Income Taxes

The provisions for income taxes were as follows:



	Fiscal Year Ended
	December 27, 2017		December 28, 2016		December 30, 2015
	(In thousands)
Current:
Federal	$	3,688	$	4,270	$	1,622
State and local	2,071		2,316		1,382
Foreign	961		912		873
Deferred:
Federal	10,075		8,225		12,264
State and local	196		619		1,742
Increase (release) of valuation allowance	216		132		(130		)
Total provision for income taxes	$	17,207	$	16,474	$	17,753

The reconciliation of income taxes at the U.S. federal statutory tax rate to our effective tax rate was as follows:



	December 27, 2017		December 28, 2016		December 30, 2015
Statutory provision rate	35	%	35	%	35	%
State and local taxes, net of federal income tax benefit	5		9		6
Wage addback on income tax credits earned	2		3		2
General business credits generated	(5	)	(9	)	(6	)
Foreign tax credits generated	(2	)	(12	)	(2	)
Pension plan liquidation	—		18		—
Share-based compensation	(3	)	—		—
Impact of tax reform	(3	)	—		—
Other	1		2		(2	)
Effective tax rate	30	%	46	%	33	%

On December 22, 2017, The Tax Cut and Jobs Act of 2017 (the “Tax Act”) was signed into law. The Tax Act reduces the U.S. statutory tax rate from 35% to 21% for years after 2017. Accordingly, we have revalued our deferred taxes as of December 27, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are realized. The net tax benefit recognized in 2017 related to the Tax Act was $1.6 million.

For the 2017 period, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state taxes and the generation of employment and foreign tax credits. The 2017 rates also benefited $1.7 million from share-based compensation and $1.6 million from the revaluing of deferred tax assets and liabilities required under the Tax Act. For the 2016 period, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state taxes, the generation of employment tax credits, the Pension Plan liquidation, and foreign tax credits generated with the filings of federal amended tax returns. The 2016 rates were impacted by the recognition of a $2.1 million tax benefit related to the $24.3 million pre-tax settlement loss on the Pension Plan liquidation. This benefit was at a rate lower than the effective tax rate due to the previous recognition of an approximate $7.2 million tax benefit recognized with the reversal of our valuation allowance in 2011. In addition, we amended prior years’ U.S. tax returns in order to maximize a foreign tax credit in lieu of a foreign tax deduction, resulting in a net tax benefit of approximately $3.7 million during the year.

The following table represents the approximate tax effect of each significant type of temporary difference that resulted in deferred income tax assets or liabilities.



	December 27, 2017			December 28, 2016
	(In thousands)
Deferred tax assets:
Self-insurance accruals	$	4,364		$	7,791
Capitalized leases	1,718			2,298
Accrued exit cost	487			1,074
Interest rate swaps	566			294
Pension, other retirement and compensation plans	10,328			12,378
Other accruals	443			386
Alternative minimum tax credit carryforwards	3,534			3,534
General business credit carryforwards - state and federal	13,355			13,541
Net operating loss carryforwards - state	14,096			11,753
Total deferred tax assets before valuation allowance	48,891			53,049
Less: valuation allowance	(13,078		)	(12,567		)
Total deferred tax assets	35,813			40,482
Deferred tax liabilities:
Intangible assets	(14,578		)	(22,073		)
Deferred finance costs	(111		)	(125		)
Fixed assets	(4,179		)	(601		)
Total deferred tax liabilities	(18,868		)	(22,799		)
Net deferred tax asset	$	16,945		$	17,683

At December 27, 2017, we had available, on a consolidated basis, federal general business credit carryforwards of approximately $9.6 million, most of which expire between 2034 and 2037. We also had available alternative minimum tax (“AMT”) credit carryforwards of approximately $3.5 million, which under the Tax Act are now considered refundable credits estimated to be fully received by 2019. We will continue to include the AMT credits in our deferred tax assets until they are fully refunded or utilized.

It is more likely than not that we will be able to utilize our credit carryforwards prior to expiration. In addition, it is more likely than not we will be able to utilize all of our existing temporary differences and a portion of our state tax net operating losses and state tax credit carryforwards prior to their expiration.

Of the $13.1 million of remaining valuation allowance, approximately $11.8 million represents South Carolina net operating loss carryforwards that will never be utilized.

Prior to 2005, Denny’s had ownership changes within the meaning of Section 382 of the Internal Revenue Code. In general, Section 382 places annual limitations on the use of certain tax attributes, such as AMT tax credit carryforwards, in existence at the ownership change date. It is our position that any pre-2005 AMT tax credits can be utilized as of December 27, 2017. The occurrence of an additional ownership change could limit our ability to utilize our current income tax credits generated after 2004.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits:



	December 27, 2017		December 28, 2016
	(In thousands)
Balance, beginning of year	$	1,180	$	—
Increases related to prior-year tax positions	289		1,180
Balance, end of year	$	1,469	$	1,180

There was less than $0.1 million interest expense associated with unrecognized tax benefits for the year ended December 27, 2017 and no additional interest expense for the year ended December 28, 2016.

We file income tax returns in the U.S. federal jurisdictions and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2013. We remain subject to examination for U.S. federal taxes for 2014-2017 and in the following major state jurisdictions: California (2013-2017), Florida (2014-2017) and Texas (2014-2017).