Note 13 – Income Tax

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

(In thousands)	2017			2016		2015
Current income tax expense:
Federal	$	366		$	22,936	$	31,437
State		528			3,210		3,144
Total current income tax expense		894			26,146		34,581
Deferred income tax (benefit) expense:
Federal		(72,842	)		6,509		3,255
State		(7,079	)		252		(743	)
Total deferred income tax (benefit) expense		(79,921	)		6,761		2,512
Total income tax (benefit) expense	$	(79,027	)	$	32,907	$	37,093

A reconciliation of the statutory federal rate to the effective rate is as follows:

	2017				2016				2015
Federal statutory income tax rate		35.0		%		35.0		%		35.0		%
Federal rate change effect on deferred taxes		19.7				—				—
State taxes, net of federal income tax benefit		3.1				2.5				1.6
Stock compensation		1.0				—				—
Other, net		0.8				(0.6	)			0.5
Charitable product donations		0.4				(0.5	)			(0.3	)
Tax credits		0.2				—				—
Domestic production activities deduction		0.1				(0.3	)			(0.2	)
Non-deductible expenses		(0.3	)			0.5				0.4
Effective income tax rate		60.0		%		36.6		%		37.0		%

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to reducing the U.S. federal corporate tax rate from 35 percent to 21 percent, effective January 1, 2018. Shortly after the Tax Act was enacted, the SEC issued accounting guidance, which provides a one-year measurement period during which a company may complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company may determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.

In connection with initial analysis of the impact of the Tax Act, the Company recorded a discrete income tax benefit of $26.0 million in the period ending December 30, 2017 associated with the re-measurement of deferred tax assets and liabilities as a result of the reduction in the U.S. federal corporate tax rate. The Company has not completed its accounting for the income tax effects of certain elements of the Tax Act, but recorded provisional adjustments based on reasonable estimates. Those estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, state tax conformity to federal tax changes and expected changes to U.S. Treasury regulations. The Company anticipates these estimates will be finalized on or before the due date of the federal return, which is October 15, 2018. The Company’s 2018 tax provision will be recorded at an effective rate that contemplates the new lower statutory rate, and is currently anticipated to be between 23% and 24%.

Deferred tax assets and liabilities resulting from temporary differences as of December 30, 2017 and December 31, 2016 are as follows:

	December 30,		December 31,
(In thousands)	2017		2016
Deferred tax assets:
Employee benefits	$	19,311	$	30,626
Accrued workers' compensation		1,620		2,624
Allowance for doubtful accounts		1,974		2,945
Intangible assets		56		2,060
Restructuring		2,322		6,087
Deferred revenue		1,552		2,990
Accrued rent		3,853		3,555
Accrued insurance		921		1,279
All other		2,725		4,417
Total deferred tax assets		34,334		56,583

Deferred tax liabilities:
Property and equipment		34,199		52,401
Inventory		31,454		46,332
Goodwill		10,083		79,904
All other		648		1,189
Total deferred tax liabilities		76,384		179,826
Net deferred tax liability	$	42,050	$	123,243

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

	December 30,			December 31,
(In thousands)	2017			2016
Balance at beginning of year	$	2,369		$	2,211
Gross increases - tax positions taken in prior years		213			184
Gross decreases - tax positions taken in prior years		(123	)		(2	)
Gross increases - tax positions taken in current year		872			718
Lapse of statute of limitations		(923	)		(742	)
Balance at end of year	$	2,408		$	2,369

Unrecognized tax benefits of $2.0 million are set to expire prior to December 29, 2018. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. The amount of unrecognized tax benefits, including interest and penalties, that would reduce the Company’s effective income tax rate if recognized in future periods was $1.4 million as of December 30, 2017.

SpartanNash or its subsidiaries file income tax returns with federal, state and local tax authorities within the United States. With few exceptions, SpartanNash is no longer subject to U.S. federal, state or local examinations by tax authorities for fiscal years before December 28, 2013. 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.