Income Taxes

The component of the provision for income taxes are as follows (in thousands):



	52 Weeks Ended		52 Weeks Ended			53 Weeks Ended
	January 1, 2019		January 2, 2018			January 3, 2017
Current:
Federal	$	3,762	$	5,884		$	4,204
State	1,800		886			270
	5,562		6,770			4,474
Deferred:
Federal	698		(24,636		)	7,145
State	399		2,042			3,710
	1,097		(22,594		)	10,855
Income tax provision (benefit)	$	6,659	$	(15,824	)	$	15,329

On December 22, 2017, the Tax Cuts and Jobs Act, (the “Act”) was enacted, reducing the U.S. federal corporate income tax rate from 35% to 21%, among other changes, for tax years beginning after December 31, 2017.

The SEC staff issued Staff Accounting Bulletin 118, ("SAB 118") which provides guidance on accounting for the tax effects of the Act for which the accounting under ASC 740, Income Taxes (“ASC 740”) is incomplete. To the extent that a company's accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before enactment of the Act.

The Company re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. The provisional amount recorded in fiscal 2017 related to the remeasurement of our deferred tax balance was a tax benefit of approximately $29.1 million based on then currently available information and interpretations, which are continuing to evolve. The Company will continue to analyze additional information and guidance related to the Act as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. As of January 1, 2019, the Company has completed its analysis of the Act and recorded a $0.3 million favorable adjustment in the fourth quarter of 2018 to the provisional amount disclosed for the remeasurement of the deferred tax assets and liabilities.

The effective tax rates for the fifty-two weeks ended January 1, 2019, fifty-two weeks ended January 2, 2018 and fifty-three weeks ended January 3, 2017 were 26.0%, (46.5)% and 42.3% respectively. The difference between the effective rates and the statutory federal income tax rate is composed of the following items (dollars in thousands):



	52 Weeks Ended					52 Weeks Ended					53 Weeks Ended
	January 1, 2019					January 2, 2018					January 3, 2017
Federal income taxes	$	5,380		21.0	%	$	11,916		35.0	%	$	12,685		35.0	%
State and local income taxes, net of federal tax benefit	1,639			6.4	%	1,688			5.0	%	1,882			5.2	%
Targeted job credits	(727		)	(2.8	)%	(420		)	(1.2	)%	(448		)	(1.2	)%
Investment in subsidiary	—			—	%	—			—	%	570			1.6	%
Tax reform	(291		)	(1.1	)%	(29,111		)	(85.5	)%	—			—	%
Transaction costs	—			—	%	—			—	%	227			0.6	%
Executive compensation disallowed	362			1.4	%	81			0.2	%	104			0.3	%
Permanent tax differences and other	296			1.1	%	22			—	%	309			0.8	%
Income tax provision (benefit)	$	6,659		26.0	%	$	(15,824	)	(46.5	)%	$	15,329		42.3	%

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



	January 1, 2019			January 2, 2018
Deferred tax assets:
Deferred rent	$	1,173		$	741
Accrued insurance	3,685			3,332
Reserve for restructuring and closed restaurants	652			763
Net operating loss carryforwards and tax credits	122			485
Deferred income	1,196			1,069
Stock-based compensation	1,049			767
Accrued compensation	532			472
Other, net	494			355
Deferred tax assets	8,903			7,984
Less valuation allowance	—			—
Net deferred tax assets	8,903			7,984
Deferred tax liabilities:
Property, equipment and intangibles	(69,357		)	(67,696		)
Investment in subsidiary	(7,448		)	(7,420		)
Prepaid expenses	(1,569		)	(1,442		)
Deferred tax liabilities	(78,374		)	(76,558		)
Net deferred tax liabilities	$	(69,471	)	$	(68,574	)

The Company maintains deferred tax liabilities related to trademarks and other indefinite lived assets that are not netted against the deferred tax assets as reversal of the taxable temporary difference cannot serve as a source for realization of the deferred tax assets, because the deferred tax liability will not reverse until some indefinite future period when the assets are either sold or written down due to an impairment.

The Company had no federal net operating loss carryforwards as of both January 1, 2019 and January 2, 2018. State tax credit carryforwards as of January 1, 2019 totaled $0.1 million and begin to expire in 2024. State tax credit carryforwards as of January 2, 2018 totaled $0.6 million and begin to expire in 2024.

As of January 1, 2019 and January 2, 2018, the Company considered the weight of both positive and negative evidence and concluded that it is more likely than not that the Company's deferred tax assets will be realized and no valuation allowance is required.

As of January 1, 2019 and January 2, 2018, the liability for unrecognized tax positions was $0.2 million, and is included in other non-current liabilities in the consolidated balance sheets. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the fifty-two weeks ended January 1, 2019, fifty-two weeks ended January 2, 2018 and fifty-three weeks ended January 3, 2017, the Company did not have any accrued interest and penalties related to uncertain tax positions. The Company does not expect any significant increases or decreases within the next twelve months to its unrecognized tax positions. The total amount of net unrecognized tax positions that would impact the Company's effective tax rate, if ever recognized, is $0.2 million.

The Company is subject to U.S. and state income taxes. The Company is no longer subject to federal and state income tax examinations for years before 2015 and 2014, respectively. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses and tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss and tax credit carry forward amounts.