Income Taxes:

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



	2016			2015			2014
Current tax expense:
Federal	$	221,207		$	225,253		$	211,383
State	20,858			17,419			25,133
Total current	242,065			242,672			236,516

Deferred tax expense (benefit):
Federal	12,256			(7,017		)	(14,493		)
State	(3,171		)	1,567			(5,321		)
Total deferred	9,085			(5,450		)	(19,814		)
Total provision	$	251,150		$	237,222		$	216,702

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In the first quarter of fiscal 2016, the Company adopted accounting guidance which affected the presentation of deferred tax liabilities and assets. This guidance was applied retrospectively for all periods presented and therefore the presentation of previously reported deferred tax assets has been changed to conform to the presentation used in the current period. Significant components of the deferred tax assets and liabilities are as follows (in thousands):



	2016			2015
Tax assets:
Inventory valuation	$	19,713		$	18,147
Accrued employee benefit costs	14,120			16,485
Accrued sales tax audit reserve	4,317			4,821
Rent expenses in excess of cash payments required	35,391			30,788
Deferred compensation	23,978			20,125
Workers’ compensation insurance	13,565			12,116
General liability insurance	5,332			4,853
Lease exit obligations	2,617			2,378
Income tax credits	4,265			2,316
Other	7,311			8,831
	130,609			120,860
Tax liabilities:
Inventory basis difference	(4,600		)	(3,497		)
Prepaid expenses	(2,912		)	(2,108		)
Depreciation	(73,336		)	(55,805		)
Amortization	(2,419		)	(2,435		)
Other	(2,124		)	(1,821		)
	(85,391		)	(65,666		)

Net deferred tax asset	$	45,218		$	55,194

The Company has evaluated the need for a valuation allowance for all or a portion of the deferred tax assets. The Company believes that all of the deferred tax assets will more likely than not be realized through future earnings. The Company had state tax credit carryforwards of $7.5 million and $4.4 million as of December 31, 2016 and December 26, 2015, respectively, with varying dates of expiration between 2017 and 2030. The Company provided no valuation allowance as of December 31, 2016 and December 26, 2015 for state tax credit carryforwards, as the Company believes it is more likely than not that all of these credits will be utilized before their expiration dates.

A reconciliation of the provision for income taxes to the amounts computed at the federal statutory rate is as follows (in thousands):



	2016			2015			2014
Tax provision at statutory rate	$	240,894		$	226,666		$	205,656
Tax effect of:
State income taxes, net of federal tax benefits	11,496			12,341			12,878
Permanent differences	(1,240		)	(1,785		)	(1,832		)
	$	251,150		$	237,222		$	216,702

The Company and its affiliates file income tax returns in the United States and various state and local jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years before 2012. Various states have completed an examination of our income tax returns for 2011 through 2014 with minimal adjustments.

The total amount of unrecognized tax positions that, if recognized, would decrease the effective tax rate, is $1.1 million at December 31, 2016. In addition, the Company recognizes current interest and penalties accrued related to these uncertain tax positions as interest expense, and the amount is not material to the Consolidated Statements of Income. The Company has considered the reasonably possible expected net change in uncertain tax positions during the next 12 months, and does not expect any material changes to our liability for uncertain tax positions through December 30, 2017.

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



	2016			2015			2014
Balance at beginning of year	$	2,922		$	3,500		$	2,482
Additions based on tax positions related to the current year	460			869			1,104
Additions for tax positions of prior years	139			—			280
Reductions for tax positions of prior years	(1,829		)	(1,447		)	(366		)
Reductions due to audit results	(113		)	—			—
Balance at end of year	$	1,579		$	2,922		$	3,500