8. Income Taxes

The following table represents the current and deferred income tax provision for federal, state and foreign income taxes attributable to operations (in thousands):



	For the Years Ended
	May 30,		May 25,		May 26,
	2020		2019		2018
Current
Federal	$	3,038	$	5,068	$	10,785
State		1,302		2,278		2,829
Foreign		1,686		2,690		(392)
		6,026		10,036		13,222
Deferred
Federal		874		5,890		(3,011)
State		245		619		367
Foreign		(202)		(46)		(515)
		917		6,463		(3,159)
	$	6,943	$	16,499	$	10,063

Income before provision for income taxes is as follows (in thousands):



	For the Years Ended
	May 30,		May 25,		May 26,
	2020		2019		2018
Domestic	$	36,148	$	41,828	$	26,774
Foreign		(920)		6,141		2,115
	$	35,228	$	47,969	$	28,889

The provision for income taxes differs from the amount that would result from applying the federal statutory rate as follows:



	For the Years Ended
	May 30,		May 25,		May 26,
	2020		2019		2018
Statutory tax rate	21.0	%	21.0	%	29.4	%
State taxes, net of federal benefit	3.6		4.9		7.9
Non-U.S. rate adjustments	0.9		1.3		(0.8)
Stock-based compensation	3.2		2.8		4.5
Long-term net capital gains	-		(6.1)		10.1
Foreign tax credit	-		9.3		(16.5)
Valuation allowance	4.1		(2.8)		(4.3)
Global Intangible Low-Taxed Income ("GILTI")	0.9		1.1		-
Worthless Stock Deduction	(14.8)		-		-
Worthless Debt Deduction	(2.6)		-		-
FIN48	1.6		-		-
Permanent items, primarily meals and entertainment	2.0		1.4		3.2
Deferred tax impact of U.S. federal rate changes	-		0.1		(2.8)
Deferred tax impact of foreign rate changes	(0.2)		1.2		3.9
Other, net	-		0.2		0.2
Effective tax rate	19.7	%	34.4	%	34.8	%

The impact of state taxes, net of federal benefit, and foreign income taxed at other than U.S. rates fluctuates year over year due to the changes in the mix of operating income and losses amongst the various states and foreign jurisdictions in which the Company operates.

The components of the net deferred tax asset (liability) consist of the following (in thousands):



	As of		As of
	May 30,		May 25,
	2020		2019
Deferred tax assets:
Allowance for doubtful accounts	$	1,158	$	1,108
Accrued compensation		3,716		3,347
Accrued expenses		2,652		2,418
Stock options and restricted stock		4,870		5,541
Foreign tax credit		567		498
Net operating losses		12,018		14,489
State taxes		70		208
Gross deferred tax asset		25,051		27,609
Valuation allowance		(11,069)		(13,190)
Gross deferred tax asset, net of valuation allowance		13,982		14,419
Deferred tax liabilities:
Property and equipment		(547)		(77)
Outside basis difference - Sweden investment		(263)		-
Goodwill and intangibles		(17,790)		(17,991)
Net deferred tax liability	$	(4,618)	$	(3,649)

The Company had a net income tax receivable of $3.5 million and $1.0 million as of May 30, 2020 and May 25, 2019, respectively.

The tax benefit associated with the exercise of nonqualified stock options and the disqualifying dispositions by employees of incentive stock options, restricted stock awards and shares issued under the Company’s ESPP reduced income taxes payable by $0.9 million and $1.8 million for the years ended May 30, 2020 and May 25, 2019, respectively.

The Company has foreign net operating loss carryforwards of $53.2 million and foreign tax credit carryforwards of $0.6 million. The foreign tax credits will expire beginning in fiscal 2023. The following table summarizes the net operating loss expiration periods.


Expiration Periods	Amount of Net Operating Losses
Fiscal Years Ending:	(in thousands)
2021	$	3,936
2022		154
2023		251
2024		2,312
2025		540
2026-2029		1,917
Unlimited		44,083
	$	53,193

The following table summarizes the activity in our valuation allowance accounts (in thousands):



					Currency
	Beginning		Charged to		Rate		Ending
	Balance		Operations		Changes		Balance
Years Ended:
May 26, 2018	$	15,971	$	(1,181)	$	508	$	15,298
May 25, 2019	$	15,298	$	(1,440)	$	(668)	$	13,190
May 30, 2020	$	13,190	$	(1,919)	$	(202)	$	11,069

Realization of the deferred tax assets is dependent upon generating sufficient future taxable income. Management believes that it is more likely than not that all other remaining deferred tax assets will be realized through future taxable earnings or alternative tax strategies.

Deferred income taxes have not been provided on the undistributed earnings of approximately $21.1 million from the Company’s foreign subsidiaries as of May 30, 2020 since these amounts are intended to be indefinitely reinvested in foreign operations. If the earnings of the Company’s foreign subsidiaries were to be distributed, management estimates that the income tax impact would be immaterial as a result of the transition tax and federal dividends received deduction for foreign source earnings provided under the US Tax Cuts and Jobs Act of 2017.

The following table summarizes the activity related to the gross unrecognized tax benefits (in thousands):



	For the Years Ended
	May 30,		May 25,
	2020		2019
Unrecognized tax benefits, beginning of year	$	42	$	42
Gross decreases-tax positions in prior period		(42)		-
Gross increases-current period tax positions		848		-
Unrecognized tax benefits, end of year	$	848	$	42

The Company’s total liability for unrecognized gross tax benefits was $848,000 and $42,000 as of May 30, 2020 and May 25, 2019, respectively; which, if ultimately recognized, would impact the effective tax rate in future periods. The unrecognized tax benefits are included in long-term liabilities in the Consolidated Balance Sheets. None of the unrecognized tax benefits are short-term liabilities due to the closing of the statute of limitations.

The Company’s major income tax jurisdiction is the U.S., with federal statutes of limitations remaining open for fiscal 2017 and thereafter. For states within the U.S. in which the Company does significant business, the Company remains subject to examination for fiscal 2016 and thereafter. Major foreign jurisdictions in Europe remain open for fiscal years ended 2015 and thereafter.

The Company recognizes interest and penalties related to unrecognized tax benefits as a part of its provision for income taxes. During the fiscal year ended May 30, 2020, the Company did not accrue for any interest and penalties as a component of the liability for unrecognized tax benefits.