Texas Roadhouse, Inc.

(8) Income Taxes

Components of our income tax provision for the years ended December 26, 2017, December 27, 2016 and December 29, 2015 are as follows:


	Fiscal Year Ended
	December 26, 2017		December 27, 2016		December 29, 2015
Current:
Federal	$	43,108	$	36,201	$	33,403
State		10,233		8,786		8,821
Foreign		309		202		351
Total current		53,650		45,189		42,575
Deferred:
Federal		(4,830)		5,364		274
State		(239)		630		137
Total deferred		(5,069)		5,994		411
Income tax provision	$	48,581	$	51,183	$	42,986

Our pre-tax income is substantially derived from domestic restaurants.

A reconciliation of the statutory federal income tax rate to our effective tax rate for December 26, 2017, December 27, 2016 and December 29, 2015 is as follows:


	December 26, 2017		December 27, 2016		December 29, 2015

Tax at statutory federal rate	35.0	%	35.0	%	35.0	%
State and local tax, net of federal benefit	3.3		3.4		3.5
FICA tip tax credit	(7.0)		(6.8)		(7.2)
Work opportunity tax credit	(0.9)		(0.8)		(0.9)
Stock compensation	(1.8)		(0.1)		(0.2)
Net income attributable to noncontrolling interests	(1.1)		(0.9)		(1.0)
Tax reform	(1.7)		—		—
Other	0.3		—		0.6
Total	26.1	%	29.8	%	29.8	%

Our effective tax rate decreased to 26.1% in 2017 compared to 29.8% in 2016 primarily due to the adoption of Accounting Standards Update 2016-09, Compensation – Stock Compensation and new tax legislation that was enacted in late 2017. As a result of the new guidance requirements, excess tax benefits and tax deficiencies from share-based compensation are recognized within the income tax provision. During 2017, we recognized $3.4 million, or $0.05 per share, as an income tax benefit related to the new guidance requirements. As a result of the new tax legislation, significant tax changes were enacted including a reduction of the federal corporate tax rate from 35.0% to 21.0% and changes in the federal taxes paid on foreign sourced earnings. These changes are generally effective beginning with our fiscal year 2018. During 2017, we recognized $3.1 million, or $0.04 per share, as an income tax benefit related to the new tax legislation which includes an income tax benefit of approximately $3.8 million to revalue our deferred tax balances as of the enactment date and an income tax expense of approximately $0.7 million related to our foreign operations.

During the first quarter of 2017, we adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which required deferred tax assets and liabilities to be classified as noncurrent on our consolidated balance sheets. We adopted ASU 2015-17 on a prospective basis.

Components of deferred tax assets (liabilities) are as follows:


	December 26, 2017		December 27, 2016
Deferred tax assets:
Deferred revenue—gift cards	$	10,355	$	10,887
Insurance reserves		3,638		5,049
Other reserves		621		587
Share-based compensation		6,022		8,642
Deferred rent		10,338		13,400
Deferred compensation		6,737		8,422
Other assets		1,866		3,261
Total deferred tax asset		39,577		50,248
Deferred tax liabilities:
Property and equipment		(35,430)		(48,390)
Goodwill and intangibles		(4,697)		(5,978)
Other liabilities		(4,751)		(6,152)
Total deferred tax liability		(44,878)		(60,520)
Net deferred tax liability	$	(5,301)	$	(10,272)
Current deferred tax asset	$	—	$	1,996
Noncurrent deferred tax liability		(5,301)		(12,268)
Net deferred tax liability	$	(5,301)	$	(10,272)

We have not provided any valuation allowance as we believe the realization of our deferred tax assets is more likely than not.

A reconciliation of the beginning and ending liability for unrecognized tax benefits, all of which would impact the effective tax rate if recognized, is as follows:


Balance at December 29, 2015	$	405
Additions to tax positions related to prior years		23
Additions to tax positions related to current year		274
Reductions due to statute expiration		(4)
Reductions due to exam settlements		(187)
Balance at December 27, 2016		511
Additions to tax positions related to prior years		36
Additions to tax positions related to current year		389
Reductions due to statute expiration		(2)
Reductions due to exam settlement		(128)
Balance at December 26, 2017	$	806

As of December 26, 2017 and December 27, 2016, the total amount of accrued penalties and interest related to uncertain tax provisions was not material.

All entities for which unrecognized tax benefits exist as of December 26, 2017 possess a December tax year-end. As a result, as of December 26, 2017, the tax years ended December 30, 2014, December 29, 2015 and December 27, 2016 remain subject to examination by all tax jurisdictions. As of December 26, 2017, no audits were in process by a tax jurisdiction that, if completed during the next twelve months, would be expected to result in a material change to our unrecognized tax benefits. Additionally, as of December 26, 2017, no event occurred that is likely to result in a significant increase or decrease in the unrecognized tax benefits through December 25, 2018.