Income Taxes:

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



	Fiscal Year
	Fiscal Year
	2018		2017		2016
Current tax expense:
Federal	$	123,388	$	207,986	$	221,207
State	15,597		14,516		20,858
Total current	138,985		222,502		242,065

Deferred tax expense (benefit):
Federal	9,650		22,469		12,256
State	2,393		4,953		(3,171		)
Total deferred	12,043		27,422		9,085
Total provision	$	151,028	$	249,924	$	251,150

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. Significant components of the deferred tax assets and liabilities are as follows (in thousands):



	December 29, 2018			December 30, 2017
Tax assets:
Inventory valuation	$	14,417		$	13,029
Accrued employee benefits costs	15,333			7,092
Accrued sales tax audit reserve	3,419			3,479
Rent expenses in excess of cash payments required	25,628			24,728
Deferred compensation	17,598			20,299
Workers’ compensation insurance	9,900			9,153
General liability insurance	5,410			4,265
Lease exit obligations	2,010			1,829
Income tax credits	5,773			4,206
Other	9,160			6,997
	108,648			95,077
Tax liabilities:
Inventory basis difference	(4,590		)	(4,141		)
Prepaid expenses	(1,912		)	(1,423		)
Depreciation	(87,417		)	(65,650		)
Amortization	(6,039		)	(3,818		)
Other	(2,083		)	(1,551		)
	(102,041		)	(76,583		)

Net deferred tax asset	$	6,607		$	18,494

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the TCJA. The TCJA made broad and complex changes to the U.S. tax code including, but not limited to, a reduction of the federal income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017. This change required the Company to remeasure our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which generally is 21% for federal income tax purposes. As permitted by the SEC Staff Accounting Bulletin 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act”, we recorded a provisional estimate of the effects of the TCJA on our existing deferred tax balances as of December 30, 2017, and recognized a provisional amount of $4.9 million, which was included as a component of income tax expense from continuing operations in fiscal 2017. We have subsequently finalized our accounting analysis based on the guidance, interpretations, and data available as of December 29, 2018. Adjustments made in the fourth quarter of fiscal 2018 upon finalization of our accounting analysis were not material to our Consolidated Financial Statements.

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 $5.7 million and $5.1 million as of December 29, 2018 and December 30, 2017, respectively, with varying dates of expiration between 2018 and 2030. The Company provided no valuation allowance as of December 29, 2018 and December 30, 2017 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):



	Fiscal Year
	Fiscal Year
	2018			2017			2016
Tax provision at statutory rate	$	143,511		$	235,383		$	240,894
Tax effect of:
State income taxes, net of federal tax benefits	18,019			14,320			15,527
Section 162(m) limitation	2,581			1,223			633
Tax credits, net of federal tax benefits	(7,140		)	(5,060		)	(7,227		)
Share-based compensation programs	(4,522		)	(1,040		)	—
Enactment of tax legislation	—			4,856			—
Other	(1,421		)	242			1,323
Total income tax expense	$	151,028		$	249,924		$	251,150

The Company and its affiliates file income tax returns in the U.S. 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 2014. Various states have completed an examination of our income tax returns for 2014 through 2016 with minimal adjustments.

The total amount of unrecognized tax positions that, if recognized, would decrease the effective tax rate, is $2.1 million at December 29, 2018. 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 28, 2019.

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



	Fiscal Year
	2018			2017			2016
Balance at beginning of year	$	1,993		$	1,579		$	2,922
Additions based on tax positions related to the current year	621			527			460
Additions for tax positions of prior years	257			14			139
Reductions for tax positions of prior years	(420		)	(127		)	(1,829		)
Reductions due to audit results	—			—			(113		)
Balance at end of year	$	2,451		$	1,993		$	1,579