10.Income Taxes:

A reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense is provided below:

	Year Ended
	December 27, 2014			December 28, 2013			December 29, 2012
Federal income tax expense at statutory rate (35%)	$	11,406,100		$	10,356,500		$	8,104,400
Valuation allowance	(25,800		)	7,300			1,413,600
State and local income taxes, net of federal benefit	897,800			886,200			677,700
Permanent differences, including stock option expenses	144,500			113,000			60,200
Other, net	99,700			(4,700		)	(38,300		)
Actual income tax expense	$	12,522,300		$	11,358,300		$	10,217,600

Components of the provision for income taxes are as follows:

	Year Ended
	December 27, 2014			December 28, 2013			December 29, 2012
Current:
Federal	$	10,567,100		$	10,013,500		$	8,332,400
State	1,456,400			1,468,600			1,186,000
Foreign	386,900			375,400			374,900
Current provision	12,410,400			11,857,500			9,893,300
Deferred:
Federal	134,200			(449,300		)	435,300
State	(22,300		)	(49,900		)	(111,000		)
Deferred provision	111,900			(499,200		)	324,300
Total provision for income taxes	$	12,522,300		$	11,358,300		$	10,217,600

The tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities are presented below:

	December 27, 2014			December 28, 2013
Deferred tax assets:
Accounts receivable and lease reserves	$	169,600		$	376,900
Accrued restructuring charge	64,200			64,600
Non-qualified stock option expense	1,382,400			946,000
Deferred franchise and software license fees	720,900			606,600
Trademarks	91,100			95,600
Lease deposits	1,228,300			1,263,600
Loss from and impairment of equity and note investments	4,055,800			4,081,600
Valuation allowance	(4,055,800		)	(4,081,600		)
Other	420,100			328,200
Total deferred tax assets	4,076,600			3,681,500
Deferred tax liabilities:
Lease revenue and initial direct costs	(9,579,400		)	(9,101,900		)
Depreciation and amortization	(254,100		)	(224,600		)
Total deferred tax liabilities	(9,833,500		)	(9,326,500		)
Total net deferred tax liabilities	$	(5,756,900	)	$	(5,645,000	)

During the years ended December 27, 2014, December 28, 2013 and December 29, 2012, $91,100, $413,600 and $884,300 respectively, was directly credited to stockholders’ equity to account for excess tax benefits related to stock option exercises.

The Company has assessed its taxable earnings history and prospective future taxable income. Based upon this assessment, the Company has determined that it is more likely than not that its deferred tax assets will be realized in future periods and no valuation allowance is necessary, except for the deferred tax assets related to the loss from and impairment of equity and note investments (which are capital losses for tax purposes). As a result, valuation allowances of $4.1 million and $4.1 million as of December 27, 2014 and December 28, 2013, respectively, have been recorded.

The amount of unrecognized tax benefits, including interest and penalties, as of December 27, 2014 and December 28, 2013, was $465,500 and $398,000, respectively, primarily for potential foreign and state taxes.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense for all periods presented. The Company had accrued approximately $16,500 and $14,300 for the payment of interest and penalties at December 27, 2014 and December 28, 2013, respectively.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Total
Balance at December 29, 2012	$	312,300
Increases related to current year tax positions	111,500
Additions for tax positions of prior years	17,700
Expiration of the statute of limitations for the assessment of taxes	(57,800		)
Balance at December 28, 2013	383,700
Increases related to current year tax positions	136,500
Additions for tax positions of prior years	1,600
Expiration of the statute of limitations for the assessment of taxes	(72,800		)
Balance at December 27, 2014	$	449,000

The Company and its subsidiaries file income tax returns in the U.S. federal, numerous state and certain foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010. The Internal Revenue Service concluded its examination of our U.S. federal tax return for the fiscal year ended 2010 in 2012. We expect various statutes of limitation to expire during the next 12 months. Due to the uncertain response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time.