11. Income Taxes

In fiscal 2016 a valuation allowance of $12.6 million was recorded against our net deferred tax asset upon determining it is more likely than not that the deferred tax assets will not be realized. In addition, the net deferred tax liability related to goodwill and other indefinite-lived assets was not used as a future source of income in the valuation allowance analysis. Accordingly, this deferred tax liability is recorded on our balance sheet.

The provision for income taxes consisted of the following for the fiscal years ended December 31, 2016, December 26, 2015 and December 27, 2014 (in thousands):


	2016		2015		2014
Current:
Federal	$	—	$	(4,372)	$	3,217
State		90		(493)		408
		90		(4,865)		3,625
Deferred:
Federal		2,279		(6,683)		2,124
State		325		(498)		19
		2,604		(7,181)		2,143
Income tax expense (benefit)	$	2,694	$	(12,046)	$	5,768

The income tax effects of temporary differences between financial and income tax reporting that give rise to the deferred income tax asset and liability are as follows as of December 31, 2016 and December 26, 2015 (in thousands):


	2016		2015
Deferred Tax Asset
Accounts receivable	$	59	$	34
Charitable contributions carryover		114		75
Federal credit carryover		428		411
Inventories		761		633
Accrued liabilities		532		—
State credit carryover		108		94
Stock-based compensation		649		580
Federal net operating loss carryforward		9,687		4,874
Deferred rent		42		92
State net operating loss carryforward		1,174		405
Total		13,554		7,198
Less: Valuation allowance		(12,578)		—
		976		7,198
Deferred Tax Liability
Accrued liabilities		—		(111)
Contingent consideration		(913)		(1,004)
Depreciation and amortization		(1,439)		(4,855)
		(2,352)		(5,970)

Net deferred tax (liability) asset	$	(1,376)	$	1,228

We had U.S. net operating loss carry forwards in the amount of $28.7 million at December 31, 2016 that will expire in tax years ending 2035 and 2036 and state net operating loss carry forwards in the amount of $27.7 million at December 31, 2016 that will expire in the tax years ending 2020 through 2036. Our alternative minimum tax credits of $0.2 million have no expiration date. Our other general business tax credits of $0.4 million at December 31, 2016 will expire in tax years ending 2025 through 2036.

The following table provides a reconciliation between the amount determined by applying the statutory federal income tax rate to our income tax provision for fiscal years ended December 31, 2016, December 26, 2015 and December 27, 2014 (in thousands):


	2016			2015			2014
Expected expense at statutory rate of 34.0%	$	(9,369)		$	(11,162)		$	5,552
Change resulting from:
State tax provision, net		(756)			(976)			434
Federal and state credits		(6)			116			(167)
Domestic production benefits		—			—			(322)
Change in valuation allowance		12,579			—			—
Nondeductible expenses and other		246			(24)			271
Income tax expense (benefit)	$	2,694		$	(12,046)		$	5,768
Effective tax rate		(9.8)	%		36.7	%		35.3	%