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Note 5 - Income Taxes | 12 Months Ended
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Jul. 26, 2014
Notes |
Note 5 - Income Taxes | NOTE 5 — INCOME TAXES The components of the provision for income taxes are:
| 2014 |  | 2013 |  | 2012
Federal: |  |  |  |  |
Current | $ 10,808 |  | $ 17,215 |  | $ 16,009
Deferred | (6,938) |  | (3,021) |  | 931
State: |  |  |  |  |
Current | 21,043 |  | 5,139 |  | 5,165
Deferred | (1,110) |  | (478) |  | 158
| $ 23,803 |  | $ 18,855 |  | $ 22,263
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|  | July 26, 2014 |  | July 27, 2013
Deferred tax assets: |  |  |  |
Leasing activities |  | $ 7,814 |  | $ 5,747
Federal benefit of uncertain tax positions |  | 14,816 |  | 8,028
Compensation related costs |  | 4,000 |  | 6,256
Pension costs |  | 8,553 |  | 5,644
Other |  | 3,189 |  | 1,868
Total deferred tax assets |  | 38,372 |  | 27,543
Deferred tax liabilities: |  |  |  |
Tax over book depreciation |  | 17,214 |  | 17,352
Patronage dividend receivable |  | 5,223 |  | 4,903
Investment in partnerships |  | 1,423 |  | 1,411
Other |  | 170 |  | 491
Total deferred tax liabilities |  | 24,030 |  | 24,157
Net deferred tax asset |  | $ 14,342 |  | $ 3,386
Deferred income tax assets (liabilities) are included in the following captions on the consolidated balance sheets at July 26, 2014 and July 27, 2013:
|  | 2014 |  | 2013
Other current assets |  | $ 12,077 |  | $ 5,053
Other assets |  | 3,037 |  | 1,211
Accounts payable and accrued expenses |  | (772) |  | (838)
Other liabilities |  | - |  | (2,040)
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In management’s opinion, in view of the Company’s previous, current and projected taxable income and reversal of deferred tax liabilities, such tax assets will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at July 26, 2014 and July 27, 2013. The effective income tax rate differs from the statutory federal income tax rate as follows:
|  | 2014 |  | 2013 |  | 2012 |
Statutory federal income tax rate |  | 35.0 | % | 35.0 | % | 35.0 | %
State income taxes, net of federal tax benefit |  | 6.4 |  | 5.2 |  | 5.3 |
Unrecognized tax benefits, interest and penalties on prior year tax positions |  | 34.9 |  | - |  | - |
Current year interest and penalties on unrecognized tax benefits |  | 5.4 |  | 1.6 |  | 1.1 |
Other |  | 0.8 |  | 0.4 |  | 0.1 |
Effective income tax rate |  | 82.5 | % | 42.2 | % | 41.5 | %
An examination of the Company’s fiscal 2009 federal tax return was completed in fiscal 2011 with no change. In prior years, the state of New Jersey issued two separate tax assessments related to nexus beginning in fiscal 2000 and the deductibility of certain payments between subsidiaries beginning in fiscal 2002. Village contested both of these assessments through the state’s conference and appeals process and was subsequently denied. The Company then filed two complaints in Tax Court against the New Jersey Division of Taxation contesting these assessments and a trial limited to the nexus dispute was conducted in June 2013. On October 23, 2013, the Tax Court issued their opinion on the matter in favor of the New Jersey Division of Taxation. The Company is currently in the process of appealing the court’s decision. No payments with respect to these matters are required until the dispute is definitively resolved. The Company recorded a $10,052 charge to income tax expense in fiscal 2014, which includes a $4,933 (net of federal benefit of $2,656) increase in unrecognized tax benefits and $5,119 (net of federal benefit of $2,078) of related interest and penalties for tax positions taken in prior years. This charge increased our beginning of year accrued tax liability to reflect the estimated total tax, interest and penalties due if the Company is unable to overturn the Court’s decision upon appeal. It is reasonably possible that this matter will be resolved within the next twelve months. A favorable resolution could result in a reduction in gross unrecognized tax benefits of up to $28,993. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|  | 2014 |  | 2013
Balance at beginning of year |  | $ 17,640 |  | $ 14,895
Additions based on tax positions related to prior periods |  | 7,589 |  | -
Additions based on tax positions related to the current year |  | 3,764 |  | 2,745
Balance at end of year |  | $ 28,993 |  | $ 17,640
Unrecognized tax benefits at July 26, 2014 and July 27, 2013 include tax positions of $18,845 and $11,466 (net of federal benefit), respectively, that would reduce the Company’s effective income tax rate, if recognized in future periods. The Company recognizes interest and penalties on income taxes in income tax expense. The Company recognized $10,287, $1,211 and $1,008, related to interest and penalties on income taxes in fiscal 2014, 2013 and 2012, respectively. The amount of accrued interest and penalties included in the consolidated balance sheet was $16,107 and $5,820 at July 26, 2014 and July 27, 2013, respectively.

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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 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&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=6907707&loc=d3e32537-109319 Reference 6: 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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