(6)	INCOME TAXES

Income before provision for income taxes in 2016, 2015 and 2014 consists of the following (in thousands):


	2016		2015		2014
Domestic	$	334,892	$	298,055	$	250,730
Foreign		9,766		8,160		7,893

	$	344,658	$	306,215	$	258,623

The differences between the United States Federal statutory income tax provision (using the statutory rate of 35%) and the Company’s consolidated provision for income taxes for 2016, 2015 and 2014 are summarized as follows (in thousands):


	2016			2015			2014
Federal income tax provision based on the statutory rate	$	120,630		$	107,175		$	90,518
State and local income taxes, net of related Federal income taxes		9,787			8,589			7,320
Non-resident withholding and foreign income taxes		17,275			15,750			15,032
Foreign tax and other tax credits		(20,049	)		(18,345	)		(17,397	)
Non-deductible expenses, net		1,579			1,180			1,284
Valuation allowance		(120	)		(301	)		(369	)
Unrecognized tax benefits, net of related Federal income taxes		(98	)		110			(48	)
Other		976			(732	)		(304	)

	$	129,980		$	113,426		$	96,036

The components of the 2016, 2015 and 2014 consolidated provision for income taxes are as follows (in thousands):


	2016			2015		2014
Provision for Federal income taxes
Current provision	$	100,673		$	84,071	$	70,958
Deferred provision (benefit)		(3,096	)		862		(873	)

Total provision for Federal income taxes		97,577			84,933		70,085

Provision for state and local income taxes
Current provision		15,091			11,892		10,178
Deferred provision		37			851		741

Total provision for state and local income taxes		15,128			12,743		10,919

Provision for non-resident withholding and foreign income taxes		17,275			15,750		15,032

	$	129,980		$	113,426	$	96,036

As of January 1, 2017 and January 3, 2016, the significant components of net deferred income taxes are as follows (in thousands):


	2016			2015
Deferred Federal income tax assets
Insurance reserves	$	11,202		$	10,202
Equity compensation		11,978			12,040
Other accruals and reserves		18,741			14,411
Bad debt reserves		1,005			1,232
Valuation allowance		(35	)		(155	)
Other		5,767			5,409

Total deferred Federal income tax assets		48,658			43,139

Deferred Federal income tax liabilities
Depreciation, amortization and asset basis differences		6,352			3,667
Capitalized software		25,869			21,398
Gain on debt extinguishments		9,073			13,609
Other		—			288

Total deferred Federal income tax liabilities		41,294			38,962

Net deferred Federal income tax asset		7,364			4,177

Net deferred state and local income tax asset		1,571			1,688

Net deferred income taxes	$	8,935		$	5,865

Realization of the Company’s deferred tax assets is dependent upon many factors, including, but not limited to, the Company’s ability to generate sufficient taxable income. Although realization of the Company’s net deferred tax assets is not assured, management believes it is more likely than not that the net deferred tax assets will be realized. On an ongoing basis, management will assess whether it remains more likely than not that the net deferred tax assets will be realized.

For financial reporting purposes, the Company’s investment in foreign subsidiaries does not exceed its tax basis. Therefore no deferred income taxes have been provided.

The Company recognizes the financial statement benefit of a tax position if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority’s widely understood administrative practices and precedents. For tax positions meeting the “more likely than not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties in income tax expense.

During 2014 and in connection with the sale of 14 Company-owned stores to franchisees, the Company recognized a capital gain and also released $0.3 million of a deferred tax valuation allowance.

During 2014, the Company accrued interest expense of $0.1 million. At December 28, 2014, the amount of unrecognized tax benefits was $2.9 million of which, if ultimately recognized, $1.7 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. At December 28, 2014, the Company had $0.7 million of accrued interest and no accrued penalties. This amount is excluded from the $2.9 million total unrecognized tax benefit.

During 2015 and in connection with the sale of four Company-owned stores to franchisees, the Company recognized a capital gain and also released $0.3 million of a deferred tax valuation allowance.

During 2015, the Company reversed an interest expense accrual of $0.6 million. At January 3, 2016, the amount of unrecognized tax benefits was $2.1 million of which, if ultimately recognized, $1.7 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. At January 3, 2016, the Company had less than $0.1 million of accrued interest and no accrued penalties.

At January 1, 2017, the amount of unrecognized tax benefits was $2.0 million of which, if ultimately recognized, $1.6 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. At January 1, 2017, the Company had less than $0.1 million of accrued interest and no accrued penalties.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


Balance as of December 29, 2013	$	3,573

Additions for tax positions of current year		211
Additions for tax positions of prior years		173
Reductions in tax positions from prior years for:
Changes in prior year tax positions		(605	)
Settlements during the period		(55	)
Lapses of applicable statute of limitations		(358	)

Balance as of December 28, 2014		2,939

Additions for tax positions of current year		233
Additions for tax positions of prior years		171
Reductions in tax positions from prior years for:
Changes in prior year tax positions		(100	)
Settlements during the period		(27	)
Lapses of applicable statute of limitations		(1,101	)

Balance as of January 3, 2016		2,115

Additions for tax positions of current year		209
Reductions in tax positions from prior years for:
Changes in prior year tax positions		(33	)
Lapses of applicable statute of limitations		(337	)

Balance as of January 1, 2017	$	1,954

The Company continues to be under examination by certain states. The Company’s Federal statute of limitation has expired for years prior to 2013 and the relevant state and foreign statutes vary. The Company expects the current ongoing examinations to be concluded in the next twelve months and does not expect the assessment of any significant additional amounts in excess of amounts reserved.