INCOME TAXES

12 Months Ended

Dec. 29, 2019

The provision for income taxes is comprised of the following:



	Years ended
(in thousands)	2019			2018			2017
Current taxes:
Federal	$	(933	)	$	5,088		$	12,134
State	3,835			5,208			3,979
Foreign	2,806			1,542			3,545
Total current taxes	5,708			11,838			19,658
Deferred taxes:
Federal	846			(1,283		)	3,645
State	1,216			120			(195		)
Foreign	(799		)	(766		)	(1,014		)
Total deferred taxes	1,263			(1,929		)	2,436
Provision for income taxes	$	6,971		$	9,909		$	22,094

The items accounting for the difference between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income are as follows:



	Years ended
(in thousands, except percentages)	2019			%		2018			%		2017			%
Income tax expense based on statutory rate	$	14,709		21.0	%	$	15,889		21.0	%	$	27,140		35.0	%
Increase (decrease) resulting from:
State income taxes, net of federal benefit	3,666			5.3		3,826			5.1		2,667			3.4
Tax credits, net	(13,627		)	(19.4	)	(12,303		)	(16.3	)	(9,964		)	(12.9	)
Transition to the U.S. Tax Cuts and Job Act	97			0.1		(194		)	(0.3	)	2,466			3.2
Non-deductible/non-taxable items	1,559			2.2		1,191			1.6		1,157			1.5
Foreign taxes	282			0.4		735			1.0		(342		)	(0.4	)
Other, net	285			0.4		765			1.0		(1,030		)	(1.3	)
Total taxes on income	$	6,971		10.0	%	$	9,909		13.1	%	$	22,094		28.5	%

Our effective tax rate for fiscal 2019 was 10.0%. The difference between the statutory federal income tax rate of 21.0% and our effective income tax rate results primarily from the federal WOTC. This tax credit is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. During fiscal 2019, we recognized $1.4 million of tax benefits from prior year WOTC. Other differences between the statutory federal income tax rate of 21.0% and our effective tax rate of 10.0% result from state and foreign income taxes, certain non-deductible expenses, tax exempt interest, and tax effects of stock-based compensation.

U.S. and international components of income before tax expense was as follows:



	Years ended
(in thousands)	2019		2018		2017
U.S.	$	61,610	$	73,051	$	69,119
International	8,434		2,612		8,431
Income before tax expense	$	70,044	$	75,663	$	77,550

The components of deferred tax assets and liabilities were as follows:



(in thousands)	December 29, 2019			December 30, 2018
Deferred tax assets:
Allowance for doubtful accounts	$	973		$	1,049
Workers’ compensation	817			4,162
Accounts payable and other accrued expenses	3,818			3,957
Net operating loss carryforwards	2,085			2,103
Tax credit carryforwards	9,528			1,562
Accrued wages and benefits	5,148			7,016
Deferred compensation	6,622			5,438
Lease liabilities	8,670			—
Other	969			636
Total	38,630			25,923
Valuation allowance	(1,780		)	(2,079		)
Total deferred tax asset, net of valuation allowance	36,850			23,844
Deferred tax liabilities:
Prepaid expenses, deposits and other current assets	(1,282		)	(2,054		)
Lease right-of-use assets	(7,985		)	—
Depreciation and amortization	(24,355		)	(17,402		)
Total deferred tax liabilities	(33,622		)	(19,456		)
Net deferred tax asset, end of year	$	3,228		$	4,388

Deferred taxes related to our foreign currency translation were de minimis for fiscal 2019, 2018 and 2017.

The following table summarizes our net operating losses (“NOLs”) and credit carryforwards along with their respective valuation allowance as of December 29, 2019:



(in thousands)	Carryover tax benefit		Valuation allowance			Expected benefit		Year expiration begins
Year-end tax attributes:
Federal WOTCs	$	8,209	$	—		$	8,209	2039
State NOLs	1,355		—			1,355		Various
Foreign NOLs	730		(730		)	—		Various
California Enterprise Zone credits	1,319		(1,050		)	269		2023
Foreign alternative minimum tax credits	722		—			722		2028
Total	$	12,335	$	(1,780	)	$	10,555

As of December 29, 2019, our liability for unrecognized tax benefits was $2.1 million. If recognized, $1.6 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 29, 2019. This liability is recorded in other non-current liabilities on our Consolidated Balance Sheets. In general, the tax years 2016 through 2018 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:



	Years ended
(in thousands)	2019			2018			2017
Balance, beginning of fiscal year	$	2,190		$	2,210		$	2,242
Increases for tax positions related to the current year	318			377			356
Reductions due to lapsed statute of limitations	(430		)	(397		)	(388		)
Balance, end of fiscal year	$	2,078		$	2,190		$	2,210

We recognize interest and penalties related to unrecognized tax benefits within income tax expense on the accompanying Consolidated Statements of Operations and Comprehensive Income. Accrued interest and penalties are included within other long-term liabilities on the Consolidated Balance Sheets. Related to the unrecognized tax benefits noted above, we accrued a de minimis amount for interest and penalties during fiscal 2019 and, in total, as of December 29, 2019, have recognized a liability for penalties of $0.2 million and interest of $1.0 million.