13.	Income Taxes

The components of the provision for income taxes for each of the three years were as follows:

	2018			2017		2016
Current:
Federal	$	40,761		$	83,743	$	62,054
State		6,099			7,567		6,447
Deferred:
Federal		(16,779	)		4,696		12,477
State		722			982		(3,858	)
Total provision for income taxes	$	30,803		$	96,988	$	77,120

A reconciliation of the Company’s provision for income taxes and income taxes based on the statutory U.S. federal rate of 26.9%, 35.0% and 35.0% in 2018, 2017 and 2016, respectively, was as follows:

	2018			2017			2016
Provision computed at federal statutory income tax rate	$	74,859		$	104,611		$	93,247
State and local income taxes, net of federal benefit		5,066			5,856			1,427
Revaluation of deferred taxes due to a reduction in the federal tax rate at the enactment date of the Tax Act		(26,772	)		--			--
Revaluation of deferred taxes due to the impact of the change in rate on 2018 temporary items		(3,710	)		--			--
Employer tax credits for FICA taxes paid on employee tip income		(13,707	)		(11,543	)		(11,048	)
Other employer tax credits		(4,476	)		(2,814	)		(7,326	)
Other-net		(457	)		878			820
Total provision for income taxes	$	30,803		$	96,988		$	77,120

The decrease in the Company’s provision for income taxes from 2017 to 2018 reflected the significant impact of the Tax Act. The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, the Company used a blended rate of 26.9% for its fiscal 2018 tax year, by applying a prorated percentage of the number of days prior to and subsequent to the January 1, 2018 effective date of the Tax Act.

Significant components of the Company’s net deferred tax liability consisted of the following at:

	August 3, 2018		July 28, 2017
Deferred tax assets:
Compensation and employee benefits	$	6,342	$	10,110
Deferred rent		12,667		18,270
Accrued liabilities		8,546		13,233
Insurance reserves		7,291		12,401
Inventory		3,106		4,411
Other		--		2,767
Deferred tax assets	$	37,952	$	61,192

Deferred tax liabilities:
Property and equipment	$	75,433	$	100,373
Inventory		7,448		10,906
Other		7,232		12,273
Deferred tax liabilities		90,113		123,552
Net deferred tax liability	$	52,161	$	62,360

The decrease in the Company’s net deferred tax liability reflected the significant impact of the Tax Act on rate and capitalization policies. While the Company is able to make reasonable estimates of the impact of both, the final impact of the Tax Act may differ from these estimates, due to, among other things, additional guidance that may be issued by the Internal Revenue Service, expected state tax responses to either follow or reject the federal changes, and changes in our interpretations and assumptions. The Company continues to gather additional information to determine the final impact.

The Company believes that adequate amounts of tax, interest and penalties have been provided for potential tax uncertainties; these amounts are included in other long-term liabilities in the Consolidated Balance Sheets. As of August 3, 2018 and July 28, 2017, the Company’s gross liability for uncertain tax positions, exclusive of interest and penalties, was $18,634 and $20,731, respectively. Summarized below is a tabular reconciliation of the beginning and ending balance of the Company’s total gross liability for uncertain tax positions exclusive of interest and penalties:

	August 3, 2018			July 28, 2017			July 29, 2016
Balance at beginning of year	$	20,731		$	21,899		$	25,507
Tax positions related to the current year:
Additions		3,029			4,003			4,860
Reductions		--			--			--
Tax positions related to the prior year:
Additions		610			582			2,186
Reductions		(575	)		(2,966	)		(6,896	)
Settlements		(3,878	)		(1,027	)		(2,324	)
Expiration of statute of limitations		(1,283	)		(1,760	)		(1,434	)
Balance at end of year	$	18,634		$	20,731		$	21,899

If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would be a tax benefit to the Company and impact the effective tax rate. The following table highlights the amount of uncertain tax positions, exclusive of interest and penalties, which, if recognized, would affect the effective tax rate for each of the three years:

		2018				2017				2016
Uncertain tax positions		$	14,721			$	13,475			$	14,234

The Company had $5,681, $6,128, and $5,497 in interest and penalties accrued as of August 3, 2018, July 28, 2017, and July 29, 2016, respectively.

The Company recognized accrued interest and penalties related to unrecognized tax benefits of $(447), $631 and $(4,256) in its provision for income taxes on August 3, 2018, July 28, 2017 and July 29, 2016, respectively. The decrease from 2017 to 2018 was mostly attributable to audit settlements in 2018. The increase from 2016 to 2017 was attributable to the Company’s revaluation of select reserves and audit settlements in 2016.

In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. Based on the outcome of these examinations or as a result of the expiration of the statutes of limitations for specific taxing jurisdictions, it is reasonably possible that the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company’s financial statements at August 3, 2018 by approximately $2,000 to $3,000 within the next twelve months. At August 3, 2018, the Company was subject to income tax examinations for its U.S. federal income taxes after 2014 and for state and local income taxes generally after 2014.