Note 8 Income Taxes

The provision (benefit) for income taxes consists of:



(dollars in thousands)		2016		2015		2014
Current:
Federal	$	25,908	$	29,888	$	24,809
State		5,888		3,325		1,237
Deferred:
Federal		6,020		(188)		2,559
State		(317)		(24)		676
	$	37,499	$	33,001	$	29,281

The reconciliation of income taxes computed at the federal statutory rate (35% in 2016, 2015 and 2014) to the provision for income taxes is:



(dollars in thousands)		2016		2015		2014
Income taxes at federal statutory rate	$	43,631	$	32,316	$	29,282
State income taxes, net of federal income tax benefit		2,413		1,112		1,436
Deferred tax on gain on bargain purchase		(8,358)		-		-
Other		(187)		(427)		(1,437)
Provision for income taxes (effective tax rate 30.1%, 35.7% and 35.0%, respectively)	$	37,499	$	33,001	$	29,281

Cash paid for federal income taxes was $27.3 million, $28.0 million and $25.0 million in 2016, 2015 and 2014 respectively. Cash paid for state income taxes was $3.7 million, $2.2 million and $1.8 million in 2016, 2015 and 2014 respectively.

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2016 and December 26, 2015, are:



(dollars in thousands)		2016		2015
Deferred tax assets:
Accounts receivable	$	586	$	813
Compensated absences		1,076		983
Employment incentives		9,826		3,143
Employee benefit plans		9,243		10,485
General liability insurance		4,359		4,048
Postretirement benefit obligations		6,484		5,906
Net operating loss carryforwards		5,600		5,926
Other		2,224		2,173
Total deferred tax assets		39,398		33,477
Deferred tax liabilities:
Inventories		(7,619)		(6,808)
Unrealized gains on marketable securities		(3,382)		(3,323)
Nondeductible accruals and other		(7,517)		(9,240)
Depreciation		(140,325)		(111,126)
Total deferred tax liabilities		(158,843)		(130,497)
Net deferred tax liability	$	(119,445)	$	(97,020)

Note 8 Income Taxes (continued)

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



(dollars in thousands)		2016		2015
Unrecognized tax benefits at beginning of year	$	1,264	$	-
Increases based on tax positions related to the current year		1,563		1,264
Additions for tax positions of prior year		297		-
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	$	3,124	$	1,264

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1,860,000 in 2016 and $1,264,000 in 2015.

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 2012 to 2016.

The Company has net operating loss carryforwards of $86.2 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.