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Income Taxes | 12 Months Ended
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Jan. 02, 2018
Income Taxes |
Income Taxes | 14. Income Taxes The provision for income taxes consisted of the following (in thousands):
|  | Fiscal Year |
|  | 2017 (1) |  | 2016 |  | 2015 |
Income before income taxes |  | $ | 146,466 |  | $ | 191,768 |  | $ | 159,352 |
Income tax provision/(benefit): |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |
Federal |  | $ | 7,148 |  | $ | 42,665 |  | $ | 32,765 |
State |  | 7,106 |  | 10,614 |  | 8,880 |
Total current |  | 14,254 |  | 53,279 |  | 41,645 |
Deferred: |  |  |  |  |  |  |
Federal |  | (24,570 | ) | (564 | ) | 2,659 |
State |  | (610 | ) | (441 | ) | (1,475 | )
Total deferred |  | (25,180 | ) | (1,005 | ) | 1,184 |
Total provision/(benefit) |  | $ | (10,926 | ) | $ | 52,274 |  | $ | 42,829 |
| (1) |  | The Tax Cuts and Jobs Act (“Tax Act”), which was enacted on December 22, 2017, made significant changes to how corporations are taxed in the U.S., the most prominent of which affecting us was to lower the U.S. corporate tax rate from 35% to 21%. In addition to the benefit of a lower rate in future years, the enactment of the Tax Act caused us to revalue our deferred tax assets and liabilities to reflect the new rate, resulting in a benefit to our fiscal 2017 income tax provision of $38.5 million.
The following reconciles the U.S. federal statutory rate to the effective tax rate:
|  | Fiscal Year |
|  | 2017 |  | 2016 |  | 2015 |
U.S. federal statutory rate |  | 35.0 | % | 35.0 | % | 35.0 | %
State and district income taxes, net of federal benefit |  | 3.3 |  | 3.5 |  | 3.0 |
Credit for FICA taxes paid on tips |  | (9.4 | ) | (7.0 | ) | (8.0 | )
Other credits and incentives |  | (1.9 | ) | (1.3 | ) | (1.0 | )
Manufacturing deduction |  | (2.3 | ) | (2.5 | ) | (2.8 | )
Deferred compensation |  | (1.5 | ) | (0.5 | ) | 0.3 |
Equity compensation (1) |  | (4.5 | ) | — |  | — |
Impact of statutory rate change on deferred taxes |  | (26.3 | ) | — |  | — |
Other |  | 0.1 |  | 0.1 |  | 0.4 |
Effective tax rate |  | (7.5 | )% | 27.3 | % | 26.9 | %
| (1) |  | This item impacts our effective tax rate for the first time in fiscal 2017 due to our adoption of new accounting guidance that requires the tax impact of exercised stock options and vested restricted stock to be recorded in the income tax provision instead of additional paid-in capital. See “Recent Accounting Pronouncements” in Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of this accounting change.
Following are the temporary differences that created our deferred tax assets and liabilities (in thousands):
|  | January 2, 2018 |  | January 3, 2017 |
Deferred tax assets: |  |  |  |  |
Staff member benefits |  | $ | 22,626 |  | $ | 32,258 |
Insurance reserves |  | 14,027 |  | 20,932 |
Accrued rent |  | 12,523 |  | 20,583 |
Deferred income |  | 11,607 |  | 14,409 |
Stock-based compensation |  | 8,710 |  | 15,384 |
Tax credit carryforwards |  | 2,308 |  | 2,247 |
Other |  | 738 |  | 957 |
Subtotal |  | 72,539 |  | 106,770 |
Less: Valuation allowance |  | (455 | ) | (457 | )
Total |  | $ | 72,084 |  | $ | 106,313 |
Deferred tax liabilities: |  |  |  |  |
Property and equipment |  | $ | (111,324 | ) | $ | (166,183 | )
Prepaid expenses |  | (9,120 | ) | (12,192 | )
Inventory |  | (6,724 | ) | (10,339 | )
Other |  | (2,132 | ) | — |
Total |  | $ | (129,300 | ) | $ | (188,714 | )
Net deferred tax liability |  | $ | (57,216 | ) | $ | (82,401 | )
At January 2, 2018 and January 3, 2017, we had $2.9 million and $3.5 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 at both January 2, 2018 and January 3, 2017 to reflect the amount 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 2, 2018, 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 |
|  | 2017 |  | 2016 |  | 2015 |
Balance at beginning of year |  | $ | 829 |  | $ | 1,067 |  | $ | 875 |
Additions related to current period tax positions |  | 168 |  | 139 |  | 192 |
Reductions related to settlements with taxing authorities and lapses of statutes of limitations |  | (154 | ) | (377 | ) | (0 | )
Balance at end of year |  | $ | 843 |  | $ | 829 |  | $ | 1,067 |
At January 2, 2018 and January 3, 2017, we had $0.1 million and $0.1 million, respectively, of accrued interest and penalties related to uncertain tax positions. None of the balance of uncertain tax positions at January 2, 2018 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. We believe we have properly estimated our federal and state income tax liabilities. However, given the amount and complexity of the changes in tax law resulting from the Tax Act, we continue to analyze the effects of the Tax Act on our income tax provision. We may make further refinements to our calculations considering technical guidance that may be published, our assumptions about the applicability to our business of certain provisions in the Tax Act and changes to current interpretations of certain provisions of the Tax Act. In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” we expect to complete our analysis within the one-year measurement period.

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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 Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 Reference 4: 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=65882285&loc=d3e32639-109319 Reference 5: 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=65882285&loc=d3e32537-109319 + Details
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