14. Income Taxes

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

	Fiscal Year
	2016			2015			2014

Income before income taxes	$	191,768		$	159,352		$	138,544

Income tax provision/(benefit):
Current:
Federal	$	42,665		$	32,765		$	28,687
State	10,614			8,880			8,377

Total current	53,279			41,645			37,064

Deferred:
Federal	(564		)	2,659			480
State	(441		)	(1,475		)	(276		)

Total deferred	(1,005		)	1,184			204

Total provision	$	52,274		$	42,829		$	37,268

The following reconciles the U.S. federal statutory rate to the effective tax rate:

	Fiscal Year
	2016		2015		2014

U.S. federal statutory rate	35.0	%	35.0	%	35.0	%

State and district income taxes, net of federal benefit	3.5		3.0		3.8
FICA tip credit	(7.0	)	(8.0	)	(8.4	)
Other credits and incentives	(1.3	)	(1.0	)	(0.7	)
Manufacturing deduction	(2.5	)	(2.8	)	(2.9	)
Deferred compensation	(0.5	)	0.3		(0.4	)
Other	0.1		0.4		0.5

Effective tax rate	27.3	%	26.9	%	26.9	%

Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):

	January 3, 2017			December 29, 2015
Deferred tax assets:
Employee benefits	$	32,258		$	28,856
Insurance reserves	20,932			19,399
Accrued rent	20,583			21,504
Stock-based compensation	15,384			16,100
Deferred income	14,409			11,406
Tax credit carryforwards	2,247			2,694
Other	957			794

Subtotal	106,770			100,753
Less: Valuation allowance	(457		)	(618		)

Total	$	106,313		$	100,135


Deferred tax liabilities:
Property and equipment	$	(166,183	)	$	(160,764	)
Inventory	(10,339		)	(10,154		)
Prepaid expenses	(12,192		)	(11,741		)

Total	$	(188,714	)	$	(182,659	)


Net deferred tax liability	$	(82,401	)	$	(82,524	)

At January 3, 2017 and December 29, 2015, we had $3.5 million and $4.1 million, respectively, of state tax credit carryforwards, consisting of hiring and investment credits, which began to expire in 2013. We assess 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 $0.5 million and $0.6 million at January 3, 2017 and December 29, 2015, respectively, relating to the portion of these credits that we will likely not realize. 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 2010.

At January 3, 2017, we had a reserve of $0.8 million for uncertain tax positions. If recognized, this amount would impact our effective income tax rate. A reconciliation of the beginning and ending amount of our uncertain tax positions is as follows (in thousands):

	Fiscal Year
	2016			2015			2014

Balance at beginning of year	$	1,067		$	875		$	802
Additions related to current period tax positions	139			192			233
Reductions related to settlements with taxing authorities and lapses of statutes of limitations	(377		)	(0		)	(160		)

Balance at end of year	$	829		$	1,067		$	875

None of the balance of uncertain tax positions at January 3, 2017 relates 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. At both January 3, 2017 and December 29, 2015, we had approximately $0.1 million of accrued interest and penalties related to uncertain tax positions.