Note 8 Income Taxes

The provision (benefit) for income taxes consists of:



(dollars in thousands)		2015		2014		2013
Current:
Federal	$	29,888	$	24,809	$	26,994
State		3,325		1,237		6,774
Deferred:
Federal		(188)		2,559		8,973
State		(24)		676		2,429
	$	33,001	$	29,281	$	45,170

The reconciliation of income taxes computed at the federal statutory rate (35% in 2015, 2014 and 2013) to the provision for income taxes is:



(dollars in thousands)		2015		2014		2013
Income taxes at federal statutory rate	$	32,316	$	29,282	$	41,425
State income taxes, net of federal income tax benefit		1,112		1,436		5,981
Other		(427)		(1,437)		(2,236)
Provision for income taxes (effective tax rate 35.7%, 35.0% and 38.2%, respectively)	$	33,001	$	29,281	$	45,170

Cash paid for federal income taxes was $28.0 million, $25.0 million and $26.4 million in 2015, 2014 and 2013 respectively. Cash paid for state income taxes was $2.2 million, $1.8 million and $3.5 million in 2015, 2014 and 2013 respectively.

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 26, 2015 and December 27, 2014, are:



(dollars in thousands)		2015		2014
Deferred tax assets:
Accounts receivable	$	813	$	615
Compensated absences		983		362
Long term employment incentives		3,143		1,161
Employee benefit plans		10,485		10,734
General liability insurance		4,048		3,655
Postretirement benefit obligations		5,906		7,676
Net operating loss carryforwards		5,926		6,218
Other		2,173		1,359
Total deferred tax assets		33,477		31,780
Deferred tax liabilities:
Inventories		(6,808)		(7,459)
Unrealized gains on marketable securities		(3,323)		(3,371)
Nondeductible accruals and other		(9,240)		(6,522)
Depreciation		(111,126)		(111,708)
Total deferred tax liabilities		(130,497)		(129,060)
Net deferred tax liability	$	(97,020)	$	(97,280)

The Company adopted ASU 2015-17 for the fiscal year ended December 26, 2015 and applied it retrospectively. The Company reclassified $5.8 million out of “Total current liabilities” related to “Deferred income taxes” in the December 27, 2014 Consolidated Balance Sheet and into noncurrent “Deferred income taxes.”

Note 8 Income Taxes (continued)

The following table summarizes the activity related to the Company’s unrecognized tax benefits:



(dollars in thousands)		2015		2014
Unrecognized tax benefits at beginning of year	$	-	$	-
Increases based on tax positions related to the current year		1,264		-
Additions for tax positions of prior year		-		-
Reductions for tax positions of prior years		-		-
Settlements		-		-
Expiration of the statute of limitations for assessment of taxes		-		-
Unrecognized tax benefits at end of year	$	1,264	$	-

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1,264,000 in 2015 and $0 in 2014.

The Company’s U.S. Federal income tax filings have been examined by the Internal Revenue Service through 2008. The Company or one of its subsidiaries files tax returns in various states. The tax years subject to examination in Pennsylvania, where the majority of the Company's revenues are generated, are 2011 to 2015.

The Company has net operating loss carryforwards of $88.5 million available for state income tax purposes. The net operating losses will begin to expire starting in 2027. The Company expects to fully utilize these net operating loss carryforwards.