Entity information:
Income Taxes:
 
U.S. Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act amends the Internal Revenue Code by, among other things, permanently lowering the corporate tax rate to 21% from the existing maximum rate of 35%, implementing a territorial tax system and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries. The Company is required to remeasure deferred income tax assets and liabilities in the reporting period of enactment. The remeasurement of the Company’s net deferred income tax liability resulted in a $155.1 million income tax benefit in 2017.

The Company recorded an estimated charge of $11.3 million to income tax expense primarily for the nonrecurring repatriation tax on accumulated earnings of foreign subsidiaries and it is the Company’s intention to bring back the accumulated foreign earnings held as cash in the near term. Prospectively, any future foreign earnings will be utilized to grow and support the Company’s foreign operations and will be treated as being indefinitely reinvested outside the U.S. The estimated charge and the benefit from the remeasurement of the net deferred tax liability were recorded based on the Company's initial evaluation of the impact of the Act and are subject to change in 2018 as the Company continues to refine, analyze and update the underlying data, computations and assumptions used to prepare these provisional amounts during the measurement period.
Provision for Income Taxes

Provision for income taxes consists of the following:
(in thousands)
 
Current
 
Deferred
 
Total
2017
 
 
 
 
 
 
Federal
 
$
146,855

 
$
(146,741
)
 
$
114

State
 
31,352

 
(3,437
)
 
27,915

Foreign
 
17,810

 
(1,085
)
 
16,725

 
 
$
196,017

 
$
(151,263
)
 
$
44,754

2016
 
 
 
 
 
 
Federal
 
$
209,499

 
$
17,989

 
$
227,488

State
 
29,345

 
1,366

 
30,711

Foreign
 
20,156

 
858

 
21,014

 
 
$
259,000

 
$
20,213

 
$
279,213

2015
 
 
 
 
 
 
Federal
 
$
242,801

 
$
(6,564
)
 
$
236,237

State
 
33,023

 
(1,797
)
 
31,226

Foreign
 
12,885

 
(858
)
 
12,027

 
 
$
288,709

 
$
(9,219
)
 
$
279,490



The provision for income taxes differed from the amount computed by applying the federal statutory income tax rate due to:
 
 
Year Ended
(in thousands)
 
December 30, 2017
 
December 31, 2016
 
January 2, 2016
Income before provision for income taxes at statutory U.S. federal income tax rate (35%)
 
$
182,091

 
$
258,592

 
$
263,511

State income taxes, net of federal income tax benefit
 
18,145

 
19,962

 
20,297

Impact of the Act, net
 
(143,756
)
 
—

 
—

Other, net
 
(11,726
)
 
659

 
(4,318
)
 
 
$
44,754

 
$
279,213

 
$
279,490



Deferred Income Tax Assets (Liabilities)

Temporary differences that give rise to significant deferred income tax assets (liabilities) are as follows:
(in thousands)
 
December 30,
2017
 
December 31,
2016
Deferred income tax assets:
 
 
 
 
Accrued expenses not currently deductible for tax
 
$
38,200

 
$
63,992

Share-based compensation
 
9,556

 
11,752

Accrued medical and workers compensation
 
33,697

 
46,116

Net operating loss carryforwards
 
6,701

 
5,093

Straight-line rent
 
21,733

 
31,631

Other, net
 
2,973

 
6,274

Total deferred income tax assets before valuation allowances
 
112,860

 
164,858

Less: Valuation allowance
 
(3,778
)
 
(2,437
)
Total deferred income tax assets
 
109,082

 
162,421

Deferred income tax liabilities:
 
 
 
 
Property and equipment
 
(98,186
)
 
(168,906
)
Inventories
 
(169,478
)
 
(222,301
)
Intangible assets
 
(145,038
)
 
(225,496
)
Total deferred income tax liabilities
 
(412,702
)
 
(616,703
)
Net deferred income tax liabilities
 
$
(303,620
)
 
$
(454,282
)


As of December 30, 2017 and December 31, 2016, the Company’s net operating loss (“NOL”) carryforwards related to state NOLs of $177.8 million and $153.0 million. These NOLs may be used to reduce future taxable income and expire periodically through 2036. Due to uncertainties related to the realization of these NOLs in certain jurisdictions, the Company recorded a valuation allowance of $3.8 million and $2.4 million as of December 30, 2017 and December 31, 2016. The amount of deferred income tax assets realizable, however, could change in the future if projections of future taxable income change.

Unrecognized Tax Benefits

The following table summarizes the activity of the Company’s gross unrecognized tax benefits:
(in thousands)
 
December 30,
2017
 
December 31,
2016
 
January 2,
2016
Unrecognized tax benefits, beginning of period
 
$
13,946

 
$
13,841

 
$
14,033

Increases related to prior period tax positions
 
8,077

 
8,274

 
412

Decreases related to prior period tax positions
 
(2,331
)
 
(1,600
)
 
(2,120
)
Increases related to current period tax positions
 
5,644

 
2,105

 
3,137

Settlements
 
(1,496
)
 
(6,894
)
 
(582
)
Expiration of statute of limitations
 
(1,175
)
 
(1,780
)
 
(1,039
)
Unrecognized tax benefits, end of period
 
$
22,665

 
$
13,946

 
$
13,841



As of December 30, 2017, December 31, 2016 and January 2, 2016, the entire amount of unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate. During 2017, 2016 and 2015, the Company recorded income tax-related interest and penalties of $1.7 million, $1.9 million and $0.1 million related to uncertain tax positions included in Provision for income taxes in the accompanying consolidated statements of operations. As of December 30, 2017 and December 31, 2016, the Company had recorded a liability for potential interest of $4.2 million and $2.7 million and for potential penalties of $0.1 million and $0.2 million. The Company has not provided for any penalties associated with tax contingencies unless considered probable of assessment. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2013.