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Income Taxes
9 Months Ended
Sep. 28, 2013
Income Tax Expense (Benefit) [Abstract]  
Income Taxes
INCOME TAXES
The Company calculates its interim income tax provision by estimating the annual effective tax rate and applying that rate to its year-to-date ordinary earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in tax laws, rates or status is recognized in the interim period in which the change occurs. The Company evaluates its effective income tax rate on a quarterly basis and updates its estimate of the full-year effective income tax rate as necessary.
The Company's effective income tax rate for the 13-week period ended September 28, 2013 was 51.3%, which resulted in a provision of $6.7 million, while the effective tax rate for the 13-week period ended September 29, 2012 was 39.4%, which also resulted in a provision of $6.7 million. The Company's effective income tax rate for the 39-week period ended September 28, 2013 was 44.8%, which resulted in a provision of $16.0 million, while the effective tax rate for the 39-week period ended September 29, 2012 was 40.0%, which resulted in a provision of $17.7 million.
On July 11, 2013, the Governor of California signed legislation which significantly changed the California Enterprise Zones ("CA EZ"), effective for tax years beginning on or after January 1, 2014. Under prior law, CA EZ credits did not expire. Under the newly-enacted law, credits expire after 10 years. The Company currently has a $4.3 million deferred tax asset for California tax credits, which amount does not include the portion of the deferred tax asset that is already offset by an unrecognized tax benefit. In evaluating the impact of the new tax law, the Company determined that it is more likely than not that the Company will not be able to realize the tax benefit for a portion of the CA EZ credits. Therefore, a gross valuation allowance was recorded on these credits in the amount of $2.4 million. After adjusting for the expected federal tax benefit, the net valuation allowance recorded was $1.5 million. The net valuation allowance increased the Company's effective tax rate by 11.8% and 4.3% for the 13-week and the 39-week period ended September 28, 2013, respectively.
On September 13, 2013, the U. S. Department of Treasury ("Treasury") released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Code of 1986 (the "Code"), regarding the deduction and capitalization of expenditures related to tangible property. Treasury also released proposed regulations under Section 168 of the Code regarding dispositions of tangible property. These final and proposed regulations will be effective for the Company's tax year ending December 31, 2014. The Company continues to review the regulations and the expected impact on the Company's consolidated financial statements when they are effective.