10. INCOME TAXES

The provision for income taxes is based on the following components (in thousands):

For the Years Ended	December 28, 2016		December 30, 2015		December 31, 2014
Current income taxes:
Federal	$	—	$	—	$	(1	)
State		224		188		29
Total current		224		188		28
Deferred income taxes:
Federal		9,660		8,871		(44,137	)
State		2,730		6,378		(22,864	)
Total deferred		12,390		15,249		(67,001	)
Charge in lieu of tax (attributable to stock options)		169		5,420		3,965
Tax provision for income taxes	$	12,783	$	20,857	$	(63,008	)

The provision for income taxes differs from the amount computed by applying the federal income tax rate as follows:

For the Years Ended	December 28, 2016			December 30, 2015			December 31, 2014
Statutory federal income tax rate of 35% applied to earnings before income taxes and extraordinary items		35.0	%		35.0	%		35.0	%
State tax benefit (net of federal benefit)		5.0			5.1			(5.7	)
State tax credits		—			(0.6	)		32.7
TRA expense		0.4			0.1			(70.6	)
WOTC Credit		(0.8	)		—			—
Change in valuation allowance		1.3			6.5			317.4
Other		0.2			0.3			(1.7	)
Total		41.1	%		46.4	%		307.1	%

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets. After evaluating all of the positive and negative evidence, including the Company’s continued income from operations, the reduction in interest expense resulting from the 2014 and 2013 debt refinancing and from the Company’s IPO and the resultant payoff of the 2013 Second Lien Term Loan, the Company concluded that it is more likely than not that its deferred tax assets will be realized. As a result, in fiscal 2014, the Company released its valuation allowance of approximately $65.0 million, which was recorded as a benefit to income taxes. We had previously maintained a full valuation allowance on our deferred tax assets, as we had been experiencing continuing taxable losses, and accordingly did not recognize a benefit for NOL carryforwards or other deferred tax assets. In fiscal 2015, a valuation allowance of $2.9 million was established to reserve against the potential that certain tax credits may not be utilized prior the date they expire. In fiscal 2016, the valuation allowance increased by $0.4 million. As of December 28, 2016 the total valuation allowance was $3.3 million.

On July 30, 2014, the Company entered into the TRA. The TRA calls for the Company to pay its pre-IPO stockholders 85% of the cash savings that the Company realizes in its taxes as a result of utilizing its NOLs and other tax attributes attributable to preceding periods. In fiscal 2014, the Company incurred a charge of approximately $41.4 million related to the present value of its total expected TRA payments. The TRA charge of $41.4 million is a permanent add-back to the Company’s taxable income and resulted in approximately $0.4 million of tax expense in fiscal 2016, $0.1 million of tax expense in fiscal 2015, and $14.0 million of tax expense in fiscal 2014. In fiscal 2016, we paid $3.2 million to our pre-IPO stockholders under the TRA

In fiscal 2014, the Company applied for California Enterprise Zone (“EZ”) credits, resulting in approximately $11.1 million of California tax credits and approximately $6.5 million of additional deferred tax assets and tax benefits. As of fiscal 2016, the deferred tax assets related to California Enterprise Zone credits are $5.9 million.

The Company’s deferred tax assets and liabilities consist of the following (in thousands):

	December 28, 2016			December 30, 2015
Deferred assets:
Capital leases	$	197		$	273
Accrued vacation		658			583
Accrued legal		308			216
Deferred rent		4,351			3,758
Accrued workers’ compensation		1,932			1,778
Enterprise zone and other credits		11,982			11,433
Net operating losses		30,452			45,081
Fixed assets		—			—
Other		2,737			2,293
Total deferred tax assets		52,617			65,415
Valuation allowance		(3,311	)		(2,920	)
Net deferred tax assets		49,306			62,495
Deferred liabilities:
Goodwill		(8,809	)		(8,557	)
Trademark		(26,463	)		(26,525	)
Prepaid expense		(523	)		(761	)
Fixed asset		(1,771	)		(1,758	)
Other		(4,323	)		(5,087	)
Deferred tax liabilities		(41,889	)		(42,688	)
Net deferred tax asset	$	7,417		$	19,807

The deferred tax amounts mentioned above have been classified on the accompanying consolidated balance sheets as follows (in thousands):

	December 28, 2016			December 30, 2015
Current:
Assets (liabilities)	$	21,457		$	21,656
Noncurrent:
Assets (liabilities)		(14,040	)		(1,849	)
	$	7,417		$	19,807

As of December 28, 2016, the Company has federal and state NOL carryforwards of approximately $73.8 million and $52.1 million, respectively, which expire beginning in 2028 and 2025, respectively. The Company also has state enterprise zone credits of approximately $11.0 million, which expire in 2023, federal WOTC of approximately $0.4 million, and federal and state alternative minimum tax ("AMT") credits of approximately $0.7 million, which carry forward indefinitely. In fiscal 2014, the Company completed a section 382 analysis and determined that all of the Company's NOL carryforwards and other tax attributes are subject to limitation under section 382 of the Internal Revenue Code of 1986 (the “Code”) and similar state law provisions. However, that limitation did not impact the Company's 2016 or 2015 year tax liability.

The Company has elected to utilize the tax-law-ordering approach with respect to excess share-based compensation deductions. Under this approach, the utilization of excess tax deductions associated with share-based awards is dictated by provisions in the tax law that identify the sequence in which such benefits are utilized for tax purposes. In fiscal 2016 and 2015, the Company recognized excess tax deductions of approximately $1.0 million and $15.0 million, respectively. The associated windfall tax benefits of approximately $0.2 million and $5.4 million, respectively, were recorded in additional paid-in-capital ("APIC") pursuant to the tax-law-ordering approach.

Recently enacted tax laws may also affect the tax provision on the Company's consolidated financial statements. For example, the state of California passed a law which mandates the use of a single sales factor apportionment formula for tax years beginning on or after January 1, 2013. As of December 28, 2016, we held a related $3.3 million valuation allowance against the state deferred tax asset.

As of December 28, 2016, December 30, 2015, and December 31, 2014, the Company had no accrual for unrecognized tax benefits. Consequently, no interest or penalties have been accrued by the Company. The Company believes that no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months.

The Company is subject to taxation in the United States and in various state jurisdictions. The Company is no longer subject to U.S. examination for years before 2013 by the federal taxing authority, and for years before 2012 by state taxing authorities.