11. INCOME TAXES

The provision (benefit) for income taxes is comprised of:

	Fiscal Year
	2014			2013		2012
Current federal taxes	$	274,000		$	88,000	$	88,000
Current state taxes		164,000			44,000		77,000
Deferred federal taxes (benefit)		(782,000	)		—		(1,830,000	)
Deferred state taxes (benefit)		(646,000	)		—		(418,000	)

	$	(990,000	)	$	132,000	$	(2,083,000	)

The provision (benefit) for income taxes reconciles to the amounts computed by applying the statutory federal tax rate of 34% to our income (loss) before income taxes. The sources and tax effects of the differences for fiscal years 2014, 2013 and 2012 are as follows:

	2014			2013			2012
Computed "expected" federal income tax expense (benefit)	$	2,864,000		$	940,000		$	(6,590,000	)
Permanent differences		139,000			93,000			93,000
Current and deferred state income tax expense (benefit), net of federal benefit		586,000			(19,000	)		(1,081,000	)
Change in valuation allowances on deferred tax assets		(4,576,000	)		(897,000	)		5,473,000
Other		(3,000	)		15,000			22,000

	$	(990,000	)	$	132,000		$	(2,083,000	)

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and liabilities are as follows:

	January 2, 2015			December 27, 2013			December 28, 2012
Current deferred tax assets:
Accounts receivable allowance	$	265,000		$	156,000		$	119,000
Other accrued liabilities		1,482,000			764,000			866,000

		1,747,000			920,000			985,000
Valuation allowance		—			(483,000	)		(570,000	)

Net deferred tax assets		1,747,000			437,000			415,000

Current deferred tax liabilities:
Deferred revenue		(4,878,000	)		(4,125,000	)		(3,867,000	)

		(4,878,000	)		(4,125,000	)		(3,867,000	)

Net current deferred tax liability	$	(3,131,000	)	$	(3,688,000	)	$	(3,452,000	)


Deferred tax assets, net of current portion:
Federal and state net operating losses	$	244,000		$	3,157,000		$	3,370,000
Intangible assets		4,016,000			4,571,000			4,962,000
Other		409,000			64,000			143,000

		4,669,000			7,792,000			8,475,000
Valuation allowance		—			(4,093,000	)		(4,903,000	)

Net deferred tax assets		4,669,000			3,699,000			3,572,000
Deferred tax liabilities, net of current portion:
Fixed assets		(111,000	)		(11,000	)		(67,000	)
Other		—			—			(53,000	)

Net non-current deferred tax assets	$	4,558,000		$	3,688,000		$	3,452,000

At January 2, 2015, the Company had state operating loss carryovers of $4.0 million. The carryovers expire through 2033. During 2014 management assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Significant pieces of objective positive evidence evaluated were the cumulative earnings generated over the three-year period ended January 2, 2015 and the Company's strong future earnings projections. Based on this evaluation, as of January 2, 2015, the Company reversed $4.6 million of its valuation allowance.

Management also believes that there are no material uncertain tax positions that would impact the accompanying consolidated financial statements. The Company's policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of January 2, 2015 and December 27, 2013, there was no unrecognized tax benefit. The Company may be subject to examination by the Internal Revenue Service for calendar years 2011 through 2014. The Company may also be subject to examination on certain state and local jurisdictions for the years 2010 through 2014.