NOTE 9. LEASES

The Company leases retail stores and other facilities, vehicles, and equipment under operating lease agreements. Facility leases typically are for a fixed non-cancellable term with one or more renewal options. In addition to minimum rentals, the Company is required to pay certain executory costs such as real estate taxes, insurance and common area maintenance on most of the facility leases. Many lease agreements contain tenant improvement allowances, rent holidays, and/or rent escalation clauses. Certain leases contain provisions for additional rent to be paid if sales exceed a specified amount, though such payments have been immaterial during the years presented.

For tenant improvement allowances, scheduled rent increases, and rent holidays, a deferred rent liability is recognized and amortized over the terms of the related leases as a reduction of rent expense. Rent related accruals totaled $196 million and $221 million at December 31, 2016 and December 26, 2015, respectively. The short-term and long-term components of these liabilities are included in Accrued expenses and other current liabilities and Deferred income taxes and other long-term liabilities, respectively, on the Consolidated Balance Sheets.

Rent expense, including equipment rental, was $484 million, $513 million, $602 million in 2016, 2015 and 2014, respectively. Rent expense was reduced by sublease income of $2 million in 2016, $4 million in 2015 and $5 million in 2014.

Future minimum lease payments due under the non-cancelable portions of leases as of December 31, 2016 include facility leases that were accrued as store closure costs and are as follows:


(In millions)
2017	$	486
2018		369
2019		275
2020		180
2021		104
Thereafter		173

		1,587
Less sublease income		(31	)

Total	$	1,556

These minimum lease payments do not include contingent rental payments that may be due based on a percentage of sales in excess of stipulated amounts.

As of December 31, 2016 and December 26, 2015, unfavorable lease deferred credit for store leases with terms above market value amounted to $10 million and $18 million, respectively, and are included in Deferred income taxes and other long-term liabilities in the Consolidated Balance Sheets. The unfavorable lease values are amortized on a straight-line basis over the lives of the leases, unless the facility has been identified for closure under the Real Estate Strategy or Comprehensive Business Review. In 2016, 2015 and 2014, the net amortization of favorable and unfavorable lease values reduced rent expense by $4 million, $6 million and $7 million, respectively. Refer to Note 5 for further information favorable leases.

The Company has capital lease obligations primarily related to buildings and equipment. Refer to Note 7 for further details on amounts due related to capital lease obligations.