Income Taxes

The components of the provision for income taxes are as follows for 2013, 2012 and 2011 (in thousands):



	2013		2012		2011
Current tax provision:
Federal	$	—	$	49	$	—
State	561		559		260
	561		608		260
Deferred tax provision:
Federal	3,923		2,591		1,945
State	283		16		(425		)
	4,206		2,607		1,520
Total provision for income taxes	$	4,767	$	3,215	$	1,780

8. Income Taxes (continued)

The reconciliation of income tax provision that would result from applying the federal statutory rate to pre-tax income as shown in the accompanying consolidated statements of income is as follows for 2013, 2012 and 2011 (in thousands):



	2013			2012			2011
Federal income expense at federal rate	$	3,887		$	2,848		$	1,907
State income tax, net of related federal income tax benefit	653			420			257
Permanent items—primarily follow-on transaction costs	374			83			(10		)
Foreign rate differential	26			106			—
Change in blended state rate	—			—			(25		)
Other items, net	(173		)	(242		)	(349		)
Provision for income taxes	$	4,767		$	3,215		$	1,780
Effective income tax rate	41.7		%	38.4		%	31.7		%

Pre-tax net income in 2013 totaled $11.4 million and included a foreign loss of $0.1 million in 2013.

In 2013, 2012, and 2011 the Company recognized tax benefits on option exercises at fair value in excess of those utilized to record stock-based compensation for book purposes, totaling $201,000, $27,000, and $109,000, respectively, as a credit to additional paid-in capital.

In 2013 and 2012, other items represents changes made between the provision for income taxes and the filed tax return and the impact of the prior year interest rate swap designation to interest expense. Other items in 2011 represents the reconciliation of the beginning deferred tax asset for state asset depreciation.

Deferred income taxes arise because of the differences in the book and tax bases of certain assets and liabilities. Deferred income tax liabilities and assets consist of the following (in thousands):



	2013			2012
Noncurrent deferred tax assets (liabilities):
Loss carry forwards	$	2,745		$	2,445
Deferred rent and franchise revenue	11,850			9,622
Property, equipment and intangible assets	(19,342		)	(11,061		)
Stock-based compensation	2,442			994
Alternative minimum tax credits	208			256
Interest rate swap	—			38
Other	951			497
Total noncurrent net deferred tax assets (liabilities)	(1,146		)	2,791
Current deferred tax assets (liabilities):
Inventory smallwares	(1,737		)	(1,459		)
Other	607			436
Total current deferred tax liabilities	(1,130		)	(1,023		)
Net deferred tax assets (liability)	$	(2,276	)	$	1,768

At December 31, 2013 and January 1, 2013, net operating loss carryforwards for federal income tax purposes of approximately $22.7 million and $15.6 million, respectively, were available to offset future taxable income through the year 2033 and 2032, respectively. The net operating loss carry forwards are primarily composed of excess tax deductions for equity compensation. Utilization of the net operating losses is subject to an annual limitation resulting from a change in control in 2007 and a change of control in 2010, pursuant to the change in ownership provisions of Section 382 of the Internal Revenue Code and similar provisions of state law. As a result of certain realization requirements of ASC 718, the deferred tax assets shown above include only realized tax deductions related to equity compensation equal to the compensation recognized for financial reporting during the years ended

8. Income Taxes (continued)

December 31, 2013 and January 1, 2013. Equity will be increased by up to $5.1 million if and when the net operating loss is ultimately realized.

Uncertain tax positions are recognized if it is more likely than not that the Company will be able to sustain the tax position taken, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon resolution of the benefit. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. There were no uncertain tax positions for the years ended December 31, 2013 or January 1, 2013. The only periods subject to examination for the Company's federal and state returns are 2009 through 2012.