Income Taxes:

For financial reporting purposes, income (loss) before income taxes includes the following components:



		Fiscal Year
		2018			2017			2016
	(in thousands)
United States		$	(28,731	)	$	(25,667	)	$	(11,002	)
Foreign (including U.S. Possessions)		3,249			4,442			4,709
Income (loss) before income taxes		$	(25,482	)	$	(21,225	)	$	(6,293	)

Our income tax expense (benefit) consists of the following for the periods presented:



		Fiscal Year
		2018			2017			2016
	(in thousands)
Current tax expense (benefit):
Federal		$	1,276		$	(2,668	)	$	8,008
State		1,090			(708		)	3,879
Foreign		795			960			1,008
		3,161			(2,416		)	12,895
Deferred tax expense (benefit):
Federal		(8,382		)	(72,829		)	(11,848		)
State		24			(137		)	(3,274		)
Foreign		176			1,091			(399		)
		(8,182		)	(71,875		)	(15,521		)
Income tax expense (benefit)		$	(5,021	)	$	(74,291	)	$	(2,626	)

A reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:



	Fiscal Year
	2018		2017		2016
Federal statutory rate	(21.0	)%	(35.0	)%	(35.0	)%
State income taxes, net of federal benefit	2.0	%	(4.5	)%	2.5	%
Federal employment related income tax credits, net	(2.9	)%	(1.2	)%	(21.8	)%
Merger and litigation related costs	0.4	%	1.6	%	5.8	%
Canadian tax rate difference	—	%	0.4	%	2.4	%
Canadian nondeductible interest	—	%	0.7	%	1.8	%
Canadian deferred tax valuation adjustment	0.7	%	5.7	%	—	%
Canadian tax reorganization	0.8	%	(7.6	)%	—	%
State tax credit, valuation adjustment	1.3	%	2.0	%	2.8	%
Foreign taxes withheld	1.4	%	—	%	—	%
Other	0.4	%	1.9	%	(0.2	)%
Effective tax rate (before impact of Tax Cuts and Jobs Act of 2017 ⁽¹⁾	(16.9	)%	(36.0	)%	(41.7	)%
Adjustment related to the Tax Cuts and Jobs Act of 2017 ⁽¹⁾	(2.8	)%	(314.0	)%	—	%
Adjusted effective tax rate	(19.7	)%	(350.0	)%	(41.7	)%

_________________

(1) The Tax Cuts and Jobs Act of 2017 (enacted on December 22, 2017) resulted in a $66.6 million decrease of our net deferred tax liability and a corresponding benefit to our deferred federal income taxes for Fiscal 2017.

Our effective income tax rates for Fiscal 2018 and Fiscal 2017 were 16.9% and 36.0%, respectively (excluding the adjustment to our deferred tax liability resulting from the decrease in the federal income tax rate from 35% to 21% enacted on December 22, 2017, as part of tax the Tax Cuts and Jobs Act (the “TCJA”)). The TCJA made broad changes to the U.S. tax code that not only effected 2017 (e.g., one-time transition tax on certain unrepatriated earnings of foreign subsidiaries and bonus depreciation that will allow for full expensing of qualified property) but also impacted 2018 and subsequent years. Changes enacted by the TCJA that impact our 2018 and subsequent years include: (1) the reduction of the U.S. federal corporate income tax rate from 35% to 21% ; (2) bonus depreciation that will allow for full expensing of certain qualified property in the year acquired and placed in service; (3) elimination of the corporate alternative minimum tax (AMT); (4) a new limitation on the deductibility of interest expense; (5) limitations on the deductibility of certain executive compensation; (6) limitations on the use of foreign tax credits to reduce current U.S. income tax liability; and (7) limitations on net operating losses generated after December 31, 2017, to 80 percent of taxable income.

Our effective income tax rate for Fiscal 2018 was favorably impacted by employment-related federal income tax credits, offset by the negative impact of nondeductible litigation costs related to the Merger, nondeductible penalties, an increase in our state income tax expense for the year which in large part was caused by state tax legislation enacted during the second quarter that increased the amount of income subject to state taxation, foreign income taxes withheld (not offset by a foreign tax credits due to the foreign tax credit limitation), an increase in the reserve for uncertain tax positions, an increase in a valuation allowance for deferred tax assets associated with a carryforward of certain state tax credits and deferred tax assets relating to our Canada operations that could expire before they are utilized, partially offset by a favorable one-time adjustment to deferred tax (the tax effect of the cumulative foreign currency translation adjustment existing as of January 1, 2018) resulting from the change in our intent to no longer indefinitely reinvest monies previously loaned to our Canadian subsidiary recorded in the first quarter.

Our effective income tax rate for Fiscal 2018 was also favorably impacted by adjustments to the provisional estimates provided in Fiscal 2017 to account for the impact of the TCJA pursuant to Staff Accounting Bulletin No. 118 (“SAB 118”). The SEC staff issued SAB 118 on December 22, 2017, which allows a company to recognize provisional amounts during a measurement period when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. SAB 118 further provides that the measurement period for finalizing the provisional estimates should not extend beyond one year from the enactment of the TCJA and that any adjustments made to the provisional amounts under SAB 118 should be recorded as discrete adjustments in the period identified.

Pursuant to SAB 118, we included a provisional estimate of $66.6 million tax benefit in our consolidated financial statements for the fiscal year ended December 31, 2017, relating to the enactment of TJCA, which primarily related to the re-measurement of our deferred tax liability. In the second quarter of Fiscal 2018, we recorded an adjustment to the provisional estimate of $0.2 million tax benefit, in the third quarter of Fiscal 2018, we recorded an incremental adjustment to the provisional estimate of $0.5 million tax benefit. The measurement period relating to the enactment of the TCJA ended during our fourth quarter, and the tax effects thereof have been completed as of the end of Fiscal 2018.

Deferred income tax assets and liabilities consisted of the following at the dates presented:



	December 30, 2018			December 31, 2017
	(in thousands)
Deferred tax assets:
Accrued compensation	$	1,523		$	1,231
Unearned revenue	2,360			979
Deferred rent	8,272			6,914
Stock-based compensation	730			639
Accrued insurance and employee benefit plans	3,328			3,516
Unrecognized tax benefits ⁽¹⁾	377			452
NOL and other carryforwards	5,746			5,635
Loan costs	394			577
Other	722			552
Gross deferred tax assets	23,452			20,495
Less: Valuation allowance ⁽²⁾	2,896			$	2,424
Net deferred tax asset	20,556			18,071
Deferred tax liabilities:
Depreciation and amortization	(5,774		)	(9,492		)
Prepaid assets	(621		)	(672		)
Intangibles	(117,025		)	(117,717		)
Favorable/Unfavorable Leases	(172		)	(65		)
Internal use software and other	(4,022		)	(4,311		)
Gross deferred tax liabilities	(127,614		)	(132,257		)
Net deferred tax liability	$	(107,058	)	$	(114,186	)

_________________


(1)	Amount represents the value of future tax benefits that would result if the liabilities for uncertain state tax positions and accrued interest related to uncertain tax positions are settled.


(2)	Valuation allowance for deferred tax assets relating to Canada net operating loss and other non-U.S. differences and certain state tax credits.

As of December 30, 2018, we have $8.1 million of federal net operating loss carryforwards ($5.2 million expiring at the end of tax year 2037 and $2.8 million with an indefinite carryforward period), $14.5 million of state net operating loss carryforwards (expiring at the end of tax years 2022 through 2037), and $2.1 million of Canadian net operating loss carryforwards (expiring at the end of tax years 2034 through 2037). In addition, as of December 30, 2018, we have $12.2 million of interest carryforwards with an indefinite carryforward period, $0.5 million of Alternative Minimum Tax credit carryforwards with an indefinite carryforward period, and state income tax credit carryforwards of $0.5 million net of their related valuation allowance (expiring at the end of 2019 through 2027).

We file numerous federal, state, and local income tax returns in the U.S. and some foreign jurisdictions. As a matter of ordinary course, we are subject to regular examination by various tax authorities. Certain of our federal and state income tax returns are currently under examination and are in various stages of the audit/appeals process. In general, the U.S. federal statute of limitations has expired for our federal income tax returns filed for tax years ended before 2014 with the exception of the Peter Piper Pizza federal income tax returns with net operating losses which have been carried forward to open tax years (whereas, adjustments can be made to these prior returns until the respective statute of limitations expire for the particular tax years the net operating losses are utilized). In general, our state income tax statutes of limitations have expired for tax years ended before 2014. In general, the statute of limitations for our Canada income tax returns has expired for tax years ended before 2014.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Fiscal Year
	2018			2017			2016
	(in thousands)
Balance at beginning of period	$	3,853		$	3,119		$	3,288
Additions for tax positions taken in the current year	114			1,677			74
Increases for tax positions taken in prior years	571			16			1,479
Decreases for tax positions taken in prior years	(48		)	(390		)	(964		)
Settlements with tax authorities	(5		)	(32		)	(558		)
Expiration of statute of limitations	(199		)	(537		)	(200		)
Balance at end of period	$	4,286		$	3,853		$	3,119

Our liability for uncertain tax positions (excluding interest and penalties) was $4.3 million and $3.9 million as of December 30, 2018 and December 31, 2017, respectively, and if recognized would decrease our provision for income taxes by $3.3 million. Within the next twelve months, we could settle or otherwise conclude certain ongoing income tax audits. As such, it is reasonably possible that the liability for uncertain tax positions could decrease within the next twelve months by as much as $3.9 million as a result of payments and/or settlements with certain taxing authorities and expiring statutes of limitations within the next twelve months. The total accrued interest and penalties related to unrecognized tax benefits as of December 30, 2018 and December 31, 2017, was $1.1 million and $1.0 million, respectively. On the Consolidated Balance Sheets, we include current accrued interest related to unrecognized tax benefits in “Accrued interest,” current accrued penalties in “Accrued expenses” and non-current accrued interest and penalties in “Other noncurrent liabilities.”