Income Taxes

Reconciliations between the effective tax rate on income/(loss) from continuing operations before income taxes and the federal statutory rate are presented below.



	December 29, 2013					December 30, 2012					December 25, 2011
(In thousands)	Amount			% of Pre-tax		Amount			% of Pre-tax		Amount			% of Pre-tax
Tax at federal statutory rate	$	33,180		35.0	%	$	90,494		35.0	%	$	23,104		35.0	%
State and local taxes, net	8,312			8.8		11,507			4.4		10,446			15.8
Effect of enacted changes in tax laws	—			—		—			—		(1,520		)	(2.3	)
Reduction in uncertain tax positions	(1,803		)	(1.9	)	(6,721		)	(2.6	)	(12,105		)	(18.3	)
(Gain)/loss on Company-owned life insurance	(3,673		)	(3.9	)	(2,690		)	(1.0	)	36			—
Other, net	1,876			2.0		2,027			0.8		1,456			2.2
Income tax expense	$	37,892		40.0		$	94,617		36.6		$	21,417		32.4

The components of income tax expense as shown in our Consolidated Statements of Operations were as follows:



(In thousands)	December 29, 2013		December 30, 2012			December 25, 2011
Current tax expense/(benefit)
Federal	$	18,903	$	51,836		$	(13,571	)
Foreign	681		1,154			1,110
State and local	8,371		(6,680		)	(14,345		)
Total current tax expense/(benefit)	27,955		46,310			(26,806		)
Deferred tax expense
Federal	5,426		38,845			542
Foreign	—		—			37,471
State and local	4,511		9,462			10,210
Total deferred tax expense	9,937		48,307			48,223
Income tax expense	$	37,892	$	94,617		$	21,417

As of December 29, 2013, we have a federal net operating loss of $6.9 million.

State tax operating loss carryforwards totaled $9.3 million as of December 29, 2013 and $10.5 million as of December 30, 2012. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives generally ranging from 1 to 20 years.

The components of the net deferred tax assets and liabilities recognized in our Consolidated Balance Sheets were as follows:



(In thousands)	December 29, 2013			December 30, 2012
Deferred tax assets
Retirement, postemployment and deferred compensation plans	$	251,082		$	387,202
Accruals for other employee benefits, compensation, insurance and other	35,596			36,959
Accounts receivable allowances	1,478			6,111
Net operating losses	57,885			49,476
Other	63,821			64,884
Gross deferred tax assets	409,862			544,632
Valuation allowance	(42,295		)	(42,138		)
Net deferred tax assets	$	367,567		$	502,494
Deferred tax liabilities
Property, plant and equipment	$	75,661		$	108,763
Intangible assets	11,902			—
Investments in joint ventures	19,625			13,430
Other	14,531			19,875
Gross deferred tax liabilities	121,719			142,068
Net deferred tax asset	$	245,848		$	360,426
Amounts recognized in the Consolidated Balance Sheets
Deferred tax asset – current	$	65,859		$	58,214
Deferred tax asset – long-term	179,989			302,212
Net deferred tax asset	$	245,848		$	360,426

The previous presentation of deferred taxes as of December 30, 2012 has been corrected in this 2013 annual report on Form 10-K to present the federal tax benefit on uncertain state tax positions on a gross basis and to correct the classification of certain other deferred taxes.

We assess whether a valuation allowance should be established against deferred tax assets based on the consideration of both positive and negative evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We evaluated our deferred tax assets for recoverability using a consistent approach that considers our three-year historical cumulative income/(loss), including an assessment of the degree to which any such losses were due to items that are unusual in nature (e.g., impairments of non-deductible goodwill and intangible assets).

We had a valuation allowance totaling $42.3 million as of December 29, 2013 and $42.1 million as of December 30, 2012 for deferred tax assets primarily associated with net operating losses of non-U.S. operations, as we determined these assets were not realizable on a more-likely-than-not basis. The valuation allowance was allocated in proportion to the related current and noncurrent gross deferred tax asset balances.

Income tax benefits related to the exercise or vesting of equity awards reduced current taxes payable by $3.4 million in 2013, $2.4 million in 2012 and $1.6 million in 2011.

As of December 29, 2013 and December 30, 2012, “Accumulated other comprehensive loss, net of income taxes” in our Consolidated Balance Sheets and for the years then ended in our Consolidated Statements of Changes in Stockholders’ Equity was net of deferred tax assets of approximately $283 million and $363 million, respectively.

A reconciliation of unrecognized tax benefits is as follows:



(In thousands)	December 29, 2013			December 30, 2012			December 25, 2011
Balance at beginning of year	$	45,308		$	47,971		$	55,636
Gross additions to tax positions taken during the current year	2,249			5,241			4,094
Gross additions to tax positions taken during the prior year	127			258			460
Gross reductions to tax positions taken during the prior year	(833		)	(922		)	(970		)
Reductions from settlements with taxing authorities	—			—			(1,941		)
Reductions from lapse of applicable statutes of limitations	(793		)	(7,240		)	(9,308		)
Balance at end of year	$	46,058		$	45,308		$	47,971

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $30 million as of December 29, 2013 and as of December 30, 2012.

We also recognize accrued interest expense and penalties related to the unrecognized tax benefits within income tax expense or benefit. The total amount of accrued interest and penalties was approximately $18 million as of December 29, 2013 and $16 million December 30, 2012. The total amount of accrued interest and penalties was a net detriment of $1.7 million in 2013 and a net benefit of $0.3 million in 2012 and $1.4 million in 2011.

With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2004. Management believes that our accrual for tax liabilities is adequate for all open audit years. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.

It is reasonably possible that certain income tax examinations may be concluded, or statutes of limitation may lapse, during the next 12 months, which could result in a decrease in unrecognized tax benefits of $27.8 million that would, if recognized, impact the effective tax rate.