8. Income Taxes

The components of the net deferred tax liability are as follows:

	May 29, 2014		May 30, 2013
	(in thousands)
Current deferred income tax assets:
Accrued employee benefits	$	832	$	838
Other		2,224		2,039
Net current deferred tax assets	$	3,056	$	2,877

Noncurrent deferred income tax (liabilities) assets:
Depreciation and amortization	$	(58,035)	$	(58,032)
Accrued employee benefits		14,206		13,192
Other		1,268		1,324
Net noncurrent deferred tax liabilities	$	(42,561)	$	(43,516)

Income tax expense consists of the following:

	Year Ended
	May 29, 2014		May 30, 2013		May 31, 2012
	(in thousands)
Current:
Federal	$	14,788	$	10,048	$	10,617
State		2,654		2,448		3,082
Deferred:
Federal		(861)		(964)		1,325
State		229		(182)		(319)
	$	16,810	$	11,350	$	14,705

The Company’s effective income tax rate, adjusted for earnings from noncontrolling interests, for fiscal 2014, 2013 and 2012 was 40.2%, 39.3% and 39.3%, respectively. The Company has not included the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interest in its income tax expense as the entities are considered pass-through entities and, as such, the income tax expense or benefit is attributable to its owners.

A reconciliation of the statutory federal tax rate to the effective tax rate on earnings attributable to The Marcus Corporation follows:

	Year Ended
	May 29, 2014			May 30, 2013			May 31, 2012
Statutory federal tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		4.5			5.3			4.8
Unrecognized tax benefits and related interest		-			(0.6)			(1.1)
Other		0.7			(0.4)			0.6
		40.2	%		39.3	%		39.3	%

Net income taxes paid in fiscal 2014, 2013 and 2012 totaled $19,437,000, $10,902,000 and $14,496,000, respectively.

A reconciliation of the beginning and ending gross amounts of unrecognized tax benefit are as follows:

	Year Ended
	May 29, 2014		May 30, 2013		May 31, 2012
	(in thousands)
Balance at beginning of year	$	102	$	1,614	$	2,543
Increases due to:
Tax positions taken in prior years		-		102		1,535
Tax positions taken in current year		-		-		-
Decreases due to:
Tax positions taken in prior years		-		-		-
Settlements with taxing authorities		-		(1,535)		(2,301)
Lapse of applicable statute of limitations		-		(79)		(163)
Balance at end of year	$	102	$	102	$	1,614

The Company’s total unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate were $67,000, $67,000 and $52,000 as of May 29, 2014, May 30, 2013 and May 31, 2012, respectively. At May 29, 2014, the Company had accrued interest of $41,000 and no accrued penalties, compared to accrued interest of $43,000 and no accrued penalties at May 30, 2013. The Company classifies interest and penalties relating to income taxes as income tax expense. For the year ended May 29, 2014, $(1,000) of interest and no accrued penalties were recognized in the statement of earnings, compared to $(191,000) of interest and no accrued penalties for the year ended May 30, 2013 and $44,000 of interest and $(436,000) of penalties for the year ended May 31, 2012.

The Company’s income tax return for the year ended May 31, 2012 is currently under examination by The Internal Revenue Service. With certain exceptions, the Company’s state income tax returns are no longer subject to examination for the fiscal years 2009 and prior. At this time, the Company does not expect the results from any income tax audit or appeal to have a significant impact on the Company’s financial statements.

The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months.