7. Income Taxes

The following table represents the current and deferred income tax provision for federal, state and foreign income taxes attributable to operations (in thousands):



	For the Years Ended
	May 25,		May 26,		May 27,
	2019		2018		2017
Current
Federal	$	5,068	$	10,785	$	10,901
State		2,278		2,829		2,551
Foreign		2,690		(392)		1,472
		10,036		13,222		14,924
Deferred
Federal		5,890		(3,011)		259
State		619		367		62
Foreign		(46)		(515)		(123)
		6,463		(3,159)		198
	$	16,499	$	10,063	$	15,122

Income before provision for income taxes is as follows (in thousands):



	For the Years Ended
	May 25,		May 26,		May 27,
	2019		2018		2017
Domestic	$	41,828	$	26,774	$	32,390
Foreign		6,141		2,115		1,383
	$	47,969	$	28,889	$	33,773

The provision for income taxes differs from the amount that would result from applying the federal statutory rate as follows:



	For the Years Ended
	May 25,		May 26,		May 27,
	2019		2018		2017
Statutory tax rate	21.0	%	29.4	%	35.0	%
State taxes, net of federal benefit	4.9		7.9		5.0
Non-U.S. rate adjustments	1.3		(0.8)		0.1
Stock-based compensation	2.8		4.5		0.7
Long-term net capital gains	(6.1)		10.1		-
Foreign tax credit	9.3		(16.5)		(0.1)
Valuation allowance	(2.8)		(4.3)		1.2
Global Intangible Low-Taxed Income ("GILTI")	1.1		-		-
Permanent items, primarily meals and entertainment	1.4		3.2		2.2
Deferred tax impact of U.S. federal rate changes	0.1		(2.8)		-
Deferred tax impact of foreign rate changes	1.2		3.9		0.5
Other, net	0.2		0.2		0.2
Effective tax rate	34.4	%	34.8	%	44.8	%

The impact of state taxes, net of federal benefit, and foreign income taxed at other than U.S. rates fluctuates year over year due to the changes in the mix of operating income and losses amongst the various states and foreign jurisdictions in which the Company operates.

The components of the net deferred tax asset (liability) consist of the following (in thousands):



	As of		As of
	May 25,		May 26,
	2019		2018
Deferred tax assets:
Allowance for doubtful accounts	$	1,108	$	854
Accrued compensation		3,347		3,210
Accrued expenses		2,418		2,311
Stock options and restricted stock		5,541		7,326
Foreign tax credit		498		5,596
Net operating losses		14,489		15,563
Property and equipment		-		1,017
State taxes		208		138
Gross deferred tax asset		27,609		36,015
Valuation allowance		(13,190)		(15,298)
Gross deferred tax asset, net of valuation allowance		14,419		20,717
Deferred tax liabilities:
Property and equipment		(77)		-
Goodwill and intangibles		(17,991)		(17,867)
Net deferred tax asset (liability)	$	(3,649)	$	2,850

The Company had a net income tax receivable of $1.0 million and income tax payable of $3.3 million as of May 25, 2019 and May 26, 2018, respectively.

The tax benefit associated with the exercise of nonqualified stock options and the disqualifying dispositions by employees of incentive stock options, restricted stock awards and shares issued under the Company’s ESPP reduced income taxes payable by $1.8 million and $1.1 million for the years ended May 25, 2019 and May 26, 2018, respectively.

The Company has foreign net operating loss carryforwards of $63.5 million and foreign tax credit carryforwards of $0.5 million. The foreign tax credits will expire beginning in fiscal 2023. The following table summarizes the net operating loss expiration periods.


Expiration Periods	Amount of Net Operating Losses
Fiscal Years Ending:	(in thousands)
2020	$	1,600
2021		4,200
2022		300
2023		300
2024		2,300
2025-2029		1,200
Unlimited		53,600
	$	63,500

The following table summarizes the activity in our valuation allowance accounts (in thousands):



					Currency
	Beginning		Charged to		Rate		Ending
	Balance		Operations		Changes		Balance
Years Ended:
May 27, 2017	$	15,714	$	438	$	(181)	$	15,971
May 26, 2018	$	15,971	$	(1,181)	$	508	$	15,298
May 25, 2019	$	15,298	$	(1,440)	$	(668)	$	13,190

Realization of the deferred tax assets is dependent upon generating sufficient future taxable income. Management believes that it is more likely than not that all other remaining deferred tax assets will be realized through future taxable earnings or alternative tax strategies.

Deferred income taxes have not been provided on the undistributed earnings of approximately $17.6 million from the Company’s foreign subsidiaries as of May 25, 2019 since these amounts are intended to be indefinitely reinvested in foreign operations. If the earnings of the Company’s foreign subsidiaries were to be distributed, management estimates that the income tax impact would be immaterial as a result of the transition tax and federal dividends received deduction for foreign source earnings provided under the US Tax Cuts and Jobs Act of 2017.

The following table summarizes the activity related to the gross unrecognized tax benefits (in thousands):



	For the Years Ended
	May 25,		May 26,
	2019		2018
Unrecognized tax benefits, beginning of year	$	42	$	42
Gross increases-tax positions in prior period		-		-
Gross decreases-tax positions in prior period		-		-
Gross increases-current period tax positions		-		42
Settlements		-		-
Lapse of statute of limitations		-		(42)
Unrecognized tax benefits, end of year	$	42	$	42

The Company’s total liability for unrecognized gross tax benefits was $42,000 as of both May 25, 2019 and May 26, 2018, which, if ultimately recognized, would impact the effective tax rate in future periods. The unrecognized tax benefits include long-term liabilities of $42,000 as of both May 25, 2019 and May 26, 2018; none of the unrecognized tax benefits are short-term liabilities due to the closing of the statute of limitations.

The Company’s major income tax jurisdiction is the U.S., with federal statute of limitations remaining open for fiscal 2016 and thereafter. For states within the U.S. in which the Company does significant business, the Company remains subject to examination for fiscal 2015 and thereafter. Major foreign jurisdictions in Europe remain open for fiscal years ended 2014 and thereafter.

The Company continues to recognize interest expense and penalties related to income tax as a part of its provision for income taxes. During the current fiscal year, the Company did not accrue for any interest and penalties as a component of the liability for unrecognized tax benefits.