C. Income Taxes

The income tax provision (benefit) differs from that computed using the statutory federal income tax rates for the following reasons:

	(000’s omitted)
	2013			2012			2011

Federal taxes at statutory rate	$	6,234		$	5,166		$	(330	)
State taxes, net of federal tax benefit	634			1,104			(170		)
Federal manufacturer’s deduction	(518		)	(458		)	(390		)
Tax credits	(53		)	(235		)	(181		)
Transaction costs	226			—			—
Change in fair value of earnout	91			—			—
Other	(24		)	18			(5		)
Total	$	6,590		$	5,595		$	(1,076	)

Federal and state tax benefits were recognized in fiscal year 2011 related to REA’s impairment charge (see Note G), however, a valuation allowance of approximately $200,000 was deemed necessary in fiscal 2012 related to the state tax benefit.

The provision for income taxes consisted of the following:

		(000’s omitted)
		2013			2012		2011

Current:	Federal	$	4,906		$	3,977	$	3,735
	State	958			1,055		668
		5,864			5,032		4,403

Deferred:	Federal	739			90		(4,417		)
	State	(13		)	473		(1,062		)
		726			563		(5,479		)
Total		$	6,590		$	5,595	$	(1,076	)

The following is a summary of the significant components of deferred tax assets and liabilities as of September 28, 2013 and September 29, 2012:

	(000’s omitted)
	2013			2012
Current deferred tax assets (liabilities):
Vacation accrual not currently deductible	$	736		$	767
Other accruals not currently deductible	528			684
State NOL and credit carryforwards	299			0
Deferred Revenue	(450		)	0
Non-deductible reserves	2,970			3,158
Other	54			58
Total current deferred tax assets	4,137			4,667
Valuation allowances	(183		)	(394		)
Total current deferred tax assets, net	3,954			4,273

Non-current deferred tax assets (liabilities):
Deferred compensation arrangements	1,709			1,646
Goodwill and other intangibles	6,069			8,506
Accelerated depreciation	(6,816		)	(7,898		)
State NOL and credit carryforwards	4,045			3,497
Pension obligation (Note N)	302			217
Restructuring reserve	895			1,141
Other	496			543
Total non-current deferred tax assets	6,700			7,652
Valuation allowances	(3,873		)	(4,201		)
Total non-current deferred tax assets (liabilities), net	2,827			3,451

Total deferred tax assets	$	6,781		$	7,724

The Company fully provided valuation allowances for net operating loss and credit carryforwards in states where the Company does not expect to realize the benefit. The losses and credits expire in fiscal years 2014 through 2034. The Company decreased its valuation allowance by $0.5 million in 2013 and increased its valuation allowance by $0.8 million in 2012.

There was no liability for unrecognized tax benefits at the end of fiscal years 2013 and 2012 and the Company does not anticipate any significant changes in the amount of unrecognized tax benefits over the next twelve months. The Company recognizes any interest and penalties related to unrecognized tax benefits in income tax expense.

The Company files federal and state income tax returns in various jurisdictions of the United States. With few exceptions, the Company is no longer subject to income tax examinations for years prior to fiscal 2010. Substantially all U.S. federal tax years prior to fiscal 2011 have been audited by the Internal Revenue Service and closed.

In September 2013, the Internal Revenue Service released final tangible property regulations under IRC Sections 162(a) and 263(a), regarding the deduction and capitalization of expenditures related to tangible property as well as rules for expensing materials and supplies. Also released were proposed regulations under IRC Section 168 regarding dispositions of tangible property. These final and proposed regulations will be effective for the Company’s fiscal year ending September 26, 2015. The Company is currently assessing these rules and the impacts to the financial statements.