4. Income Taxes

The components of the provision for income taxes are as follows:



	Year ended December 31,
	2017		2016		2015
Current tax:
U.S. Federal	$	98,208	$	20,765	$	244,470
U.S. State		18,639		8,687		37,957
Foreign		669		556		172
		117,516		30,008		282,599
Deferred tax:
U.S. Federal		(16,201)		(11,596)		11,000
U.S. State		(1,559)		(2,546)		699
Foreign		(496)		(2,470)		(2,288)
		(18,256)		(16,612)		9,411
Valuation allowance		230		2,405		2,255
Provision for income taxes	$	99,490	$	15,801	$	294,265

On December 22, 2017, the Tax Cuts and Jobs Act, (the “TCJA”) was enacted. The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 35% to 21%, for tax years beginning after December 31, 2017. We recorded a benefit of $6,047 ($0.21 per basic and diluted earnings per share) in deferred income tax expense for the remeasurement of our net deferred tax liability at the 21% tax rate. The TCJA also provides for acceleration of depreciation for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including additional limitations on deductibility of executive compensation and employee meal benefits.

The $6,047 benefit represents what we believe is the impact of the TCJA. As the benefit is based on currently available information and interpretations, which are continuing to evolve, the benefit should be considered provisional. We will continue to analyze additional information and guidance related to the TCJA as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. The final impacts may differ from the recorded amounts as of December 31, 2017, and we will continue to refine such amounts within the measurement period provided by Staff Accounting Bulletin No. 118. We expect to complete our analysis no later than the fourth quarter of 2018.

Actual taxes paid for 2016 and 2015 were less than the current tax expense due to the excess tax benefit on stock-based compensation of $1,320 and $74,442 during the years ended December 31, 2016 and 2015, respectively.

The effective tax rate differs from the statutory tax rates as follows:



	Year ended December 31,
	2017		2016		2015
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of related federal income tax benefit	4.4		13.3		3.6
Federal credits	(1.5)		(10.1)		(0.4)
Enhanced deduction for food donation	(0.2)		(2.4)		(0.2)
Valuation allowance	0.1		6.0		0.3
Other	1.5		6.2		-
Effects of the TCJA	(2.3)		-		-
Return to provision and other discrete items	(0.9)		(7.2)		(0.1)
Effective income tax rate	36.1	%	40.8	%	38.2	%

The 2017 effective tax rate was lower than the 2016 rate due to the enactment of the TCJA and a lower state tax rate, partially offset by federal credits on overall higher pre-tax operating income. The 2016 effective tax rate was higher than 2015 due to a higher state tax rate, not qualifying for the federal research and development tax credit in 2016, and other federal credits on overall lower pre-tax operating income.

Deferred income tax liabilities are taxes we expect to pay in future periods. Similarly, deferred income tax assets are recorded for expected reductions in taxes payable in future periods. Deferred income taxes arise because of the differences in the book and tax bases of certain assets and liabilities.

Deferred income tax liabilities and assets consist of the following:



	December 31,
	2017		2016
Deferred income tax liability:
Leasehold improvements, property and equipment	$	140,908	$	204,640
Goodwill and other assets		1,339		1,856
Prepaid assets and other		5,191		6,012
Total deferred income tax liability		147,438		212,508
Deferred income tax asset:
Deferred rent		42,859		63,159
Gift card liability		4,580		5,563
Capitalized transaction costs		324		500
Stock-based compensation and other employee benefits		80,447		101,628
Foreign net operating loss carry-forwards		11,376		9,580
State credits		5,589		4,595
Allowances, reserves and other		13,719		19,359
Valuation allowance		(12,270)		(10,820)
Total deferred income tax asset		146,624		193,564
Net deferred income tax liability	$	814	$	18,944

The December 31, 2017, deferred tax liability was measured using a 21% U.S. federal tax rate because of the enactment of TCJA, which reduced the rate from 35%.

As of December 31, 2017, we have $8,468 of deferred tax assets related to outstanding non-vested stock awards that contain market conditions. If market conditions are not achieved, then we may not realize the benefit of these deferred tax assets, which would result in a higher effective tax rate in future periods.

The unrecognized tax benefits are as follows:



	2017		2016		2015
Beginning of year	$	4,211	$	3,776	$	1,342
Increase resulting from prior year tax position		-		-		402
Increase resulting from current year tax position		4,726		435		2,032
End of year	$	8,937	$	4,211	$	3,776

During the years ended December 31, 2017, 2016, and 2015, we recognized $364, $430, and $0, respectively, in interest expense related to uncertain tax positions. We have $794 and $430 for the payment of interest accrued at December 31, 2017, and 2016, respectively. We are open to federal and state tax audits until the applicable statutes of limitations expire. Tax audits by their very nature are often complex and can require several years to complete. We are no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2014. For the majority of states where we have a significant presence, we are no longer subject to tax examinations by tax authorities for tax years before 2014. As of December 31, 2017, we had cumulative gross foreign net operating losses of $50,292, which have no expiration date.