Income Taxes

12 Months Ended

Dec. 28, 2019

Income Taxes:

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


	Fiscal Year

	2019		2018		2017
Current tax expense:
Federal	$	128,490	$	123,388	$	207,986
State	25,091		15,597		14,516
Total current	153,581		138,985		222,502

Deferred tax expense (benefit):
Federal	11,770		9,650		22,469
State	(4,328)		2,393		4,953
Total deferred	7,442		12,043		27,422
Total provision	$	161,023	$	151,028	$	249,924

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 28, 2019		December 29, 2018
Tax assets:
Inventory valuation	$	16,676	$	14,417
Accrued employee benefits costs	12,002		15,333
Accrued sales tax audit reserve	4,173		3,419
Rent expenses in excess of cash payments required	30,975		25,628
Deferred compensation	14,836		17,598
Workers’ compensation insurance	10,154		9,900
General liability insurance	6,025		5,410
Lease exit obligations	2,087		2,010
Income tax credits	6,377		5,773
Other	5,768		9,160
	109,073		108,648
Tax liabilities:
Inventory basis difference	(4,667)		(4,590)
Prepaid expenses	(2,024)		(1,912)
Depreciation	(93,919)		(87,417)
Amortization	(8,230)		(6,039)
Other	(386)		(2,083)
	(109,226)		(102,041)

Net deferred tax (liability)/asset	$	(153)	$	6,607

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 $6.2 million and $5.7 million as of December 28, 2019 and December 29, 2018, respectively, with varying dates of expiration through 2031. The Company provided no valuation allowance as of December 28, 2019 and December 29, 2018 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

	2019		2018		2017
Tax provision at statutory rate	$	151,909	$	143,511	$	235,383
Tax effect of:
State income taxes, net of federal tax benefits	19,722		18,019		14,320
Section 162(m) limitation	2,572		2,581		1,223
Tax credits, net of federal tax benefits	(7,768)		(7,140)		(5,060)
Share-based compensation programs	(4,484)		(4,522)		(1,040)
Enactment of tax legislation	—		—		4,856
Other	(928)		(1,421)		242
Total income tax expense	$	161,023	$	151,028	$	249,924

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 2015. Various states have completed an examination of our income tax returns for 2015 through 2017 with minimal adjustments.

The total amount of unrecognized tax positions that, if recognized, would decrease the effective tax rate, is $2.3 million at December 28, 2019. 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 26, 2020.

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
	2019		2018		2017
Balance at beginning of year	$	2,451	$	1,993	$	1,579
Additions based on tax positions related to the current year	650		621		527
Additions for tax positions of prior years	59		257		14
Reductions for tax positions of prior years	(400)		(420)		(127)
Balance at end of year	$	2,760	$	2,451	$	1,993