12. INCOME TAXES

The provision for income taxes is summarized as follows (amounts in thousands):


	2016		2015
Federal: Current	$	613	$	(71)
Deferred		1,284		737
State: Current		2		2
Deferred		249		113
	$	2,148	$	781

Note that the percentage effect of an item on the statutory tax rate in a given year will fluctuate based upon the magnitude of the pre-tax profit or loss in that year. The difference between the tax rate on income for financial statement purposes and the federal statutory tax rate was as follows:


	2016		2015
Statutory tax rate	34.0	%	34.0	%
Percentage depletion	(1.8)		(4.0)
Non-deductible expenses	1.0		2.0
Valuation allowance for tax assets	1.0		(4.9)
State income taxes, net of federal benefit	4.2		5.7
Expiring charitable contributions	—		2.6
Domestic production deduction	(0.8)		—
Other	(0.8)		0.2
	36.8	%	35.6	%

For financial statement purposes, deferred tax assets and liabilities are recorded at a blend of the current statutory federal and states’ tax rates – 37.96%. The principal temporary differences and their related deferred taxes are as follows (amounts in thousands):


	2016		2015
Deferred tax assets
Reserves for self-insured losses	$	579	$	605
Accrued reclamation		1,945		2,154
Unfunded supplemental profit sharing plan liability		351		379
Asset valuation reserves		267		317
Future state tax credits		789		789
Net state operating loss carryforwards		167		252
Federal AMT carryforward		620		481
Federal NOL carryforward		—		16
Other		873		746
		5,591		5,739
Deferred tax liabilities
Depreciation		1,013		841
Deferred development		1,057		563
Prepaid royalties		1,187		478
Other		588		635
		3,845		2,517
Net deferred tax asset before valuation allowance		1,746		3,222
Valuation allowance
Beginning balance		(73)		(180)
(Increase) decrease during the period		(57)		107
Ending Balance		(130)		(73)
Net deferred tax asset	$	1,616	$	3,149

At December 31, 2016 the Company carries a valuation reserve of $79,000 ($30,000 tax effected) related to the carry forward of charitable contribution deductions arising in prior years due to the uncertainty that the Company will be able to utilize these deductions prior to the expiration of their carry forward periods. For Federal purposes, Alternative Minimum Tax credits can be carried forward indefinitely. For State purposes, Net Operating Losses can be carried forward for periods ranging from 5 to 20 years for the states that the Company is required to file in. Of the $789,000 of recorded state tax credits, $760,000 relates to California Enterprise Zone hiring credits earned in prior years. California repealed the credit and limited its use to tax years through 2023. The Company established a valuation reserve of $152,000 ( $100,000 tax effected) at the end of the current year related to the carryforward of the California Enterprise Zone hiring credits due to the uncertainty that the Company will be able to utilize the credits prior to their expiration in 2023.

The realization of the deferred tax assets is subject to our ability to generate sufficient taxable income during the periods in which the temporary differences become realizable. In evaluating whether a valuation allowance is required, we consider all available positive and negative evidence, including prior operating results, the nature and reason of any losses, our forecast of future taxable income and the dates on which any deferred tax assets are expected to expire. These assumptions require a significant amount of judgment, including estimates of future taxable income. The estimates are based on our best judgment at the time made based on current and projected circumstances and conditions.

As a result of the evaluation of the realizability of our deferred tax assets as of December 31, 2016, we concluded that it was more likely than not that all of our deferred tax assets would be realized to the extent not reserved for by a valuation allowance.

The Company accounts for uncertainty in income taxes recognized in its financial statements by applying GAAP’s recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The financial statement effects of a tax position are initially recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon effective settlement with a taxing authority. There was no gross amount of unrecognized tax benefits at either December 31, 2016 or January 2, 2016.

We file income tax returns in the United States Federal and various state jurisdictions. Federal tax years 2013 and on remain subject to examination. Various state income tax returns also remain subject to examination.