (“VAT”) benefits. The effective income tax rate for the thirty-nine weeks ended September 29, 2024 is lower than the effective income tax rate for the thirty-nine weeks ended September 24, 2023, primarily due to the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the period, resulted in a negative effective income tax rate. On January 24, 2024, the Company’s Brazilian subsidiary received an unfavorable second level court ruling related to its ongoing litigation regarding its eligibility for tax exemptions under the Brazil tax legislation. This legislation temporarily granted certain industries a 100% exemption from income tax (IRPJ and CSLL) and federal value added taxes (PIS and COFINS). The Company claimed this benefit for the periods between September 2022 and December 2023. The Company is appealing this ruling and in connection with the appeal made a cash judicial deposit of $42.9 million, inclusive of principal, interest and potential penalties, in July 2024. The deposit was recorded in Other assets, net, on the Company’s Consolidated Balance Sheet. The judicial deposit accumulates interest income until final resolution of the judicial proceedings. The Company believes that it will more likely than not prevail in this appeal and, accordingly, has not recorded any expense or liability for the disputed amounts. On November 6, 2024, the Company entered into a purchase agreement to sell 67% of its Brazil operations. In connection with the purchase agreement, the Company expects to retain the legal rights to fully recover the judicial deposit related to the Brazil tax legislation. The Company is still evaluating the value of those legal rights to recovery and the accounting for such amounts. See Note 15 - Subsequent Events of the Notes to Consolidated Financial Statements for additional details regarding the purchase agreement. During the second quarter of 2024, Brazil enacted new tax legislation that temporarily grants certain industries a 100% exemption from income tax (IRPJ and CSLL) for the periods between May 23, 2024 and December 2024 and 100% exemption from federal value added taxes (PIS and COFINS) for the periods between May 23, 2024 and December 2026. The Company applied for this exemption and was approved by the Brazilian tax authorities. The Company’s estimated annual effective income tax rate for the thirteen and thirty-nine weeks ended September 29, 2024 includes the benefit expected from this legislation. The new Brazil tax legislation also established a country-wide limitation to the total benefits that will be granted under this law. The exemption from value added taxes could end before December 2026 due to this country-wide limitation. In the U.S., a restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (the “FICA tax credit”). The level of FICA tax credits is primarily driven by U.S. Restaurant sales and is not impacted by costs incurred that may reduce Income before provision for income taxes. The effective income tax rate for the thirty-nine weeks ended September 29, 2024 was lower than the Company’s blended federal and state statutory rate of approximately 26% primarily due to the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the period, resulted in a negative effective income tax rate. The effective income tax rates for the thirteen and thirty-nine weeks ended September 24, 2023 were lower than the Company’s blended federal and state statutory rate of approximately 26% primarily due to the benefit of FICA tax credits on certain tipped wages, benefits of Brazil tax legislation that include a temporary reduction in the Brazilian income tax rate from 34% to 0%, and the income tax exemption on Brazil state VAT benefits.

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