Income Taxes

The provision (benefit) for income taxes for the fiscal years ended December 25, 2012, December 27, 2011 and December 28, 2010 consisted of the following (in thousands):



	December 25, 2012			December 27, 2011			December 28, 2010
Current:
Federal	$	(597	)	$	2,446		$	790
State	88			2,471			1,925
Deferred:
Federal	2,179			(7,015		)	2,859
State	617			(1,405		)	91
Income tax expense (benefit)	$	2,287		$	(3,503	)	$	5,665

Items of reconciliation to the statutory rate:



	December 25, 2012			December 27, 2011			December 28, 2010
Tax computed at U.S. federal statutory rate	$	6,058		$	421		$	9,496
State and local income taxes (net of federal benefit)	675			(223		)	971
Tax credits	(3,303		)	(5,211		)	(3,065		)
Charitable contributions	(827		)	(654		)	(457		)
Non-deductible transaction expenses	—			1,335			—
Uncertain tax position (release) accrual	(444		)	622			(1,102		)
Change in deferred tax rate	—			185			—
Other	128			22			(178		)
Income tax (benefit) expense	$	2,287		$	(3,503	)	$	5,665

During 2012, the Company generated $5.0 million of employment-related tax credits from continuing operations compared to $7.7 million in 2011 and $5.0 million in 2010.

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):



	December 25, 2012			December 27, 2011
Assets:
Insurance reserves	$	9,078		$	8,139
Deferred gains	769			1,553
Profit sharing and vacation	6,833			6,359
Uncertain tax position benefit	783			3,299
General business credit carryforwards	13,450			964
Other	6,493			6,113
Unfavorable leasehold interests	4,933			—
Transaction costs	82			9,077
Total deferred tax assets	42,421			35,504
Liabilities:
Depreciation and amortization	(232,661		)	(140,594		)
Debt refinancing	(4,294		)	—
Favorable leasehold interests	(3,564		)	—
Other	(2,747		)	(2,275		)
Total deferred tax liabilities	(243,266		)	(142,869		)
Net deferred tax liability	$	(200,845	)	$	(107,365	)

Current asset	$	17,445		$	16,369
Non-current liability	$	(218,290	)	$	(123,734	)

The Company files a consolidated US federal tax return with the parent company, NPC Holdings. The Company allocates taxes between it and the parent company utilizing the separate return method.

The liability for uncertain tax positions was $4.6 million as of December 25, 2012, was considered long term and was included in other deferred items in the Consolidated Balance Sheets. The $4.6 million liability includes $1.4 million for interest and penalties. Interest and penalties related to unrecognized tax benefits are included in the provision for income taxes in the Consolidated Statements of Income. The Company recorded a deferred tax asset related to total state tax exposures of $0.8 million.

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



	December 25, 2012			December 27, 2011			December 28, 2010
Beginning balance	$	9,527		$	9,049		$	9,799
Purchase accounting adjustments	(6,682		)	—			—
Additions based on tax positions related to the current year	2,439			64			42
Lapse of applicable statute of limitations	(895		)	(50		)	(1,682		)
Additional interest / penalties accrued	218			634			890
Adjustments to prior year positions	$	—		$	(170	)	$	—
Ending balance	$	4,607		$	9,527		$	9,049

The net impact on the effective tax rate from the release of the unrecognized tax benefits would be $1.4 million including consideration of the indirect tax benefits established with regard to such reserves. The Company has a liability established with regard to uncertain areas of tax law that could be released in the next 12 months, to the extent the statute of limitations with regard to this item expires.

The Company files income tax returns in the U.S. and various state jurisdictions. As of December 25, 2012, the Company is subject to examination in the U.S. federal tax jurisdiction for the 2009-2011 tax years. The Company is also subject to examination in various state jurisdictions for the 2005-2011 tax years, none of which was individually material.

At December 25, 2012, the Company had U.S. general business credit carryforwards of $13.5 million which begin expiring in 2030. The Company also had state net operating loss carryforwards of $1.2 million which begin expiring in 2025.