Note 12

Taxes on Income

The income tax provision for continuing operations is made up of the following components:

(In thousands)	January 3, 2015		December 28, 2013			March 31, 2013
Currently payable:
Federal	$	27,015	$	3,897		$	17,056
State		777		510			2,490
Total currently payable		27,792		4,407			19,546
Deferred:
Federal		3,362		531			(3,361	)
State		175		(4,097	)		(760	)
Total deferred		3,537		(3,566	)		(4,121	)
Total	$	31,329	$	841		$	15,425

The effective income tax rates are different from the statutory federal income tax rates for the following reasons:

	January 3, 2015			December 28, 2013			March 30, 2013
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal income tax benefit		2.9			(112.7	)		2.6
Charitable product donations		(0.4	)		(13.4	)		(0.8	)
Non-deductible merger expenses		-			101.3			—
Change in tax contingencies		(2.7	)		36.9			0.3
Domestic product activities deduction		(0.2	)		(8.6	)		(0.2	)
Non-deductible expenses		0.9			3.8			0.5
Other, net		(0.9	)		(1.7	)		(1.7	)
Effective income tax rate		34.6	%		40.6	%		35.7	%

Deferred tax assets and liabilities resulting from temporary differences as of January 3, 2015 and December 28, 2013 are as follows:

(In thousands)	January 3, 2015			December 28, 2013
Deferred tax assets:
Employee benefits	$	29,842		$	29,417
Accrued workers’ compensation		3,074			4,216
Allowance for doubtful accounts		2,951			2,927
Intangible assets		1,128			1,945
Restructuring		1,947			2,244
Deferred revenue		1,843			2,401
Accrued rent		4,635			4,551
Accrued insurance		1,107			1,322
All other		5,627			3,776
Total deferred tax assets		52,154			52,799
Deferred tax liabilities:
Property and equipment		47,860			53,279
Inventory		51,616			50,514
Goodwill		53,628			44,082
Convertible debt interest		789			1,055
Leases		10,585			8,912
All other		1,402			1,616
Total deferred tax liabilities		165,880			159,458
Net deferred tax liability	$	(113,726	)	$	(106,659	)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(In thousands)	January 3, 2015			December 28, 2013
Balance at beginning of year	$	8,805		$	2,648
Liability assumed in merger		-			1,754
Gross increases – tax positions taken in prior years		161			16
Gross decreases – tax positions taken in prior years		(5,812	)		(1,338)
Gross increases – tax positions taken in current year		650			5,725
Lapse of statute of limitations		(1,625	)		-
Balance at end of year	$	2,179		$	8,805

SpartanNash anticipates that $0.8 million of the unrecognized tax benefits will be settled prior to January 2, 2016. SpartanNash recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. As of January 3, 2015, the balance of unrecognized tax benefits included tax positions, including interest and penalties, of $1.3 million that would reduce SpartanNash’s effective income tax rate if recognized in future periods.

SpartanNash or its subsidiaries file income tax returns with federal, state and local tax authorities within the United States. During fiscal 2014, federal tax authorities completed an audit of Nash-Finch Company’s 2010 through 2012 tax years. No adjustments that would have a substantial impact on the effective tax rate occurred. With few exceptions, we are no longer subject to U.S. federal, state or local examinations by tax authorities for fiscal years before March 27, 2010. Income tax returns related to the former Nash-Finch Company, with few exceptions, are no longer subject to U.S. federal, state or local examinations by tax authorities for the fiscal year ended January 1, 2011 and earlier.