Income Taxes

The expense for income taxes consists of the following (in thousands):



	Year Ended
	December 29, 2013			December 30, 2012			January 1, 2012
Current income tax expense	$	2,069		$	6,111		$	5,885
Tax (deficiency) benefit from stock based compensation recorded in equity	(583		)	(2,567		)	771
Deferred income tax expense (benefit)	2,204			1,030			(761		)
Total income tax expense	$	3,690		$	4,574		$	5,895

A reconciliation of the statutory Federal income tax rate to the effective tax rate is as follows:



	Year Ended
	December 29, 2013		December 30, 2012		January 1, 2012
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Domestic production activities deduction	(7.8	)%	—	%	—	%
Other, net	(1.9	)%	0.3	%	(0.8	)%
Effective tax rate	25.3	%	35.3	%	34.2	%

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets are as follows (in thousands):



	December 29, 2013			December 30, 2012
Deferred tax assets:
Current:
Reserves and allowances	$	804		$	722
Deferred rent	96			86
Inventory	261			295
Other	190			141
Noncurrent:
Stock-based compensation	7,174			8,657
Deferred rent	768			656
Financing obligation	201			219
Other	255			243
Gross deferred tax assets	$	9,749		$	11,019
Valuation allowance	(36		)	(27		)
Gross deferred tax assets, net of valuation allowance	$	9,713		$	10,992

Deferred tax liabilities:
Current:
Prepaid expenses	$	(295	)	$	(301	)
Other	(18		)	(17		)
Noncurrent:
Leased building	(216		)	(234		)
Excess of book over tax depreciation and amortization	(2,676		)	(1,728		)
Gross deferred tax liabilities	(3,205		)	(2,280		)
Net deferred tax assets	$	6,508		$	8,712

At December 29, 2013, the Company had foreign net operating loss carryforwards for income tax purposes of approximately $0.1 million. If not utilized the foreign net operating loss carryforwards will begin to expire in 2018.

The Company had a valuation allowance of $36,000 and $27,000 at December 29, 2013 and December 30, 2012, respectively. The valuation allowance relates to foreign net operating losses that would be realizable only upon the generation of future taxable income in the jurisdiction in which the losses were incurred.

Prepaid income taxes were $0.2 million at December 29, 2013. Income taxes payable were $2.7 million at December 30, 2012 and were included in accrued liabilities.

The Company has not provided for deferred taxes on unremitted earnings of subsidiaries outside the United States where such earnings are permanently reinvested. At December 29, 2013, unremitted earnings of foreign subsidiaries were $0.8 million. The amount of unrecognized deferred tax liability associated with these unremitted earnings is approximately $0.2 million. If these earnings were distributed in the form of dividends or otherwise, the Company would be subject to U.S. income taxes less an adjustment for applicable foreign tax credits.

The tax benefit realized for the tax deduction from stock-based compensation totaled $2.7 million, $0.6 million, and $1.8 million for the years ended December 29, 2013, December 30, 2012, and January 1, 2012, respectively.

As of December 29, 2013, the Company had $0.1 million of gross unrecognized tax benefits, all of which, if recognized, would affect the effective tax rate. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2010. The following table summarizes the gross unrecognized tax benefits activity for the fiscal years ended December 29, 2013, December 30, 2012 and January 1, 2012 (in thousands):



	Year Ended
	December 29, 2013		December 30, 2012		January 1, 2012
Unrecognized tax benefits - beginning balance	$	—	$	—	$	—
Increase related to current year tax positions	86		—		—
Unrecognized tax benefits - ending balance	$	86	$	—	$	—