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 30, 2018					December 31, 2017					December 25, 2016
(In thousands)	Amount			% of Pre-tax		Amount			% of Pre-tax		Amount			% of Pre-tax
Tax at federal statutory rate	$	36,979		21.0		$	38,928		35.0		$	10,685		35.0
State and local taxes, net	12,335			7.0		4,800			4.3		3,095			10.1
Effect of enacted changes in tax laws	(1,872		)	(1.0	)	68,747			61.8		—			—
Increase/(decrease) in uncertain tax positions	2,288			1.3		(2,277		)	(2.0	)	(4,534		)	(14.9	)
Loss/(gain) on Company-owned life insurance	449			0.2		(1,916		)	(1.7	)	(736		)	(2.4	)
Nondeductible expense	2,399			1.3		1,021			0.9		1,115			3.7
Domestic manufacturing deduction	—			—		—			—		(1,820		)	(6.0	)
Foreign Earnings and Dividends	—			—		458			0.4		(2,418		)	(7.9	)
Other, net	(3,947		)	(2.2	)	(5,805		)	(5.2	)	(966		)	(3.2	)
Income tax expense	$	48,631		27.6		$	103,956		93.5		$	4,421		14.4

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



(In thousands)	December 30, 2018		December 31, 2017			December 25, 2016
Current tax expense/(benefit)
Federal	$	31,719	$	(252	)	$	22,864
Foreign	705		458			312
State and local	10,172		350			(3,295		)
Total current tax expense	42,596		556			19,881
Deferred tax expense
Federal	913		105,905			(16,625		)
State and local	5,122		(2,505		)	1,165
Total deferred tax expense/(benefit)	6,035		103,400			(15,460		)
Income tax expense/(benefit)	$	48,631	$	103,956		$	4,421

State tax operating loss carryforwards totaled $2.0 million as of December 30, 2018 and $4.7 million as of December 31, 2017. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives up to 19 years.

On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes included, but were 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.

On December 22, 2017, 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 Tax Act. In accordance with SAB 118, we determined that the $68.7 million of additional income tax expense recorded in the fourth quarter of 2017 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 Tax 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 Tax Act was expected to 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 Tax Act, and additional regulatory guidance that would be issued. In the fourth quarter of 2018, in accordance with SAB 118, we completed the accounting for the impact of the Tax Act and recognized a $1.9 million tax benefit related to 2017, primarily attributable to the remeasurement of certain deferred tax assets and liabilities and the repatriation of foreign earnings.

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



(In thousands)	December 30, 2018		December 31, 2017
Deferred tax assets
Retirement, postemployment and deferred compensation plans	$	128,926	$	140,657
Accruals for other employee benefits, compensation, insurance and other	22,722		16,883
Net operating losses	1,598		6,228
Other	23,400		31,686
Gross deferred tax assets	$	176,646	$	195,454
Deferred tax liabilities
Property, plant and equipment	$	38,268	$	31,043
Intangible assets	7,225		7,300
Other	2,722		4,065
Gross deferred tax liabilities	48,215		42,408
Net deferred tax asset	$	128,431	$	153,046

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 $3.7 million as of December 30, 2018, compared with an income tax receivable of $25.4 million as of December 31, 2017.

Income tax benefits related to the exercise or vesting of equity awards reduced current taxes payable by $4.8 million, $13.7 million and $8.6 million in 2018, 2017 and 2016, respectively.

As of December 30, 2018 and December 31, 2017, “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 $194 million and $196 million, respectively.

A reconciliation of unrecognized tax benefits is as follows:



(In thousands)	December 30, 2018			December 31, 2017			December 25, 2016
Balance at beginning of year	$	17,086		$	10,028		$	13,941
Gross additions to tax positions taken during the current year	680			9,009			997
Gross additions to tax positions taken during the prior year	3,019			103			—
Gross reductions to tax positions taken during the prior year	(8,607		)	(372		)	(3,042		)
Reductions from lapse of applicable statutes of limitations	(549		)	(1,682		)	(1,868		)
Balance at end of year	$	11,629		$	17,086		$	10,028

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $10 million and $7 million as of December 30, 2018, and December 31, 2017, respectively.

In 2018 , we recorded $2.3 million of income tax expense due to an increase in the Company’s reserve for uncertain tax positions. In 2017, we recorded a $2.3 million income tax benefit 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 $3 million and $2 million as of December 30, 2018, and December 31, 2017, respectively. The total amount of accrued interest and penalties was a net charge of $0.7 million in 2018, a net benefit of $0.1 million in 2017 and a net benefit of $0.9 million in 2016.

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 $3.0 million that would, if recognized, impact the effective tax rate.