Income Taxes

The components of the provision for income taxes from continuing operations are as follows:



Fiscal Years	2016		2015		2014
Current:
Federal	$	17,140	$	9,912	$	10,723
State and local	2,296		1,905		844
Foreign	4,324		3,751		5,283
	23,760		15,568		16,850
Deferred	19,606		18,638		16,880
Provision for income taxes from continuing operations	$	43,366	$	34,206	$	33,730

The following table reconciles the United States statutory income tax rate with our effective income tax rate from continuing operations:



Fiscal Years	2016		2015		2014
United States statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal tax benefit	2.4		2.8		3.0
Foreign earnings taxed at different rates	—		(0.3	)	—
Change in uncertain tax position reserve	—		(1.0	)	—
Permanent differences and other, net	—		(0.1	)	(0.4	)
Effective income tax rate from continuing operations	37.4	%	36.4	%	37.6	%

The change in the uncertain tax position reserve in fiscal year 2015 was the result of the expiration of certain statutes and the resolution of a Canadian transfer pricing audit related to fiscal years 2005 to 2007, offset by reserve additions during the year.

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:



Fiscal Years	2016			2015
Deferred tax liabilities:
Inventory	$	(49,196	)	$	(47,888	)
Depreciation	(24,519		)	(12,899		)
Intangibles	(60,866		)	(57,146		)
Derivative financial instruments	—			(2,630		)
Other	(54		)	(904		)
Total deferred tax liabilities	(134,635		)	(121,467		)
Deferred tax assets:
Compensation and employees benefits	45,088			44,833
Accruals and reserves	11,486			10,859
Share-based payments	4,437			4,025
Derivative financial instruments	2,320			—
Net operating loss carry-forwards	1,674			1,693
Other	1,938			1,986
Gross deferred tax assets	66,943			63,396
Less valuation allowance	(1,203		)	(1,209		)
Total deferred tax assets	65,740			62,187
Net deferred tax liabilities	$	(68,895	)	$	(59,280	)

The deferred tax assets include $1,674 and $1,693 at July 2, 2016 and June 27, 2015, respectively, related to state net operating loss carry-forwards which expire between fiscal year 2018 and fiscal year 2035.

We recognize a valuation allowance if it is more likely than not that at least some portion, or all, of a deferred tax asset will not be realized. The valuation allowance of $1,203 at July 2, 2016 and $1,209 at June 27, 2015, relates to capital loss carry-forwards.

We have no foreign tax credit carry-forwards as of July 2, 2016.

We have not provided U.S. income taxes and foreign withholding taxes on undistributed earnings from our foreign subsidiaries of approximately $46,296 and $48,729 as of July 2, 2016 and June 27, 2015, respectively. These earnings are considered to be indefinitely reinvested in the operations of such subsidiaries. It is not practicable to estimate the amount of tax that may be payable upon distribution.

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. We recognized a net benefit from tax-related interest and penalties of $64 and $795 in fiscal years 2016 and 2015, respectively; and net expense from interest and penalties in fiscal year 2014 of $351. As of July 2, 2016 and June 27, 2015, we had $760 and $930, respectively, of accrued interest and penalties related to uncertain tax positions, of which $193 and $729 would favorably affect our effective tax rate in any future periods, if the positions are effectively settled in our favor.

We file income tax returns in the United States, Canada and numerous state and local jurisdictions. We have substantially concluded all U.S. Federal income tax examinations through fiscal year 2012 and all Canadian income tax examinations through fiscal year 2009. With few exceptions, we are no longer subject to state and local income tax examinations prior to fiscal year 2011.

A reconciliation of the beginning and ending amount of unrecognized tax benefits are as follows:



Fiscal Years	2016			2015
Beginning balance	$	8,839		$	10,826
Tax positions related to current year:
Gross increase	1,364			1,487
Tax positions related to prior years:
Gross increase	577			208
Gross decrease	(867		)	(547		)
Settlements	(50		)	(1,670		)
Lapses in statutes of limitations	(1,903		)	(1,465		)
Ending balance	$	7,960		$	8,839

As of July 2, 2016 and June 27, 2015, the total amount of unrecognized tax benefits that would favorably affect the effective tax rate, if recognized was $1,439 and $821, respectively. We are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.