Income Taxes

The components of the income tax provision are as follows:

	2017			2016		2015
Current:
Federal	$	7,887		$	3,728	$	7,972
State		2,035			896		1,533

Deferred:
Increase (decrease) in valuation allowance		-			-		(70	)
Federal		(200	)		4,559		1,520
State		(102	)		765		480
Total	$	9,620		$	9,948	$	11,435

A reconciliation of the statutory federal income tax rate and the effective income tax rate, as a percentage of income before income taxes, is as follows:

	2017			2016			2015
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
Change in income tax valuation allowance		-			-			(0.1	)
Change in income tax reserves		-			-			0.1
State income tax, net of federal benefit		3.9			4.2			4.4
Benefit of goodwill basis difference		-			-			(3.2	)
Excess tax benefits from stock-based compensation		(1.8	)		(0.3	)		-
Other		(2.6	)		(0.3	)		(0.3	)
Effective income tax rate		34.5	%		38.6	%		35.9	%

Excess tax benefits in the amount of $

554

and

$87

were recognized as a component of income tax expense during fiscal

2017

and

2016,

respectively, resulting from the exercise of stock options and the release of restricted shares. Prior to the adoption of ASU

2016

in fiscal

2016,

excess tax benefits of

$1,998

were recognized as additional paid-in capital during fiscal

2015.

The income tax effects of temporary differences and carryforwards, which give rise to significant portions of the deferred income tax assets and deferred income tax liabilities, are as follows:

	November 25, 2017		November 26, 2016
Deferred income tax assets:
Trade accounts receivable	$	239	$	307
Inventories		2,606		2,407
Notes receivable		550		562
Post employment benefit obligations		5,555		5,338
State net operating loss carryforwards		583		731
Unrealized loss from affiliates		69		217
Net deferred rents		3,906		3,112
Other		1,878		2,005
Gross deferred income tax assets		15,386		14,679
Valuation allowance		-		-
Total deferred income tax assets		15,386		14,679

Deferred income tax liabilities:
Property and equipment		5,426		5,179
Intangible assets		1,185		1,012
Prepaid expenses and other		382		417

Total deferred income tax liabilities		6,993		6,608

Net deferred income tax assets	$	8,393	$	8,071

At the beginning of fiscal

2015

we carried a valuation allowance of

$70

which was primarily related to state net operating loss carryforwards for which it was considered to be more likely than

not

that they would

not

be utilized prior to their expiration. During fiscal

2015

we removed the remaining valuation allowance resulting in a credit to income of

$70.

There was

valuation allowance at either

November 25, 2017

November 26, 2016.

We have state net operating loss carryforwards available to offset future taxable state income of $

4,856,

which expire in varying amounts between

2021

and

2027.

Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.

Income taxes paid, net of refunds received, during

201

2016

and

2015

were

$7,516,

$9,949,

and

$5,906,

respectively.

We regularly evaluate, assess and adjust

our accrued liabilities for unrecognized tax benefits in light of changing facts and circumstances, which could cause the effective tax rate to fluctuate from period to period.

The following table summarizes the activity related to our gross unrecognized tax benefits

	2017		2016		2015
Balance, beginning of the year	$	55	$	12	$	1,236
Gross increases		46		43		12
Gross decreases due to settlements		-		-		(1,236	)

Balance, end of the year	$	101	$	55	$	12

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal

201

2016,

and

2015,

we recognized

$10,

$15,

and $(

144

) of interest expense (recovery) and

$11,

$10,

and

of penalty expense, respectively, related to the unrecognized benefits noted above in our consolidated statements of income. At

November 25, 2017

and

November 26, 2016,

the balance of accrued interest and penalties associated with unrecognized tax benefits was

not

material.

Significant judgment is required in evaluating the Company's federal and state tax positions and in the determination of its tax provision. Despite our belief that the liability for unrecognized tax benefits is adequate, it is often difficult to predict the final outcome or the timing of the resolution of any particular tax matter. We

may

adjust these liabilities as relevant circumstances evolve, such as guidance from the relevant tax authority, or resolution of issues in the courts. These adjustments are recognized as a component of income tax expense in the period in which they are identified. The Company also cannot predict when or if any other future tax payments related to these tax positions

may

occur.

We remain subject to examination for tax years

2014

through

2016

for all of our major tax jurisdictions. See Note

22,

Subsequent Event, regarding the impact of newly enacted changes to Federal tax law.