(6)	INCOME TAXES

Income before provision for income taxes in 2015, 2014 and 2013 consists of the following (in thousands):


	2015		2014		2013
Domestic	$	298,055	$	250,730	$	217,468
Foreign		8,160		7,893		7,631

	$	306,215	$	258,623	$	225,099

The differences between the United States Federal statutory income tax provision (using the statutory rate of 35%) and the Company’s consolidated provision for income taxes for 2015, 2014 and 2013 are summarized as follows (in thousands):


	2015			2014			2013
Federal income tax provision based on the statutory rate	$	107,175		$	90,518		$	78,785
State and local income taxes, net of related Federal income taxes		8,589			7,320			5,880
Non-resident withholding and foreign income taxes		15,750			15,032			13,923
Foreign tax and other tax credits		(18,345	)		(17,397	)		(16,423	)
Non-deductible expenses, net		1,180			1,284			1,161
Valuation allowance		(301	)		(369	)		29
Unrecognized tax benefits, net of related Federal income taxes		110			(48	)		232
Other		(732	)		(304	)		(1,473	)

	$	113,426		$	96,036		$	82,114

The components of the 2015, 2014 and 2013 consolidated provision for income taxes are as follows (in thousands):


	2015		2014			2013
Provision for Federal income taxes –
Current provision	$	84,071	$	70,958		$	54,115
Deferred provision (benefit)		862		(873	)		5,280

Total provision for Federal income taxes		84,933		70,085			59,395

Provision for state and local income taxes –
Current provision		11,892		10,178			8,021
Deferred provision		851		741			775

Total provision for state and local income taxes		12,743		10,919			8,796

Provision for non-resident withholding and foreign income taxes		15,750		15,032			13,923

	$	113,426	$	96,036		$	82,114

As of January 3, 2016 and December 28, 2014, the significant components of net deferred income taxes are as follows (in thousands):


	2015			2014
Deferred Federal income tax assets –
Insurance reserves	$	10,202		$	10,359
Equity compensation		12,040			11,697
Other accruals and reserves		14,411			12,161
Bad debt reserves		1,232			1,675
Valuation allowance		(155	)		(456	)
Other		5,409			5,082

Total deferred Federal income tax assets		43,139			40,518

Deferred Federal income tax liabilities –
Depreciation, amortization and asset basis differences		3,667			899
Capitalized software		21,398			16,628
Gain on debt extinguishments		13,609			18,146
Other		288			576

Total deferred Federal income tax liabilities		38,962			36,249

Net deferred Federal income tax asset		4,177			4,269

Net deferred state and local income tax asset		1,688			2,475

Net deferred income taxes	$	5,865		$	6,744

As of January 3, 2016, the classification of net deferred income taxes is summarized as follows (in thousands):


	Long-term		Total
Deferred tax assets	$	5,865	$	5,865

Net deferred income tax assets	$	5,865	$	5,865

As of December 28, 2014, the classification of net deferred income taxes is summarized as follows (in thousands):


	Current			Long-term			Total
Deferred tax assets	$	14,681		$	28,312		$	42,993
Deferred tax liabilities		(4,824	)		(31,425	)		(36,249	)

Net deferred income taxes	$	9,857		$	(3,113	)	$	6,744

Realization of the Company’s deferred tax assets is dependent upon many factors, including, but not limited to, the Company’s ability to generate sufficient taxable income. Although realization of the Company’s net deferred tax assets is not assured, management believes it is more likely than not that the net deferred tax assets will be realized. On an ongoing basis, management will assess whether it remains more likely than not that the net deferred tax assets will be realized.

For financial reporting purposes, the Company’s investment in foreign subsidiaries does not exceed its tax basis. Therefore no deferred income taxes have been provided.

The Company recognizes the financial statement benefit of a tax position if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority’s widely understood administrative practices and precedents. For tax positions meeting the “more likely than not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and penalties in income tax expense.

During 2013, the Company accrued interest expense of $0.1 million. At December 29, 2013, the amount of unrecognized tax benefits was $3.6 million of which, if ultimately recognized, $2.1 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. At December 29, 2013, the Company had $0.6 million of accrued interest and no accrued penalties. This amount is excluded from the $3.6 million total unrecognized tax benefit.

During 2014 and in connection with the sale of 14 Company-owned stores to franchisees, the Company recognized a capital gain and also released $0.3 million of a deferred tax valuation allowance.

During 2014, the Company accrued interest expense of $0.1 million. At December 28, 2014, the amount of unrecognized tax benefits was $2.9 million of which, if ultimately recognized, $1.7 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. At December 28, 2014, the Company had $0.7 million of accrued interest and no accrued penalties. This amount is excluded from the $2.9 million total unrecognized tax benefit.

During 2015 and in connection with the sale of four Company-owned stores to franchisees, the Company recognized a capital gain and also released $0.3 million of a deferred tax valuation allowance.

During 2015, the Company reversed an interest expense accrual of $0.6 million. At January 3, 2016, the amount of unrecognized tax benefits was $2.1 million of which, if ultimately recognized, $1.7 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. At January 3, 2016, the Company had less than $0.1 million of accrued interest and no accrued penalties.

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


Balance as of December 30, 2012	$	3,472

Additions for tax positions of current year		337
Additions for tax positions of prior years		398
Reductions in tax positions from prior years for:
Changes in prior year tax positions		(157	)
Settlements during the period		(133	)
Lapses of applicable statute of limitations		(344	)

Balance as of December 29, 2013		3,573

Additions for tax positions of current year		211
Additions for tax positions of prior years		173
Reductions in tax positions from prior years for:
Changes in prior year tax positions		(605	)
Settlements during the period		(55	)
Lapses of applicable statute of limitations		(358	)

Balance as of December 28, 2014		2,939

Additions for tax positions of current year		233
Additions for tax positions of prior years		171
Reductions in tax positions from prior years for:
Changes in prior year tax positions		(100	)
Settlements during the period		(27	)
Lapses of applicable statute of limitations		(1,101	)

Balance as of January 3, 2016	$	2,115

The Company continues to be under examination by certain states. The Company’s Federal statute of limitation has expired for years prior to 2012 and the relevant state and foreign statutes vary. The Company expects the current ongoing examinations to be concluded in the next twelve months and does not expect the assessment of any significant additional amounts in excess of amounts reserved.