Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Income before Income Tax, Domestic and Foreign

Income from continuing operations before income taxes is set forth below:



	Year Ended
	2017		2016		2015
Domestic	$	86,892	$	192,082	$	208,827
Foreign (a)	14,127		9,608		25,301
	$	101,019	$	201,690	$	234,128


(a)	Excludes foreign income of domestic subsidiaries

Schedule of Components of Income Tax Expense (Benefit)

The benefit from (provision for) income taxes from continuing operations is set forth below:



	Year Ended
	2017			2016			2015
Current:
U.S. Federal	$	(13,092	)	$	(75,167	)	$	(12,414	)
State	(4,055		)	(5,805		)	3,346
Foreign	(9,173		)	(5,307		)	(10,778		)
Current tax provision	(26,320		)	(86,279		)	(19,846		)
Deferred:
U.S. Federal	127,592			7,975			(53,916		)
State	(7,729		)	6,733			(21,375		)
Foreign	(533		)	(495		)	988
Deferred tax benefit (provision)	119,330			14,213			(74,303		)
Income tax benefit (provision)	$	93,010		$	(72,066	)	$	(94,149	)

Schedule of Deferred Tax Assets and Liabilities

Deferred tax assets (liabilities) are set forth below:



	Year End
	December 31, 2017			January 1, 2017
Deferred tax assets:
Net operating loss and credit carryforwards	$	66,770		$	44,733
Unfavorable leases	40,544			50,771
Accrued compensation and related benefits	17,904			31,994
Deferred rent	14,862			19,552
Accrued expenses and reserves	9,673			16,486
Other	4,305			9,293
Valuation allowances	(47,295		)	(11,400		)
Total deferred tax assets	106,763			161,429
Deferred tax liabilities:
Intangible assets	(333,708		)	(495,505		)
Owned and leased fixed assets, net of related obligations	(47,702		)	(89,251		)
Other	(24,406		)	(23,186		)
Total deferred tax liabilities	(405,816		)	(607,942		)
	$	(299,053	)	$	(446,513	)

Summary of Net Operating Loss and Tax Credit Carryforwards

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	$	15,962	2022-2024
State tax credits	555		2020-2023
Foreign tax credits of non-U.S. subsidiaries	3,023		Not applicable
Total	$	19,540

Net operating loss carryforwards:
State and local net operating loss carryforwards	$	1,165,832	2018-2035
Foreign net operating loss carryforwards	234		2023-2026
Total	$	1,166,066

Schedule of Effective Income Tax Rate Reconciliation

The reconciliation of income tax computed at the U.S. Federal statutory rate of 35% to reported income tax is set forth below:



	Year Ended
	2017 (a)			2016			2015
Income tax provision at the U.S. Federal statutory rate	$	(35,357	)	$	(70,592	)	$	(81,945	)
State income tax provision, net of U.S. Federal income tax effect	(6,451		)	(3,767		)	(7,234		)
Federal rate change	164,893			—			—
Prior years’ tax matters (b)	15,964			—			—
Excess tax benefits from share-based compensation	5,196			—			—
Domestic tax planning initiatives	4,282			—			—
Foreign and U.S. tax effects of foreign operations	2,408			2,278			4,389
Valuation allowances (b) (c)	(35,895		)	4,915			(6,075		)
Non-deductible goodwill (d)	(15,458		)	(6,409		)	(7,435		)
Transition tax	(4,446		)	—			—
Unrepatriated earnings	(1,801		)	—			—
Non-deductible expenses and other	(325		)	1,509			4,151
	$	93,010		$	(72,066	)	$	(94,149	)

_______________

(a)

2017 includes the following impacts associated with the Tax Act: (1) the revaluation of our U.S. net deferred tax liability at 21% resulting in a benefit of $164,893, (2) a full valuation allowance of $15,962 on our U.S. foreign tax credit carryforwards due to the decrease in the U.S. federal tax rate, resulting in the Company concluding it is more likely than not that we will not be able to utilize our carryforwards before they expire, (3) a one-time transition tax of $4,446, (4) deferred tax on unrepatriated earnings of $1,801 and (5) other net expenses of $2,305.

(b)

Primarily related to certain state net operating loss carryforwards, previously considered worthless, that existed at the beginning of the year. In 2017, the Company changed its judgment regarding the likelihood of the utilization of these carryforwards. Because of this change, the Company recognized a deferred tax asset of $16,643, net of federal benefit, which was partially offset by a valuation allowance of $13,667, net of federal benefit (included in the valuation allowances amount above).


(c)	2016 includes a $2,878 benefit related to the correction to a prior year identified and recorded in the first quarter of 2016.

(d)

Substantially all of the goodwill included in the net (loss) gain on sales of restaurants in 2017, 2016 and 2015 under our system optimization initiative was non-deductible for tax purposes. See Note 2 further information. 2016 includes a $3,837 federal benefit related to the correction to a prior year identified and recorded in the second quarter of 2016. The corresponding state benefit correction of $398 is included in the state income tax provision amount above.

Schedule of Unrecognized Tax Benefits Roll Forward

As of December 31, 2017, the Company had unrecognized tax benefits of $28,848, which, if resolved favorably would reduce income tax expense by $24,018. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:



	Year End
	December 31, 2017			January 1, 2017			January 3, 2016
Beginning balance	$	19,545		$	21,224		$	25,715
Additions:
Tax positions of current year	8,251			306			927
Tax positions of prior years	1,704			440			476
Reductions:
Tax positions of prior years	(295		)	(2,126		)	(5,182		)
Settlements	(34		)	(42		)	(251		)
Lapse of statute of limitations	(323		)	(257		)	(461		)
Ending balance	$	28,848		$	19,545		$	21,224