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Income Taxes: | 12 Months Ended
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Jan. 01, 2013
Income Taxes: |
Income Taxes: | 13. Income Taxes: The provision for income taxes consisted of the following (in thousands):
|  | Fiscal Year |
|  | 2012 |  | 2011 |  | 2010 |
Income before income taxes |  | $ | 133,974 |  | $ | 129,143 |  | $ | 111,089 |
Income tax provision: |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |
Federal |  | $ | 39,792 |  | $ | 17,093 |  | $ | 26,580 |
State |  | 8,517 |  | 8,423 |  | 6,883 |
Total current |  | 48,309 |  | 25,516 |  | 33,463 |
Deferred: |  |  |  |  |  |  |
Federal |  | (11,055 | ) | 9,284 |  | (4,024 | )
State |  | (1,703 | ) | (1,377 | ) | (63 | )
Total deferred |  | (12,758 | ) | 7,907 |  | (4,087 | )
Total provision |  | $ | 35,551 |  | $ | 33,423 |  | $ | 29,376 |
The following is a reconciliation between the U.S. federal statutory rate and the effective tax rate:
|  | Fiscal Year |
|  | 2012 |  | 2011 |  | 2010 |
Tax at U.S. federal statutory rate |  | 35.0 | % | 35.0 | % | 35.0 | %
State and district income taxes, net of federal income tax benefit |  | 3.3 |  | 3.6 |  | 4.1 |
FICA tip credit |  | (7.7 | ) | (6.9 | ) | (7.6 | )
HIRE Act retention tax credit |  | — |  | (1.4 | ) | — |
Other credits and incentives |  | (0.6 | ) | (0.8 | ) | (0.6 | )
Change in uncertain tax positions |  | — |  | (1.3 | ) | (0.7 | )
Manufacturing deduction |  | (2.8 | ) | (2.7 | ) | (3.1 | )
Deferred compensation |  | (0.7 | ) | 0.2 |  | (0.6 | )
Other |  | — |  | 0.2 |  | (0.1 | )
Effective tax rate |  | 26.5 | % | 25.9 | % | 26.4 | %
Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):
|  | January 1, 2013 |  | January 3, 2012 |
Deferred tax assets: |  |  |  |  |
Employee benefits |  | $ | 20,135 |  | $ | 15,927 |
Insurance reserves |  | 15,284 |  | 13,099 |
Accrued rent |  | 23,945 |  | 21,257 |
Stock-based compensation |  | 18,908 |  | 20,800 |
Deferred income |  | 7,060 |  | 5,690 |
Tax credit carryforwards |  | 1,751 |  | 1,918 |
Other |  | 853 |  | 1,416 |
Subtotal |  | 87,936 |  | 80,107 |
Less: Valuation allowance |  | (258 | ) | — |
Total |  | $ | 87,678 |  | $ | 80,107 |
Deferred tax liabilities: |  |  |  |  |
Property and equipment |  | $ | (146,763 | ) | $ | (153,299 | )
Inventory |  | (9,160 | ) | (8,847 | )
Prepaid expenses |  | (8,350 | ) | (7,314 | )
Total |  | $ | (164,273 | ) | $ | (169,460 | )
Net deferred tax liability |  | $ | (76,595 | ) | $ | (89,353 | )
Reported in consolidated balance sheets as: |  |  |  |  |
Deferred income taxes — current asset |  | $ | 15,257 |  | $ | 14,574 |
Deferred income taxes — noncurrent liability |  | (91,852 | ) | (103,927 | )
Total |  | $ | (76,595 | ) | $ | (89,353 | )
We had $2.7 million and $3.0 million of state tax credit carryforwards at January 1, 2013 and January 3, 2012, respectively. These credits begin to expire in 2013. Management assesses the available evidence to estimate if sufficient future taxable income will be generated to use these carryforwards. Based on this evaluation, we recorded a valuation allowance of $0.3 million as of January 1, 2013 to reflect the amount that more likely than not will not be realized. The valuation allowance relates to hiring and investment tax credits in North Carolina. We believe it is more likely than not that all other state tax credit carryforwards will be realized. However, this assessment could change if estimates of future taxable income during the carryforward period are revised. The earliest tax year still subject to examination by a significant taxing jurisdiction is 2003. At January 1, 2013, we had $0.7 million of unrecognized tax benefits. If recognized, this amount would affect our effective income tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | Fiscal Year |
|  | 2012 |  | 2011 |  | 2010 |
Balance at beginning of year |  | $ | 590 |  | $ | 2,135 |  | $ | 6,460 |
Additions based on tax positions taken during a prior period |  | — |  | — |  | — |
Reductions based on tax positions taken during a prior period |  | — |  | — |  | (3,085 | )
Additions based on tax positions taken during the current period |  | 230 |  | 199 |  | 163 |
Reductions related to settlements with taxing authorities and lapses of statutes of limitations |  | (125 | ) | (1,744 | ) | (1,403 | )
Balance at end of year |  | $ | 695 |  | $ | 590 |  | $ | 2,135 |
We recognize interest related to uncertain tax positions in income tax expense. Penalties related to uncertain tax positions are part of general and administrative expenses. At both January 1, 2013 and January 3, 2012, we had approximately $0.1 million of accrued interest and penalties related to uncertain tax positions. Included in the balance of unrecognized tax benefits at January 1, 2013 is $0.1 million related to tax positions for which it is reasonably possible that the total amount could decrease during the next twelve months based on the lapses of statutes of limitations for certain jurisdictions. In 2008, the IRS issued a Notice of Proposed Adjustment to us disallowing the deduction of approximately $5.1 million of compensation expense with respect to the exercise of stock options by certain current and former executive officers during 2003 through 2006. In 2008, we reserved for the estimated taxes and interest resulting from the proposed disallowance while pursuing administrative and judicial appeals of the matter. We believe that such stock option compensation qualifies as performance-based compensation that is not subject to the limitations on deductibility under Internal Revenue Code Section 162(m). In 2010, we agreed to a resolution of this dispute as to tax years 2005 and 2006, and in 2011, we agreed to a resolution as to tax years 2003 and 2004. An immaterial amount of penalties and interest remains unresolved.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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