INCOME TAXES

The provision for income taxes is comprised of the following (in millions):



	2012		2011			2010
Current taxes:
Federal	$	14.9	$	16.3		$	2.0
State	2.7		2.9			1.6
Foreign	0.3		0.4			0.4
Total current taxes	17.9		19.6			4.0
Deferred taxes:
Federal	2.7		(1.3		)	3.9
State	0.4		0.1			1.4
Foreign	—		0.1			—
Total deferred taxes	3.1		(1.1		)	5.3
Provision for income taxes	$	21.0	$	18.5		$	9.3

The items accounting for the difference between income taxes computed at the statutory federal income tax rate and income taxes reported in the Consolidated Statements of Operations & Comprehensive Income are as follows (in millions except percentages):



	2012			%		2011			%		2010			%
Income tax expense based on statutory rate	$	19.1		35.0	%	$	17.2		35.0	%	$	10.2		35.0	%
Increase (decrease) resulting from:
State income taxes, net of federal benefit	1.8			3.3	%	1.9			3.9	%	1.9			7.0	%
Tax credits, net	(1.9		)	(3.5	)%	(3.5		)	(7.2	)%	(4.6		)	(16.0	)%
Nondeductible/nontaxable Items	2.3			4.2	%	2.9			5.8	%	2.3			8.0	%
Other, net	(0.3		)	(0.6	)%	—			0.1	%	(0.5		)	(2.0	)%
Total taxes on income	$	21.0		38.4	%	$	18.5		37.6	%	$	9.3		32.0	%

Our effective tax rate on earnings for 2012 was 38.4% compared to 37.6% for the same period in 2011 and 32.0% in 2010. The increase in the effective income tax rate is due primarily to federal Work Opportunity Tax Credits which largely expired at the end of 2011. This income tax credit was designed to encourage employers to hire workers from certain targeted groups with higher-than-average unemployment rates. The principal difference between the statutory federal income tax rate of 35.0% and our 2012 effective income tax rate results from state income taxes, federal tax credits, and certain non-deductible expenses. The lower effective tax rate in 2010 was primarily due to the favorable resolution of certain tax matters.

The components of deferred tax assets and liabilities were as follows (in millions):



	December 28, 2012			December 30, 2011
Deferred tax assets:
Allowance for doubtful accounts	$	2.0		$	2.4
Workers’ compensation claims reserve	10.1			9.7
Accounts payable and other accrued expenses	2.4			3.5
Net operating loss carry-forwards	0.6			0.5
Accrued wages and benefits	5.9			4.3
Deferred compensation	1.5			1.1
Other	0.5			0.8
Total	23.0			22.3
Valuation allowance	(0.6		)	(0.5		)
Total deferred tax asset, net of valuation allowance	22.4			21.8
Deferred tax liabilities:
Prepaid expenses, deposits and other current assets	(1.6		)	(1.1		)
Depreciation and amortization	(11.9		)	(8.8		)
Other	(0.9		)	(0.8		)
Total deferred tax liabilities	(14.4		)	(10.7		)
Net deferred tax asset, end of year	8.0			11.1
Net deferred tax asset, current	5.4			6.3
Net deferred tax asset, non-current	$	2.6		$	4.8

At December 28, 2012, Spartan Staffing Puerto Rico, LLC had net operating loss carry-forwards of approximately $2.8 million expiring in 2015 through 2022. A valuation allowance has been established against our carry-forward tax benefits based on our history of past losses.

Deferred taxes related to our foreign currency translation were de minimis for 2012 and 2011 and was $0.1 million for 2010.

As of December 28, 2012 our liability for unrecognized tax benefits was $1.9 million, if recognized, $1.2 million would impact our effective tax rate. We do not believe the amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the year ended December 28, 2012. This liability is recorded in Other non-current liabilities in our Consolidated Balance Sheets. In general, the tax years 2009 through 2011 remain open to examination by the major taxing jurisdictions where we conduct business.

The following table summarizes the activity related to our unrecognized tax benefits (in millions):



	2012			2011			2010
Balance, beginning of fiscal year	$	1.7		$	1.6		$	1.8
Decreases related to settlements	—			—			(0.5		)
Increases for tax positions related to the current year	0.5			0.3			0.2
Increases for tax positions related to prior years	—			—			0.1
Decreases for tax positions related to prior years	—			—			—
Reductions due to lapsed statute of limitations	(0.3		)	(0.2		)	—
Balance, end of fiscal year	$	1.9		$	1.7		$	1.6

We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Statements of Operations & Comprehensive Income. Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheets. Related to the unrecognized tax benefits noted above, we accrued $0.1 million for interest and de minimis amounts for penalties during 2012 and in total, as of December 28, 2012, have recognized a liability for penalties of $0.2 million and interest of $0.7 million.