Entity information:
Income Taxes
The provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015 was as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
(Benefit) provision for income taxes:
(In millions)
Current
 
 
 
 
 
Federal
$
42.6

 
$
60.8

 
$
67.3

State
5.1

 
6.4

 
8.0

Foreign
2.9

 
2.3

 
2.4

 
50.6

 
69.5

 
77.7

Deferred
 
 
 
 
 
Federal
(140.7
)
 
(10.6
)
 
(13.6
)
State
(4.7
)
 
(3.8
)
 
(0.4
)
 
(145.4
)
 
(14.4
)
 
(14.0
)
(Benefit) provision for income taxes
$
(94.8
)
 
$
55.1

 
$
63.7


The provision (benefit) for income taxes differs from the expected federal income tax rates as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Statutory federal income tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Non-deductibility of goodwill impairment
(29.5
)
 
—

 
—

Change in federal tax rate
18.2

 
—

 
—

State and other taxes, net of federal tax benefit
0.4

 
2.7

 
2.8

Change in unrecognized tax benefits
(0.7
)
 
0.5

 
0.8

Change in valuation allowance
0.3

 
—

 
—

Domestic production activity deduction
0.3

 
(0.6
)
 
(0.7
)
Changes in tax rates and state tax laws
(0.4
)
 
(1.9
)
 
—

Change in accounting for excess tax deficiencies/benefits
(0.5
)
 
—

 
—

Other
(0.8
)
 
0.3

 
(0.1
)
Effective tax rate
22.3
 %
 
36.0
 %
 
37.8
 %


The Company recognized a $358.2 million impairment of goodwill during the third quarter of 2017 that was not deductible for federal income tax purposes and therefore had no associated tax benefit. The impairment of goodwill lowered the 2017 effective tax rate by 29.5%. Additionally, the Company was required to revalue its deferred taxes at the federal tax rate of 21% in accordance with the Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017. The change in the federal tax rate applied to the deferred tax balances increased the 2017 effective tax rate by 18.2%. The Securities and Exchange Commission issued guidance that allows entities to record provisional amounts during a measurement period not to extend beyond one year of the enactment date of the Tax Act. Where the Company has been able to make reasonable estimates of the effects of the Tax Act for which its analysis is not yet complete, the Company has recorded provisional amounts in accordance with the guidance. Where the Company has not yet been able to make reasonable estimates of the impact of certain elements of the Tax Act, the Company has not recorded any amounts related to those elements and has continued accounting for them in accordance with the tax laws in effect immediately prior to the enactment of the Tax Act.

The Company applied a lower state tax rate to the deferred tax balances during second quarter of 2016, a result of the consolidating action discussed under Note 17 - Facility Exit Costs. The change in the state tax rates applied to the deferred tax balances lowered the 2016 effective tax rate by 1.9%.

The Company files federal income tax returns and the Company or one of its subsidiaries file income tax returns in various state and international jurisdictions. With few exceptions, the Company is no longer subject to federal, state or non-United States tax examinations by tax authorities for years before 2011. During the third quarter of 2016, the Company resolved its appeal regarding tax years 2008 to 2010. No additional deficiencies resulted. The Internal Revenue Service (“IRS”) commenced examination of the Company’s U.S. federal income tax return for the tax years 2011 to 2013 in fiscal year 2016. Based on recent IRS examination developments, during the fourth quarter of 2017, the Company assessed its available positive evidence and reclassified certain net deferred tax assets in the amount of $30.4 million to a prepaid income tax. The examination is anticipated to conclude during fiscal year 2018. The Company continues to believe that adequate reserves have been provided relating to all matters contained in the tax periods open to examination.

Net deferred tax assets (liabilities) consisted of the following components:
 
2017
 
2016
 
(In millions)
Differences in capitalization and depreciation and amortization of reacquired franchises and equipment
$
—

 
$
4.7

Differences in acquisition financing costs
0.1

 
0.3

Employee compensation
7.6

 
12.6

Deferred gain on sale of assets
0.7

 
5.5

Book/tax difference in revenue recognition
14.2

 
45.8

Other
21.8

 
35.4

Deferred tax assets
44.4

 
104.3

Valuation allowance
—

 
(1.1
)
Total deferred tax assets after valuation allowance
44.4

 
103.2

Differences between financial and tax accounting in the recognition of franchise and equipment sales
(20.7
)
 
(39.1
)
Differences in capitalization and depreciation (1)
(147.5
)
 
(281.3
)
Book/tax difference in revenue recognition
(2.4
)
 
(7.8
)
Differences between book and tax basis of property and equipment
(8.5
)
 
(14.6
)
Other
(3.5
)
 
(14.3
)
Deferred tax liabilities
(182.6
)
 
(357.1
)
Net deferred tax liabilities
$
(138.2
)
 
$
(253.9
)
____________________________
(1) 
Primarily related to the Applebee's acquisition.

The valuation allowance of $1.1 million as of December 31, 2016 related to the Massachusetts enacted legislation requiring unitary businesses to file combined reports. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regards to future realization of deferred tax assets. As of December 31, 2017, management determined that sufficient positive evidence exists as of the reporting date to conclude that it is more likely than not that additional deferred taxes of $1.1 million are realizable, and therefore, reduced the valuation allowance accordingly.

The Company had gross operating loss carryforwards for state tax purposes of $0.6 million and $10.7 million as of December 31, 2017 and 2016, respectively. The net operating loss carryforwards may begin to expire between 2018 and 2034 for state tax purposes.

The total gross unrecognized tax benefit as of December 31, 2017 and 2016 was $5.9 million and $3.9 million, respectively, excluding interest, penalties and related income tax benefits. If recognized, these amounts would affect the Company's effective income tax rates. The Company estimates the unrecognized tax benefits may decrease over the upcoming 12 months by an amount up to $2.9 million related to settlements with taxing authorities and the lapse of statutes of limitations. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Unrecognized tax benefit as of January 1
$
3.9

 
$
3.9

 
$
3.4

Changes for tax positions of prior years
2.8

 
0.6

 
1.0

Increases for tax positions related to the current year
0.6

 
0.1

 
0.1

Decreases relating to settlements and lapsing of statutes of limitations
(1.4
)
 
(0.7
)
 
(0.6
)
Unrecognized tax benefit as of December 31
$
5.9

 
$
3.9

 
$
3.9



As of December 31, 2017, the accrued interest was $1.1 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. As of December 31, 2016, the accrued interest and penalties were $1.0 million and less than $0.1 million, respectively, excluding any related income tax benefits. The increase of $0.1 million of accrued interest primarily related to an increase in unrecognized tax benefits as a result of recent audits, and offset with a decrease in unrecognized tax benefits due to resolution of recent audits by taxing authorities.
 
The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of the income tax provision recognized in the Consolidated Statements of Comprehensive (Loss) Income.