10.	INCOME TAXES

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. Other changes include the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as, prospective changes beginning in 2018 including additional limitations on executive compensation.

Income tax expense consists of the following:

	Year Ended December 31,
	2017		2016			2015
Current:
Federal	$	20,930	$	17,562		$	14,395
State		953		539			31
		21,883		18,101			14,426
Deferred:
Federal		2,794		509			(662	)
State		981		(61	)		(66	)
		3,775		448			(728	)
	$	25,658	$	18,549		$	13,698

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	Year Ended December 31,
	2017			2016			2015
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		0.7			0.6			0
Executive compensation limitation		0.3			0.1			0
Stock-based compensation		(6.4	)		0			0
Food donations		(1.1	)		(1.1	)		(1.2	)
Fixed assets		0			0			0.5
Changes in reserves		0			(0.1	)		(0.1	)
Tax credits		(0.2	)		(0.2	)		(0.5	)
Expired charitable contribution carryover		0.8			0			1.9
Rate change due to tax reform		1.0			0			0
Valuation allowance		0.8			0			(2.0	)
Other		(0.2	)		0			0.8
		30.7	%		34.3	%		34.4	%

The change in the effective tax rate from 2016 to 2017 was due primarily to the adoption of ASU No. 2016-09 as of January 1, 2017 partially offset by a charge recorded to write-down the net deferred asset due to the enactment of the Tax Act. The Company recognized an excess tax benefit from share-based compensation of $5,491 in the year ended December 31, 2017 within income tax expense in the accompanying consolidated statement of operations rather than as additional paid-in capital in the accompanying consolidated balance sheet under previous accounting guidance. This benefit was partially offset by a charge of $836 to write-down the net deferred tax asset to reflect the reduction of the future federal corporate income tax rate from 35% to 21%.

The significant items comprising the Company’s deferred income tax assets and liabilities are as follows:

	December 31,
	2017			2016
Deferred tax assets:
Reserves and accruals	$	979		$	1,470
Goodwill/Intangible assets		396			721
Net operating loss carryforwards		2,074			1,653
Stock-based compensation		2,437			2,441
Charitable contribution carryforward		122			1,432
Other		608			1,014
		6,616			8,731
Valuation allowance		(817	)		0
		5,799			8,731
Deferred tax liability:
Property and equipment		(2,597	)		(1,791	)
Net deferred tax asset	$	3,202		$	6,940

At December 31, 2017 and 2016, the Company had net operating loss carryforwards of approximately $27,948 and $28,038, respectively, for state tax purposes. For state tax purposes, there is a limitation on the amount of net operating loss carryforwards that can be utilized in a given year to offset state taxable income. The net operating losses will begin to expire in 2025.

At December 31, 2014, the Company had a valuation allowance of $800 recorded against its deferred tax asset generated for charitable contributions. The Company recorded the valuation allowance to reduce the deferred tax asset to an amount it expected was more likely than not to be realized due to the short carryforward period for this temporary difference. In 2015, the Company reduced the valuation allowance to zero due to the expiration of certain charitable contribution carryovers. At December 31, 2016, there was no valuation allowance. At December 31, 2017, the Company recorded a valuation allowance of $817 as certain state net operating loss carryforwards might not be realized due to changes in tax legislation. Based on the projected level of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the remaining net deferred tax assets. An analysis of the activity of the valuation allowance is as follows:

	Year Ended December 31,
	2017		2016		2015
Balance at beginning of year	$	0	$	0	$	800
Additions charged to expense		817		0		0
Deductions		0		0		(800	)
Balance at end of year	$	817	$	0	$	0

The total amount of gross unrecognized tax benefits as of December 31, 2017, 2016 and 2015 was $131, $168 and $272, respectively, which is included as a reduction of deferred income taxes in the accompanying consolidated balance sheets. The total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is approximately $103, $109 and $177 as of December 31, 2017, 2016 and 2015, respectively. The Company records accrued interest and penalties related to unrecognized tax benefits as part of interest (income) expense, net. No interest expense was recognized during 2017, 2016 and 2015. The Company’s federal income tax returns for 2014 through 2017 are open and are subject to examination by the Internal Revenue Service. State tax jurisdictions that remain open to examination range from 2014 through 2017. The Company does not believe that that there will be any material changes to unrecognized tax positions over the next 12 months.

A reconciliation of the beginning and ending amounts of the total unrecognized tax benefit is as follows:

	Year Ended December 31,
	2017			2016			2015
Balance at beginning of year	$	168		$	272		$	332
Increase related to current year tax positions		30			20			19
Increase related to prior year tax positions		0			0			72
Decrease due to lapse of statute of limitations		(67	)		(124	)		(151	)
Balance at end of year	$	131		$	168		$	272