4. Income Taxes

The provision for income taxes consists of the following (in thousands):

Year ended	August 27, 2011			August 28, 2010		August 29, 2009
Current:
Federal	$	22,372		$	34,373	$	37,843
Foreign		3,664			4,336		3,835
State		5,089			6,871		7,886
Total current		31,125			45,580		49,564

Deferred:
Federal		11,424			154		1,769
Foreign		(94	)		366		(563	)
State		1,631			344		(157	)
Total deferred		12,961			864		1,049

Total	$	44,086		$	46,444	$	50,613

The following table reconciles the provision for income taxes using the statutory federal income tax rate to the actual provision for income taxes (in thousands):

	August 27, 2011			August 28, 2010		August 29, 2009
Income taxes at the statutory federal income tax rate		35.0	%	35.0	%	35.0	%
State income taxes		3.7		3.8		4.0
Adjustments to tax reserves		-1.1		-0.7		1.0
Foreign tax rate differential		-1.0		-0.6		-0.3
Permanent and other		0.0		0.3		0.3
Total		36.6	%	37.8	%	40.0	%

The tax effect of items giving rise to the Company's deferred tax (assets) liabilities is as follows (in thousands):

	August 27, 2011		August 28, 2010
Deferred Tax Assets
Payroll and benefit related	$	14,171	$	13,145
Insurance related		11,831		9,521
Environmental		7,235		7,349
Other		10,207		8,635
		43,444		38,650

Deferred Tax Liabilities
Tax in excess of book depreciation		39,317		32,535
Purchased intangible assets		24,619		22,167
Rental merchandise in service		21,325		11,511
Other		145		205
		85,406		66,418

Net deferred tax liability	$	41,962	$	27,768

The Company has evaluated its deferred tax assets and believes that they will be fully recovered. As a result, the Company has not established a valuation allowance.

As of August 27, 2011 and August 28, 2010, there was $1.7 million and $3.0 million, respectively, in total unrecognized tax benefits, which if recognized, would favorably impact the Company's effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense which is consistent with the recognition of these items in prior reporting periods. As of August 27, 2011 and August 28, 2010, the Company had accrued a total of $0.6 million and $1.5 million in interest and penalties, respectively, in its long-term accrued liabilities. For the year ended August 27, 2011, the Company recognized a benefit in its Consolidated Statement of Income related to interest and penalties totaling $0.9 million. For the years ended August 28 2010 and August 29, 2009, the Company recognized expense in its Consolidated Statements of Income related to interest and penalties totaling $0.3 million and $0.6 million, respectively.

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

Balance at August 29, 2009	$	4,978
Additions based on tax positions related to the current year		184
Additions for tax positions of prior years		199
Statute expirations		(1,805	)

Balance at August 28, 2010	$	3,556
Additions based on tax positions related to the current year		253
Statute expirations		(1,256	)
Other adjustments		(233	)

Balance at August 27, 2011	$	2,320

The Company has a significant portion of its operations in the United States and Canada. It is required to file federal income tax returns as well as state income tax returns in a majority of the U.S. states and also in the Canadian provinces of Alberta, British Columbia, Ontario, Saskatchewan and Quebec. At times, the Company is subject to audits in these jurisdictions, which typically are complex and can require several years to resolve. The final resolution of any such tax audit could result in either a reduction in the Company's accruals or an increase in its income tax provision, both of which could have a material impact on the consolidated results of operations in any given period.

U.S. and Canadian federal income tax statutes have lapsed for filings up to, and including fiscal years 2007 and 2004, respectively. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2006. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.

The Company has undistributed earnings of its international subsidiaries that it considers indefinitely reinvested and therefore has not provided for U.S. income taxes that could result from any future distribution of such earnings to the U.S. parent. If these earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of its international subsidiaries were sold or transferred, the Company would likely be subject to additional U.S. income taxes, net of the impact of any available foreign tax credits. It is not practicable to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings.