13. Income Taxes

A summary of the provision for income taxes follows (in thousands):

	2011		2010		2009
Current:
Federal	$	14,383	$	19,049	$	18,551
Foreign		1,273		1,171		904
State and local *		850		2,083		2,061
Deferred (federal and state)		10,382		4,553		7,469
Total	$	26,888	$	26,856	$	28,985

*	The decrease in state and local tax expense is due to the lapse of statute of limitations and a reduction in the state effective tax rate.

Significant deferred tax assets (liabilities) follow (in thousands):

	2011			2010
Unearned development fees	$	2,249		$	2,392
Accrued liabilities		14,897			14,647
Other assets and liabilities		7,294			10,920
Stock options		5,091			6,291
Other		-			144
Foreign net operating losses		7,474			8,123
Valuation allowance on foreign net
operating losses		(7,474	)		(8,123	)
Total deferred tax assets		29,531			34,394

Deferred expenses		(3,497	)		(2,497	)
Accelerated depreciation		(13,477	)		(10,192	)
Goodwill		(10,426	)		(8,506	)
Other		(3,642	)		(3,893	)
Total deferred tax liabilities		(31,042	)		(25,088	)
Net deferred tax (liability) asset	$	(1,511	)	$	9,306

The Company had approximately $28.8 million and $27.8 million of foreign tax net operating loss carryovers as of December 25, 2011 and December 26, 2010, respectively, for which a full valuation allowance has been provided. A substantial majority of our foreign tax net operating losses do not have an expiration date.

The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense for the years ended December 25, 2011, December 26, 2010 and December 27, 2009 is as follows in both dollars and as a percentage of income before income taxes ($ in thousands):

	2011						2010						2009
	Income Tax Expense			Income Tax Rate			Income Tax Expense			Income Tax Rate			Income Tax Expense			Income Tax Rate
Tax at U.S. federal statutory rate	$	30,197			35.0	%	$	28,798			35.0	%	$	31,568			35.0	%
State and local income taxes		1,702			2.0	%		1,896			2.3	%		2,037			2.2	%
Foreign income taxes		1,273			1.5	%		1,171			1.4	%		904			1.0	%
Settlement of certain tax issues		(1,912	)		(2.2	%)		(550	)		(0.7	%)		(1,238	)		(1.4	%)
Income of consolidated partnerships
attributable to noncontrolling interests		(1,379	)		(1.6	%)		(1,297	)		(1.6	%)		(1,397	)		(1.5	%)
Non-qualified deferred compensation
plan loss (income)		153			0.2	%		(434	)		(0.5	%)		(803	)		(0.9	%)
Tax credits and other		(3,146	)		(3.7	%)		(2,728	)		(3.3	%)		(2,086	)		(2.3	%)
Total	$	26,888			31.2	%	$	26,856			32.6	%	$	28,985			32.1	%

Income taxes paid were $15.6 million in 2011, $21.7 million in 2010 and $24.8 million in 2009.

The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company, with few exceptions, is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2007. The Company is currently undergoing examinations by various tax authorities. The Company anticipates that the finalization of these current examinations and other issues could result in a decrease in the liability for unrecognized tax benefits (and a decrease of income tax expense) of approximately $377,000 during the next 12 months.

A reconciliation of the beginning and ending liability for unrecognized state tax benefits is as follows (in thousands):

Balance at December 27, 2009	$	3,595
Reductions for lapse of statute of limitations		(264	)
Balance at December 26, 2010		3,331
Reductions for tax positions of prior years		(95	)
Reductions for lapse of statute of limitations		(248	)
Balance at December 25, 2011	$	2,988

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a part of income tax expense. The Company’s 2011 and 2010 income tax expense includes interest benefits of $368,000 and $145,000, respectively. The Company has accrued approximately $985,000 and $1.4 million for the payment of interest and penalties as of December 25, 2011 and December 26, 2010, respectively.