4. Income Taxes

The components of the provision for income taxes are as follows:



	Year ended December 31,
	2016		2015		2014
Current tax:
U.S. Federal	$	20,765	$	244,470	$	248,219
U.S. State		8,687		37,957		41,225
Foreign		556		172		156
		30,008		282,599		289,600
Deferred tax:
U.S. Federal		(11,596)		11,000		(13,890)
U.S. State		(2,546)		699		(6,740)
Foreign		(2,470)		(2,288)		(3,075)
		(16,612)		9,411		(23,705)
Valuation allowance		2,405		2,255		3,034
Provision for income taxes	$	15,801	$	294,265	$	268,929

Actual taxes paid for each tax period were less than the current tax expense due to the excess tax benefit on stock-based compensation of $1,320, $74,442, and $21,667 during the years ended December 31, 2016, 2015, and 2014, respectively.

The effective tax rate differs from the statutory tax rates as follows:



	Year ended December 31,
	2016		2015		2014
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of related federal income tax benefit	13.3		3.6		3.7
Federal credits	(10.1)		(0.4)		(0.5)
Enhanced deduction for food donation	(2.4)		(0.2)		(0.1)
Valuation allowance	6.0		0.3		0.4
Other	6.2		-		0.1
Return to provision and other discrete items	(7.2)		(0.1)		(1.0)
Effective income tax rate	40.8	%	38.2	%	37.6	%

The 2016 effective tax rate was higher due to a higher state tax rate, not qualifying for the federal research and development tax credit in 2016, and non-deductible items on overall lower pre-tax operating income. Additionally, 2014 included a benefit from filing the 2013 tax returns, which included a non-recurring change in the estimate of usable employer credits resulting in a lower effective tax rate than 2015.

Deferred income tax liabilities are taxes the Company expects to pay in future periods. Similarly, deferred income tax assets are recorded for expected reductions in taxes payable in future periods. Deferred income taxes arise because of the differences in the book and tax bases of certain assets and liabilities. Deferred income tax liabilities and assets consist of the following:



	December 31,
	2016		2015
Deferred income tax liability:
Leasehold improvements, property and equipment	$	204,640	$	192,125
Goodwill and other assets		1,856		1,696
Prepaid assets and other		6,012		8,297
Total deferred income tax liability		212,508		202,118
Deferred income tax asset:
Deferred rent		63,159		57,716
Gift card liability		5,563		3,171
Capitalized transaction costs		500		502
Stock-based compensation and other employee benefits		101,628		83,058
Foreign net operating loss carry-forwards		9,580		11,407
State credits		4,595		4,783
Allowances, reserves and other		19,359		18,577
Valuation allowance		(10,820)		(9,401)
Total deferred income tax asset		193,564		169,813
Net deferred income tax liability	$	18,944	$	32,305

The unrecognized tax benefits are as follows:



	2016		2015		2014
Beginning of year	$	3,776	$	1,342	$	-
Increase resulting from prior year tax position		-		402		-
Increase resulting from current year tax position		435		2,032		1,342
End of year	$	4,211	$	3,776	$	1,342

During the year ending December 31, 2016, $430 of interest was accrued for uncertain tax positions. The Company is open to federal and state tax audits until the applicable statutes of limitations expire. Tax audits by their very nature are often complex and can require several years to complete. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2013. For the majority of states where the Company has a significant presence, it is no longer subject to tax examinations by tax authorities for tax years before 2013. As of December 31, 2016, the Company had cumulative gross foreign net operating losses of $36,464, which have no expiration date.