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Income Taxes
 12 Months Ended
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)202420232022
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)202420232022
Current provision (benefit):
Federal$12,192 $16,260 $12,368 
State6,011 10,593 10,428 
Foreign— (40)— 
 18,203 26,813 22,796 
Deferred (benefit) provision:   
Federal(31,185)(6,506)3,227 
State(348)726 3,327 
Foreign1,196 (2,631)4,903 
 (30,337)(8,411)11,457 
(Benefit) provision for income taxes$(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
 202420232022
Income taxes at federal statutory rate21.0 %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, net58.9 (15.9)(26.7)
Non-taxable gains on foreign currency forward contracts6.9 — — 
Non-controlling interests1.9 (0.6)(1.2)
Net life insurance expense1.4 (0.3)0.7 
U.S. tax impact on foreign income1.2 (0.9)(0.9)
Other, net1.4 0.3 — 
Total20.6 %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, 2024DECEMBER 31, 2023
Deferred income tax assets:
Operating lease liabilities$320,169 $319,039 
Insurance reserves13,874 14,184 
Unearned revenue57,567 55,746 
Deferred compensation11,392 12,210 
Net operating loss carryforwards9,002 7,046 
Federal tax credit carryforwards202,319 177,775 
Other, net (1)6,905 5,667 
Gross deferred income tax assets621,228 591,667 
Less: valuation allowance(13,707)(10,483)
Deferred income tax assets, net of valuation allowance607,521 581,184 
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 of $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 DATEAMOUNT
Federal tax credit carryforwards2026-2044$214,846 
Foreign loss carryforwards2025-Indefinite$50,187 
Foreign credit carryforwardsIndefinite$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 period19 
Reductions for tax positions taken during a prior period(6)
Additions for tax positions taken during the current period941 
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 - federal2007-2023
United States - state2020-2023
Foreign2015-2023