
	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)


	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)


	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.

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.


	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.

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.