Income Taxes

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



	December 31, 2017					December 25, 2016					December 27, 2015
(In thousands)	Amount			% of Pre-tax		Amount			% of Pre-tax		Amount			% of Pre-tax
Tax at federal statutory rate	$	38,928		35.0		$	10,685		35.0		$	33,863		35.0
State and local taxes, net	4,800			4.3		3,095			10.1		5,093			5.2
Effect of enacted changes in tax laws	68,747			61.8		—			—		1,801			1.8
Reduction in uncertain tax positions	(2,277		)	(2.0	)	(4,534		)	(14.9	)	(2,545		)	(2.6	)
Loss/(gain) on Company-owned life insurance	(1,916		)	(1.7	)	(736		)	(2.4	)	75			0.1
Nondeductible expense, net	1,021			0.9		1,115			3.7		880			0.9
Domestic manufacturing deduction	—			—		(1,820		)	(6.0	)	(2,651		)	(2.7	)
Foreign Earnings and Dividends	458			0.4		(2,418		)	(7.9	)	(1,214		)	(1.3	)
Other, net	(5,805		)	(5.2	)	(966		)	(3.2	)	(1,392		)	(1.4	)
Income tax expense	$	103,956		93.5		$	4,421		14.4		$	33,910		35.0

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



(In thousands)	December 31, 2017			December 25, 2016			December 27, 2015
Current tax expense/(benefit)
Federal	$	(252	)	$	22,864		$	41,199
Foreign	458			312			485
State and local	350			(3,295		)	5,919
Total current tax expense	556			19,881			47,603
Deferred tax expense
Federal	105,905			(16,625		)	(14,554		)
State and local	(2,505		)	1,165			861
Total deferred tax expense/(benefit)	103,400			(15,460		)	(13,693		)
Income tax expense/(benefit)	$	103,956		$	4,421		$	33,910

State tax operating loss carryforwards totaled $4.7 million as of December 31, 2017 and $3.4 million as of December 25, 2016. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives up to 20 years.

On December 22, 2017, federal tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, a one-time transition tax on the mandatory deemed repatriation of foreign earnings and numerous domestic and international-related provisions effective in 2018.

We have estimated our provision for income taxes in accordance with the Act and guidance available as of the date of this filing and as a result have recorded $68.7 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted.

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, we have determined that the $68.7 million of additional income tax expense recorded in connection with the remeasurement of certain deferred tax assets and liabilities, the one-time transition tax on the mandatory deemed repatriation of foreign earnings, and deferred tax assets related to executive compensation deductions was a provisional amount and a reasonable estimate at December 31, 2017. Provisional estimates were also made with regard to the Company’s deductions under the Act’s new expensing provisions and state and local income taxes related to foreign earnings subject to the one-time transition tax. The ultimate impact of the Act may differ from the provisional amount recognized due to, among other things, changes in estimates resulting from the receipt or calculation of final data, changes in interpretations of the Act, and additional regulatory guidance that may be issued. The accounting for the impact of the Act is expected to be completed by the fourth quarter of fiscal year 2018.

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



(In thousands)	December 31, 2017		December 25, 2016
Deferred tax assets
Retirement, postemployment and deferred compensation plans	$	140,657	$	275,611
Accruals for other employee benefits, compensation, insurance and other	16,883		34,466
Accounts receivable allowances	1,391		2,450
Net operating losses	6,228		2,598
Investment in joint ventures	—		5,329
Other	30,295		39,943
Gross deferred tax assets	$	195,454	$	360,397
Deferred tax liabilities
Property, plant and equipment	$	31,043	$	46,284
Intangible assets	7,300		11,975
Investments in joint ventures	615		—
Other	3,450		796
Gross deferred tax liabilities	42,408		59,055
Net deferred tax asset	$	153,046	$	301,342

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 (i.e., impairments of nondeductible goodwill and intangible assets).

We had an income tax receivable of $25.4 million as of December 31, 2017 versus accrued income taxes payable of $1.9 million as of December 25, 2016.

Income tax benefits related to the exercise or vesting of equity awards reduced current taxes payable by $13.7 million in 2017, $8.6 million in 2016 and $4.4 million in 2015.

As of December 31, 2017 and December 25, 2016, “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 $196 million and $331 million, respectively.

A reconciliation of unrecognized tax benefits is as follows:



(In thousands)	December 31, 2017			December 25, 2016			December 27, 2015
Balance at beginning of year	$	10,028		$	13,941		$	16,324
Gross additions to tax positions taken during the current year	9,009			997			1,151
Gross additions to tax positions taken during the prior year	103			—			282
Gross reductions to tax positions taken during the prior year	(372		)	(3,042		)	(37		)
Reductions from lapse of applicable statutes of limitations	(1,682		)	(1,868		)	(3,779		)
Balance at end of year	$	17,086		$	10,028		$	13,941

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $7 million as of December 31, 2017 and December 25, 2016.

In 2017 and 2016, we recorded a $2.3 million and $4.5 million income tax benefit, respectively, primarily due to a reduction in the Company’s reserve for uncertain tax positions.

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 $2 million and $3 million as of December 31, 2017 and December 25, 2016, respectively. The total amount of accrued interest and penalties was a net benefit of $0.1 million in 2017, a net benefit of $0.9 million in 2016 and a net benefit of $0.1 million in 2015.

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 2010. 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 $3.3 million that would, if recognized, impact the effective tax rate.