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Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The provision (benefit) for income taxes for the years ended December 31, 2014, 2013 and 2012 was as follows:
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
(In millions)
Provision (benefit) for income taxes:
 
 
 
 
 
Current
 
 
 
 
 
Federal
$
33.2

 
$
48.5

 
$
77.4

State
3.6

 
2.1

 
1.9

Foreign
2.7

 
2.4

 
1.8

 
39.5

 
53.0

 
81.1

Deferred
 
 
 
 
 
Federal
(22.1
)
 
(13.5
)
 
(12.2
)
State
(2.3
)
 
(0.9
)
 
(1.7
)
 
(24.4
)
 
(14.4
)
 
(13.9
)
Provision for income taxes
$
15.1

 
$
38.6

 
$
67.2


The provision for income taxes differs from the expected federal income tax rates as follows:
 
Year Ended December 31,
 
2014
 
2013
 
2012
Statutory federal income tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
State and other taxes, net of federal tax benefit
2.4

 
2.9

 
2.8

Change in unrecognized tax benefits
2.4

 
1.4

 
(0.2
)
Change in valuation allowance
—

 
(2.7
)
 
0.7

Domestic production activity deduction
(6.0
)
 
—

 
—

Research and experimentation tax credit
(3.4
)
 
—

 
—

State adjustments including audits and settlements
(1.1
)
 
(1.1
)
 
0.2

Compensation related tax credits, net of deduction offsets
(0.8
)
 
(0.6
)
 
(0.9
)
Changes in tax rates and state tax laws
—

 
—

 
(3.2
)
Other
0.8

 
—

 
0.1

Effective tax rate
29.3
 %
 
34.9
 %
 
34.5
 %


The Company retroactively adopted the domestic production activity deduction and the federal research and experimentation credit in 2014. Deductions related to 2014 domestic production activity lowered the 2014 tax rate by 2.3%, while deductions related to domestic production activity in prior years lowered the 2014 tax rate by 3.7%. Similarly, tax credits related to 2014 research activity lowered the 2014 tax rate by 0.5%, while tax credits related to research activity in prior years lowered the 2014 tax rate by 2.9%.
Net deferred tax assets (liabilities) consisted of the following components:
 
2014
 
2013
 
(In millions)
Differences in capitalization and depreciation and amortization of reacquired franchises and equipment
$
4.8

 
$
4.8

Differences in acquisition financing costs
1.8

 
1.8

Employee compensation
14.4

 
15.0

Deferred gain on sale of assets
6.5

 
6.3

Book/tax difference in revenue recognition
39.6

 
29.8

Other
35.9

 
35.0

Deferred tax assets
103.0

 
92.7

Valuation allowance
(1.1
)
 
(1.1
)
Total deferred tax assets after valuation allowance
101.9

 
91.6

Differences between financial and tax accounting in the recognition of franchise and equipment sales
(48.0
)
 
(51.2
)
Differences in capitalization and depreciation (1)
(294.6
)
 
(301.1
)
Differences in acquisition financing costs
—

 
(7.1
)
Book/tax difference in revenue recognition
(15.6
)
 
(19.5
)
Differences between book and tax basis of property and equipment
(11.4
)
 
(10.1
)
Other
(20.5
)
 
(20.3
)
Deferred tax liabilities
(390.1
)
 
(409.3
)
Net deferred tax liabilities
$
(288.2
)
 
$
(317.7
)
Net deferred tax asset—current
$
31.2

 
$
24.2

Valuation allowance—current
(0.3
)
 
(0.3
)
Net deferred tax asset—current
30.9

 
23.9

Deferred tax liability—non-current
(318.3
)
 
(340.8
)
Valuation allowance—non-current
(0.8
)
 
(0.8
)
Net deferred tax liability—non-current
(319.1
)
 
(341.6
)
Net deferred tax liabilities
$
(288.2
)
 
$
(317.7
)
_____________________________________
(1) 
Primarily related to the Applebee's acquisition.
The Company files federal income tax returns and the Company or one of its subsidiaries file income tax returns in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state or non-United States tax examinations by tax authorities for years before 2008. In the second quarter of 2013, the Internal Revenue Service (“IRS”) issued a Revenue Agent’s Report (“RAR”) related to its examination of the Company’s U.S federal income tax return for the tax years 2008 to 2010. The Company disagrees with a portion of the proposed assessments and has contested them through the IRS administrative appeals procedures. We anticipate the appeals process to continue into 2015. The Company continues to believe that adequate reserves have been provided relating to all matters contained in the tax periods open to examination.

The total gross unrecognized tax benefit as of December 31, 2014 and 2013 was $3.4 million and $2.7 million, respectively, excluding interest, penalties and related income tax benefits. The entire $3.4 million will be included in the Company's effective income tax rate if recognized.

The Company estimates the unrecognized tax benefits may decrease over the upcoming 12 months by an amount up to $0.7 million related to settlements with taxing authorities and the lapse of statutes of limitations. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
Year Ended December 31,
 
2014
 
2013
 
2012
Unrecognized tax benefit as of January 1
$
2.7

 
$
6.7

 
$
8.2

Changes for tax positions of prior years
1.2

 
0.8

 
0.8

Increases for tax positions related to the current year
0.1

 
—

 
0.2

Decreases relating to settlements and lapsing of statutes of limitations
(0.6
)
 
(4.8
)
 
(2.5
)
Unrecognized tax benefit as of December 31
$
3.4

 
$
2.7

 
$
6.7



As of December 31, 2014, the accrued interest and penalties were $3.9 million and $0.1 million, respectively, excluding any related income tax benefits. As of December 31, 2013, the accrued interest and penalties were $2.9 million and $0.1 million, respectively, excluding any related income tax benefits. The increase of $1.0 million of accrued interest is primarily related to an increase in unrecognized tax benefits as a result of recent audits by taxing authorities. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of the income tax provision recognized in the Consolidated Statements of Comprehensive Income.

The valuation allowance of $1.1 million as of both December 31, 2014 and 2013 related to the Massachusetts enacted legislation requiring unitary businesses to file combined reports. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regards to future realization of deferred tax assets. As of December 31, 2014, management determined that, based on available evidence, there was no change to the valuation allowance.