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Income Taxes | 12 Months Ended
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Dec. 29, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following table presents the domestic and foreign components of (Loss) income before (benefit) provision for income taxes for the periods indicated:
| FISCAL YEAR
(dollars in thousands) | 2024 |  | 2023 |  | 2022
Domestic | $ | (53,921) |  |  | $ | 235,357 |  |  | $ | 134,465 |
Foreign | (4,886) |  |  | (4,170) |  |  | (7,062) |
(Loss) income before (benefit) provision for income taxes | $ | (58,807) |  |  | $ | 231,187 |  |  | $ | 127,403 |
(Benefit) provision for income taxes consisted of the following for the periods indicated:
| FISCAL YEAR
(dollars in thousands) | 2024 |  | 2023 |  | 2022
Current provision (benefit): |  |  |  |  |
Federal | $ | 12,192 |  |  | $ | 16,260 |  |  | $ | 12,368 |
State | 6,011 |  |  | 10,593 |  |  | 10,428 |
Foreign | — |  |  | (40) |  |  | — |
| 18,203 |  |  | 26,813 |  |  | 22,796 |
Deferred (benefit) provision: |  |  |  |  |
Federal | (31,185) |  |  | (6,506) |  |  | 3,227 |
State | (348) |  |  | 726 |  |  | 3,327 |
Foreign | 1,196 |  |  | (2,631) |  |  | 4,903 |
| (30,337) |  |  | (8,411) |  |  | 11,457 |
(Benefit) provision for income taxes | $ | (12,134) |  |  | $ | 18,402 |  |  | $ | 34,253 |
Effective Income Tax Rate - The reconciliation of income taxes calculated at the United States federal tax statutory rate to the Company’s effective income tax rate is as follows for the periods indicated. Due to the pre-tax book loss for 2024, a positive percentage change for such year in the effective tax rate table reflects a favorable income tax benefit, whereas a negative percentage change in the effective tax rate table reflects an unfavorable income tax expense:
| FISCAL YEAR
| 2024 |  | 2023 |  | 2022
Income taxes at federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net of federal benefit | (7.8) |  |  | 3.8 |  |  | 8.5 |
Non-deductible loss on 2025 Notes Partial Repurchases | (49.5) |  |  | — |  |  | 21.4 |
Net changes in deferred tax valuation allowances | (5.3) |  |  | (0.9) |  |  | (2.0) |
Foreign tax rate differential | (2.7) |  |  | 0.1 |  |  | 0.2 |
Non-deductible compensation | (2.2) |  |  | 1.0 |  |  | 1.1 |
Other non-deductible expenses | (2.2) |  |  | 0.3 |  |  | (0.1) |
Change in foreign tax law | (2.0) |  |  | (1.1) |  |  | 3.8 |
Statute expiration on foreign net operating losses | (0.3) |  |  | 1.1 |  |  | 0.9 |
Tax settlements and related adjustments | (0.1) |  |  | 0.1 |  |  | 0.2 |
Employment-related credits, net | 58.9 |  |  | (15.9) |  |  | (26.7) |
Non-taxable gains on foreign currency forward contracts | 6.9 |  |  | — |  |  | — |
Non-controlling interests | 1.9 |  |  | (0.6) |  |  | (1.2) |
Net life insurance expense | 1.4 |  |  | (0.3) |  |  | 0.7 |
U.S. tax impact on foreign income | 1.2 |  |  | (0.9) |  |  | (0.9) |
Other, net | 1.4 |  |  | 0.3 |  |  | — |
Total | 20.6 | % |  | 8.0 | % |  | 26.9 | %
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 (Loss) income before (benefit) provision for income taxes. The net increase in the effective income tax rate in 2024 as compared to 2023 was primarily a result of the benefit of FICA tax credits on certain tipped wages, partially offset by the 2024 non-deductible losses associated with the Second 2025 Notes Partial Repurchase, relative to the 2024 pre-tax book loss. The net decrease in the effective income tax rate in 2023 as compared to 2022 was primarily a result of the non-deductible losses recorded during 2022 associated with the First 2025 Notes Partial Repurchase. The Company has a blended federal and state statutory rate of approximately 26%. The effective income tax rate for 2024 was lower than the blended federal and state statutory rate primarily due to the federal and state impact of nondeductible losses associated with the Second 2025 Notes Partial Repurchase, partially offset by the FICA tax credits on certain tipped wages, relative to the 2024 pre-tax book loss. Deferred Tax Assets and Liabilities - The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows as of the periods indicated:
(dollars in thousands) | DECEMBER 29, 2024 |  | DECEMBER 31, 2023
Deferred income tax assets: |  |  |
Operating lease liabilities | $ | 320,169 |  |  | $ | 319,039 |
Insurance reserves | 13,874 |  |  | 14,184 |
Unearned revenue | 57,567 |  |  | 55,746 |
Deferred compensation | 11,392 |  |  | 12,210 |
Net operating loss carryforwards | 9,002 |  |  | 7,046 |
Federal tax credit carryforwards | 202,319 |  |  | 177,775 |
Other, net (1) | 6,905 |  |  | 5,667 |
Gross deferred income tax assets | 621,228 |  |  | 591,667 |
Less: valuation allowance | (13,707) |  |  | (10,483) |
Deferred income tax assets, net of valuation allowance | 607,521 |  |  | 581,184 |
Deferred income tax liabilities: |  |  |
Less: operating lease right-of-use asset basis differences | (252,958) |  |  | (257,422) |
Less: property, fixtures and equipment basis differences | (68,814) |  |  | (70,934) |
Less: intangible asset basis differences | (100,227) |  |  | (97,656) |
Less: foreign outside basis differences | (33,822) |  |  | — |
Deferred income tax assets, net | $ | 151,700 |  |  | $ | 155,172 |
________________ (1)As of December 29, 2024 and December 31, 2023, the Company maintained deferred tax liabilities for state income taxes on historical foreign earnings o f $0.3 million and $0.5 million, respectively. As of December 29, 2024, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $0.9 million and $12.8 million, respectively. The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized. The net change in the deferred tax valuation allowance in 2024 is primarily attributable to additional net operating loss carryforwards in certain foreign jurisdictions with full valuation allowances recorded that are available to the Company. In connection with the Brazil Sale Transaction, the Company no longer asserts that is it is indefinitely reinvested in its Brazil operations and has recorded a deferred tax liability of $33.8 million. The deferred tax liability is related to the financial statement carrying amount over the respective tax basis of the Company’s investment in the Brazil operations. Except for the Brazil operations, the Company has not recorded a deferred tax liability on the financial statement carrying amount over the tax basis of its investments in foreign subsidiaries because the Company continues to assert that it is indefinitely reinvested in its underlying investments in foreign subsidiaries. The determination of any unrecorded deferred tax liability on this amount is not practicable due to the uncertainty of how these investments would be recovered. As of December 29, 2024, the Company did not have aggregate undistributed foreign earnings from its consolidated foreign subsidiaries. Tax Carryforwards - The amount and expiration dates of tax loss carryforwards and credit carryforwards as of December 29, 2024 are as follows:
(dollars in thousands) | EXPIRATION DATE |  | AMOUNT
Federal tax credit carryforwards | 2026 | - | 2044 |  | $ | 214,846 |
Foreign loss carryforwards | 2025 | - | Indefinite |  | $ | 50,187 |
Foreign credit carryforwards | Indefinite |  | $ | 864 |
As of December 29, 2024, the Company had $213.7 million in general business tax credit carryforwards, which have a 20-year carryforward period and are utilized on a first-in, first-out basis. The Company currently expects to utilize these tax credit carryforwards within a 10-year period. However, the Company’s ability to utilize these tax credits could be adversely impacted by, among other items, a future “ownership change” as defined under Section 382 of the Internal Revenue Code as well as the Company’s inability to generate sufficient future taxable income. Unrecognized Tax Benefits - As of December 29, 2024 and December 31, 2023, the liability for unrecognized tax benefits was $17.5 million and $17.1 million, respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $17.1 million and $16.6 million, respectively, if recognized, would impact the Company’s effective income tax rate. The following table summarizes the activity related to the Company’s unrecognized tax benefits for the period indicated:
| FISCAL YEAR |  |  |  |
(dollars in thousands) | 2024 |  |  |  |
Balance, beginning of the period | $ | 17,121 |  |  |  |  |
Additions for tax positions taken during a prior period | 19 |  |  |  |  |
Reductions for tax positions taken during a prior period | (6) |  |  |  |  |
Additions for tax positions taken during the current period | 941 |  |  |  |  |
Lapses in the applicable statutes of limitations | (596) |  |  |  |  |
Balance, end of the period | $ | 17,479 |  |  |  |  |
The Company had approximately $0.7 million and $0.5 million accrued for the payment of interest and penalties as of December 29, 2024 and December 31, 2023, respectively. The Company recognized immaterial interest and penalties related to uncertain tax positions in the (Benefit) provision for income taxes, for all periods presented. In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant taxable authorities. Based on the outcome of these examinations, or a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will change by approximately $0.5 million to $1.0 million within the next 12 months. Open Tax Years - Following is a summary of the open audit years by jurisdiction as of December 29, 2024:
| OPEN AUDIT YEARS
United States - federal | 2007 | - | 2023
United States - state | 2020 | - | 2023
Foreign | 2015 | - | 2023

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