8. INCOME TAXES

Income tax provision (benefit) consisted of:


	Years Ended
	December 29,		December 30,
(in thousands)	2019		2018
Current:
Federal	$	(24)	$	5,546
State		(507)		(429)
Deferred:
Federal		(4,729)		(961)
State		(1,019)		(6,326)
Income tax provision (benefit)	$	(6,279)	$	(2,170)

As of December 30, 2018, we completed our accounting for the tax effects of enactment of the Tax Act and noted no significant adjustments were required. During 2019 and 2018, we re-measured certain deferred tax assets and liabilities based on the rates at which we expect them to reverse in the future.

The effective tax rate expense (benefit) and the statutory federal income tax rate are reconciled as follows:


	Years Ended
	December 29,		December 30,
	2019		2018
Statutory rate	(21.0)	%	(21.0)	%
State taxes, net of federal benefit	0.1		(4.3)
Changes in estimates	—		0.8
Changes in unrecognized tax benefits	(0.3)		(4.3)
Other	0.5		2.8
Impact of valuation allowance	6.5		23.0
Impact of tax rate changes	—		—
Goodwill impairment	12.6		—
Stock compensation	0.1		0.3
Effective tax rate	(1.5)	%	(2.7)	%

The components of deferred tax assets and liabilities consisted of the following:


	December 29,		December 30,
(in thousands)	2019		2018
Deferred tax assets:
Compensation benefits	$	150,893	$	157,715
State taxes		1,533		1,909
State loss carryovers		9,398		4,006
Federal loss carryovers		4,899		—
Investments in unconsolidated subsidiaries		4,478		4,242
Deferred interest expense		33,069		15,342
Leases		15,564		—
Other		3,353		3,407
Total deferred tax assets		223,187		186,621
Valuation allowance		(176,069)		(143,764)
Net deferred tax assets		47,118		42,857
Deferred tax liabilities:
Depreciation and amortization		28,386		45,239
Debt discount		17,874		17,876
Leases ROU Asset		15,419		—
Other		466		517
Total deferred tax liabilities		62,145		63,632
Net deferred tax liabilities	$	(15,027)	$	(20,775)

The valuation allowance increased by $32.3 million and $34.0 million in 2019 and 2018, respectively.

The timing of recording or releasing a valuation allowance requires significant judgment. A valuation allowance is required when it is more-likely-than-not that all or a portion of deferred tax assets may not be realized. Establishment and removal of a valuation allowance requires us to consider all positive and negative evidence and to make a judgmental decision regarding the timing and amount of valuation allowance required as of a reporting date. The assessment considers expectations of future taxable income or loss, available tax planning strategies and the reversal of temporary differences. The development of these expectations involves the use of estimates such as operating profitability. The weight given to the evidence is commensurate with the extent to which it can be objectively verified.

We performed an assessment of the deferred tax assets quarterly during 2019 and 2018, weighing the positive and negative evidence as outlined in ASC 740, Income Taxes. As we have incurred three years of cumulative pre-tax losses, such objective negative evidence limits our ability to give significant weight to other positive subjective evidence, such as projections for future growth and profitability. As of December 30, 2018, our valuation allowance against a majority of our deferred tax assets was $143.8 million. For the year ended December 29, 2019, we recorded valuation allowance charges of $32.3 million due to changes to the deferred tax balances. Of this amount, $28.5 million was included as income tax expense and $3.8 million was recorded as an offset to other comprehensive income for changes related to our pension deferred tax asset. Our valuation allowance as of December 29, 2019, was $176.1 million.

We will continue to maintain a valuation allowance against our deferred tax assets until it is more-likely-than-not that these assets will be realized in the future. If sufficient positive evidence arises in the future that provides an indication that all or a portion of the deferred tax assets meet the more-likely-than-not standard, the valuation allowance may be reversed, in whole or in part, in the period that such determination is made.

As of December 29, 2019, we have net operating loss federal carryforwards totaling approximately $23.3 million, which do not expire. As of December 29, 2019, we have net operating loss carryforwards in various states totaling approximately $395.2 million, which expire in various years between 2024 and 2038, if not used. We also have state tax credits of $0.4 million which expire between 2025 and 2028, if not utilized.

As of December 29, 2019, we had approximately $13.9 million of uncertain tax positions consisting of approximately $11.3 million in gross unrecognized tax benefits (primarily state tax positions before the offsetting effect of federal income tax) and $2.6 million in gross accrued interest and penalties. If recognized, approximately $5.4 million of the net unrecognized tax benefits would impact the effective tax rate, with the remainder impacting other accounts, primarily deferred taxes. It is reasonably possible that up to $2.2 million reduction of unrecognized tax benefits and related interest may occur within the next 12 months as a result of the expiration of statutes of limitations.

We record interest on unrecognized tax benefits as a component of interest expense, while penalties are recorded as part of income tax expense. Related to the unrecognized tax benefits noted below, we recorded interest expense (benefit) of ($0.5) million and ($0.6) million for 2019 and 2018, respectively. We recorded penalty expense (benefit) of ($0.2) million and ($0.3) million during 2019 and 2018, respectively. Accrued interest and penalties at December 29, 2019 and December 30, 2018 were approximately $2.6 million and $3.3 million, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits consists of the following:


	Years Ended
	December 29,		December 30,
(in thousands)	2019		2018
Balance at beginning of fiscal year	$	13,822	$	20,764
Increases based on tax positions in prior year		231		84
Decreases based on tax positions in prior year		(2,296)		(4,261)
Increases based on tax positions in current year		801		1,124
Settlements		—		(511)
Lapse of statute of limitations		(1,277)		(3,378)
Balance at end of fiscal year	$	11,281	$	13,822

As of December 29, 2019, the following tax years and related taxing jurisdictions were open:


	Open	Years Under
Taxing Jurisdiction	Tax Year	Exam
Federal	2016-2019	—
California	2015-2019	—
Other States	2006-2019	2015-2017