

	FISCAL YEAR
(dollars in thousands)	2019			2018			2017
Current provision:
Federal	$	13,265		$	11,089		$	18,384
State	9,696			6,763			8,155
Foreign	10,502			2,405			9,041
	33,463			20,257			35,580
Deferred (benefit) provision:
Federal	(21,407		)	(28,772		)	(24,248		)
State	(1,986		)	(1,335		)	(3,850		)
Foreign	(2,497		)	617			47
	(25,890		)	(29,490		)	(28,051		)
Provision (benefit) for income taxes	$	7,573		$	(9,233	)	$	7,529

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:



	FISCAL YEAR
	2019		2018		2017
Income taxes at federal statutory rate	21.0	%	21.0	%	35.0	%
State and local income taxes, net of federal benefit	4.4		5.5		2.2
Employment-related credits, net	(24.7	)	(34.6	)	(27.2	)
Net changes in deferred tax valuation allowances	(1.6	)	3.9		3.3
Net life insurance (benefit) expense	(0.7	)	0.6		(0.7	)
Enhanced charitable contributions deduction	(0.6	)	(1.3	)	(1.7	)
Noncontrolling interests	(0.6	)	(0.9	)	(1.4	)
Excess tax benefits from stock-based compensation arrangements	(0.3	)	(7.1	)	(2.2	)
Nondeductible expenses	3.9		5.0		3.6
Foreign tax rate differential	3.2		(0.7	)	1.7
Domestic manufacturing deduction	—		(0.3	)	(4.6	)
Cumulative effect of the Tax Act	—		0.2		(3.3	)
Other, net	1.3		(0.5	)	2.1
Total	5.3	%	(9.2	)%	6.8	%

The net increase in the effective income tax rate in 2019 as compared to 2018 was primarily due to employment-related credits being a lower percentage of net income in 2019, excess tax benefits from equity-based compensation arrangements recorded in 2018 and an increase in the foreign tax rate differential in 2019. These increases were partially offset by a decrease in valuation allowances recorded against deferred income tax assets in 2019.

The net decrease in the effective income tax rate in 2018 as compared to 2017 was primarily due to the reduction in the U.S. federal corporate tax rate from 35% to 21% as part of the Tax Cuts and Jobs Act (the “Tax Act”). The remaining decrease was primarily due to employment-related credits being a higher percentage of net income in 2018 and excess tax benefits from equity-based compensation arrangements recorded in 2018. These decreases were partially offset by the domestic manufacturing deduction and the cumulative effect of the Tax Act recorded in 2017.

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, 2019			DECEMBER 30, 2018
Deferred income tax assets:
Operating lease liabilities	$	378,518		$	—
Deferred rent	—			42,550
Insurance reserves	13,722			14,232
Unearned revenue	22,230			12,590
Deferred compensation	27,222			30,864
Net operating loss carryforwards	9,876			10,279
Federal tax credit carryforwards	115,273			99,591
Partner deposits and accrued partner obligations	4,449			4,389
Other, net	13,706			17,885
Gross deferred income tax assets	584,996			232,380
Less: valuation allowance	(14,922		)	(17,535		)
Net deferred income tax assets	570,074			214,845
Deferred income tax liabilities:
Less: operating lease right-of-use asset basis differences	(326,166		)	—
Less: property, fixtures and equipment basis differences	(65,404		)	(19,445		)
Less: intangible asset basis differences	(118,855		)	(117,200		)
Net deferred income tax assets	$	59,649		$	78,200

The net change in deferred tax valuation allowance in 2019 was primarily attributable to changes in tax rates and the expiration of net operating loss carryforwards in certain foreign jurisdictions with full valuation allowances recorded. These decreases were partially offset by an increase in the valuation allowances in certain foreign jurisdictions where the realization of deferred tax assets does not meet the more likely than not to be realized threshold.

Undistributed Earnings - As of December 29, 2019, the Company had aggregate accumulated foreign earnings of approximately $84.4 million. This amount consisted primarily of historical earnings from 2017 and prior that were previously taxed in the U.S. under the Tax Act and post-2017 foreign earnings, which the Company may repatriate to the U.S. without additional material U.S. federal income taxes. These amounts are no longer considered indefinitely reinvested in the Company’s foreign subsidiaries.

As of December 29, 2019, the Company maintained a deferred tax liability for state income taxes on historical earnings of $0.2 million. 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 in not practicable due to the uncertainty of how these investments would be recovered.



(dollars in thousands)	EXPIRATION DATE			AMOUNT
Federal tax credit carryforwards	2026	-	2039	$	131,201
Foreign loss carryforwards	2020	-	Indefinite	$	41,406
Foreign tax credit carryforwards	Indefinite			$	809

As of December 29, 2019, the Company had $128.6 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 all of these tax credit carryforwards within a four to six 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.

The Company anticipates generating additional business tax credits in future years. The amount of business tax credits expected to be generated in 2020 is approximately $40 million to $45 million.

Unrecognized Tax Benefits - As of December 29, 2019 and December 30, 2018, the liability for unrecognized tax benefits was $27.2 million and $25.2 million, respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $27.0 million and $25.0 million, respectively, if recognized, would impact the Company’s effective tax rate.



	FISCAL YEAR
(dollars in thousands)	2019			2018			2017
Balance as of beginning of year	$	25,190		$	23,663		$	19,583
Additions for tax positions taken during a prior period	869			2,461			4,149
Reductions for tax positions taken during a prior period	(255		)	(826		)	(1,009		)
Additions for tax positions taken during the current period	2,237			2,017			1,822
Settlements with taxing authorities	(44		)	(682		)	—
Lapses in the applicable statutes of limitations	(749		)	(1,390		)	(945		)
Translation adjustments	(47		)	(53		)	63
Balance as of end of year	$	27,201		$	25,190		$	23,663

The Company had approximately $1.9 million and $1.5 million accrued for the payment of interest and penalties as of December 29, 2019 and December 30, 2018, respectively. The Company recognized immaterial interest and penalties related to uncertain tax positions in the Provision (benefit) 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 $2.0 million to $3.0 million within the next twelve months.