INCOME TAXES

Income tax expense consists of the following:



(Thousands of Dollars)	2017	2016	2015

Current:
Federal	394	1,241	720
State	819	379	(92	)
Deferred	10,398	20,556	12,966
	11,611	22,176	13,594

Income tax expense (benefit) related to continuing operations differs from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes. The reasons for these differences are as follows:



(Percent of Income (Loss) Before Income Taxes)	2017		2016		2015

Computed “expected” income tax expense (benefit)	35.0		35.0		35.0
State income tax expense (benefit), net of federal tax impact	2.3		3.8		(7.1	)
Net income of associated companies taxed at dividend rates	(3.7	)	(2.6	)	(5.2	)
Resolution of tax matters	2.2		3.2		0.5
Non-deductible expenses	1.5		1.0		2.8
Valuation allowance	2.6		(7.7	)	15.9
Warrant valuation	(10.2	)	5.0		(6.1	)
Other	(0.8	)	0.4		0.1
	28.9		38.1		35.9

Net deferred income tax liabilities consist of the following components:



(Thousands of Dollars)	September 24 2017		September 25 2016

Deferred income tax liabilities:
Property and equipment	(28,422	)	(33,549	)
Identified intangible assets	(35,790	)	(43,745	)
Long-term debt	(16,993	)	(16,158	)
	(81,205	)	(93,452	)
Deferred income tax assets:
Investments	2,520		12,138
Accrued compensation	4,622		6,391
Allowance for doubtful accounts and losses on loans	1,487		1,273
Pension and postretirement benefits	4,593		6,505
Net operating loss carryforwards	37,997		52,604
Accrued expenses	601		577
Other	5,023		3,634
	56,843		83,122
Valuation allowance	(29,035	)	(27,978	)
Net deferred income tax liabilities	(53,397	)	(38,308	)

All deferred taxes are categorized as non-current.

A reconciliation of 2017 and 2016 changes in gross unrecognized tax benefits is as follows:



(Thousands of Dollars)	2017		2016

Balance, beginning of year	12,531		11,799
Increases (decreases) in tax positions for prior years	36		46
Increases in tax positions for the current year	2,150		1,600
Lapse in statute of limitations	(802	)	(914	)
Balance, end of year	13,915		12,531

Approximately $9,010,000 and $8,025,000 of the gross unrecognized tax benefit balances for 2017 and 2016 respectively, relate to state net operating losses which are netted against deferred taxes on our balance sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $9,045,000 at September 24, 2017. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was, net of tax, $367,000 at September 24, 2017 and $317,000 at September 25, 2016. There were no amounts provided for penalties at September 24, 2017 or September 25, 2016.

No significant income tax audits are currently in progress and the Company has not received any notices of intent to audit. Certain of the Company's state income tax returns for the year ended September 30, 2012 are open for examination. The Federal and remaining state returns are open beginning with the September 29, 2014 year.

At September 24, 2017, we have state tax benefits of approximately $57,856,000 in net operating loss ("NOL") carryforwards that expire between 2018 and 2037. These NOL carryforwards result in a deferred income tax asset of $37,607,000 at September 24, 2017, a portion of which is offset by a valuation allowance.

We reported a Federal NOL of approximately $58,601,000 as of year-end September 25, 2016. We expect to report taxable income in 2017 which will further reduce the Federal NOL to $17,850,000 resulting in a deferred income tax asset balance of $6,247,000 as of September 24, 2017. A valuation allowance is not required for the Federal NOL in the current year based on our projection of future earnings during the carryforward period.