Entity information:
Income Taxes

The Company’s income before the provision for income taxes is classified by source as domestic income.

The components of the provision for income taxes consist of the following for the years ended August 31:

 
2017
 
2016
 
2015
Current:
 
 
 
 
 
 
Federal
 
$
30,352

 
$
20,137

 
$
14,597

State
 
3,921

 
3,791

 
3,576


 
34,273

 
23,928

 
18,173


 
 

 
 

 
 

Deferred:
 
 

 
 

 
 

Federal
 
(2,378
)
 
4,372

 
10,592

State
 
(91
)
 
137

 
(1,528
)

 
(2,469
)
 
4,509

 
9,064

Provision for income taxes
 
$
31,804

 
$
28,437

 
$
27,237



The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate due to the following for the fiscal years ended August 31:

 
2017
 
2016
 
2015
Amount computed by applying a tax rate of 35% 
 
$
33,413

 
$
32,377

 
$
32,103

State income taxes (net of federal income tax benefit)
 
2,489

 
2,553

 
1,330

Employment related and other tax credits, net
 
(1,834
)
 
(2,324
)
 
(2,096
)
Change in uncertain tax positions
 
—

 
(3,027
)
 
—

Federal tax benefit of statutory tax deduction
 
(1,560
)
 
(1,279
)
 
(4,093
)
Other
 
(704
)
 
137

 
(7
)
Provision for income taxes
 
$
31,804

 
$
28,437

 
$
27,237



Deferred tax assets and liabilities consist of the following at August 31:

 
2017
 
2016
Deferred tax assets:
 
 
 
 
Allowance for doubtful accounts and notes receivable
 
$
419

 
$
387

Leasing transactions
 
3,083

 
3,222

Deferred income
 
3,011

 
2,991

Accrued liabilities
 
4,339

 
6,187

Stock compensation
 
3,156

 
2,446

Other
 
929

 
757

State net operating losses
 
18,031

 
16,303

Total deferred tax assets
 
32,968

 
32,293

Valuation allowance
 
(16,254
)
 
(14,638
)
Total deferred tax assets after valuation allowance
 
$
16,714

 
$
17,655


 
 
 
 

Deferred tax liabilities:
 
 
 
 

Prepaid expenses
 
$
(956
)
 
$
(1,119
)
Investment in partnerships, including differences in capitalization,
 
 
 
 

depreciation and direct financing leases
 
(4,026
)
 
(4,125
)
Property, equipment and capital leases
 
(23,756
)
 
(31,565
)
Intangibles and other assets
 
(22,983
)
 
(21,628
)
Debt extinguishment
 
(838
)
 
(1,676
)
Direct financing lease
 
(4,256
)
 
(72
)
Total deferred tax liabilities
 
(56,815
)
 
(60,185
)
Net deferred tax liabilities (noncurrent)
 
$
(40,101
)
 
$
(42,530
)


State net operating loss carryforwards expire beginning in December 2017 through May 2038.  Management does not believe the Company will be able to realize the state net operating loss carryforwards utilizing future income exclusive of the reversal of existing deferred tax liabilities and therefore has provided a valuation allowance of $16.3 million and $14.6 million as of August 31, 2017 and 2016, respectively.

As of August 31, 2017 and 2016, the Company had approximately $0.6 million of unrecognized tax benefits, including approximately $0.4 million and $0.3 million, respectively, of accrued interest and penalty.  If recognized, these benefits would favorably impact the effective tax rate.  

The Company recognizes estimated interest and penalties as a component of its income tax expense, net of federal benefit, as a component of provision for income taxes in the consolidated statements of income.  During the years ended August 31, 2017, 2016 and 2015, the Company recognized a negligible net expense, a net benefit of $0.1 million and net expense of $0.1 million, respectively.

A reconciliation of unrecognized tax benefits is as follows for fiscal years ended August 31:

 
2017
 
2016
Balance at beginning of year
 
$
625

 
$
3,652

Additions for tax positions of prior years
 
18

 
725

Reductions for tax positions of prior years
 
—

 
(2,838
)
Reductions due to settlement
 
—

 
(212
)
Reductions due to statute expiration
 
—

 
(702
)
Balance at end of year
 
$
643

 
$
625



The Company or one of its subsidiaries is subject to U.S. federal income tax and income tax in multiple U.S. state jurisdictions.  At August 31, 2017, the Company was subject to income tax examinations for its U.S. federal income taxes and for state and local income taxes generally after fiscal year 2013.  The Company anticipates that the results of any examinations or appeals, combined with the expiration of applicable statutes of limitations and the additional accrual of interest related to unrecognized benefits on various return positions taken in years still open for examination, could result in a change to the liability for unrecognized tax benefits during the next 12 months ranging from a negligible increase to a decrease of $0.6 million depending on the timing and terms of the examination resolutions.