The Company’s income tax provisions for fiscal years and are summarized below (in thousands):

 

 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of and are as follows (in thousands):

 

In assessing the probability that the Company’s deferred tax assets will be realized, management of the Company has considered whether it is more likely than that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the future periods in which the temporary differences giving rise to the deferred tax assets will become deductible. The Company has also considered the scheduled inclusion into taxable income in future periods of the temporary differences giving rise to the Company’s deferred tax liabilities. The valuation allowance as of and was related to state net operating loss carryforwards that the Company does expect to be realized. Based upon the Company’s expectations of the generation of sufficient taxable income during future periods, the Company believes that it is more likely than that the Company will realize its deferred tax assets, net of the valuation allowance and the deferred tax liabilities.

 

The following table sets forth the reconciliation of the beginning and ending amounts of unrecognized tax benefits for fiscal years and (in thousands):

Management evaluates items of income, deductions and credits reported on the Company’s various federal and state income tax returns filed and recognizes the effect of positions taken on those income tax returns only if those positions are more likely than to be sustained. The Company applies the provisions of FASB ASC Sub-topic -- which requires a minimum recognition threshold that a tax benefit must meet before being recognized in the financial statements. Recognized income tax positions are measured at the largest amount that has a greater than likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. During fiscal year an evaluation was made of the Company’s process regarding the calculation of the state portion of its income tax provision. This evaluation resulted in a tax position that reflects opportunities for the application of more favorable state apportionment percentages for several prior fiscal years. After considering all relevant information, the Company believes that the technical merits of this tax position would more likely than be sustained. However, the Company also believes that the ultimate resolution of the tax position will result in a tax benefit that is less than the full amount being sought. Therefore, the Company’s measurement regarding the tax impact of the revised state apportionment percentages resulted in the Company recording during fiscal year a reserve for unrecognized tax benefits of in the accompanying consolidated financial statements. During fiscal year the Company recorded a gross reserve for unrecognized tax benefits of less an offset of to reflect state income tax overpayments net of the federal income tax impact, for a net reserve for unrecognized tax benefits of

 

The Company’s policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax benefits as a charge to interest expense in the Company’s consolidated statements of income. During fiscal years and the Company had accrued and respectively, for interest expense and penalties on the portion of the unrecognized tax benefit that has been refunded to the Company but for which the relevant statute of limitations remained unexpired. interest expense or penalties is accrued with respect to estimated unrecognized tax benefits that are associated with state income tax overpayments that remain receivable.

 

The Company's provision for income taxes is based upon effective tax rates of and in fiscal years and respectively. These effective tax rates are the sum of the top U.S. statutory federal income tax rate and a composite rate for state income taxes, net of federal tax benefit, in the various states in which the Company operates.

 

The following table reconciles income tax expense on income from continuing operations at the U.S. federal income tax statutory rate to the net income tax provision reported for fiscal years and (in thousands):