10.Income Taxes:

A reconciliation of the expected federal income tax expense based on the federal statutory tax rate to the actual income tax expense is provided below:

	Year Ended
	December 26, 2015			December 27, 2014			December 28, 2013
Federal income tax expense at statutory rate (35%)	$	12,328,700		$	11,406,100		$	10,356,500
Change in valuation allowance	(4,400		)	(25,800		)	7,300
State and local income taxes, net of federal benefit	956,000			897,800			886,200
Permanent differences, including stock option expenses	158,100			144,500			113,000
Other, net	(13,300		)	99,700			(4,700		)

Actual income tax expense	$	13,425,100		$	12,522,300		$	11,358,300

Components of the provision for income taxes are as follows:

	Year Ended
	December 26, 2015			December 27, 2014			December 28, 2013
Current:
Federal	$	13,486,500		$	10,567,100		$	10,013,500
State	1,654,800			1,456,400			1,468,600
Foreign	425,900			386,900			375,400

Current provision	15,567,200			12,410,400			11,857,500

Deferred:
Federal	(1,983,200		)	134,200			(449,300		)
State	(158,900		)	(22,300		)	(49,900		)

Deferred provision	(2,142,100		)	111,900			(499,200		)

Total provision for income taxes	$	13,425,100		$	12,522,300		$	11,358,300

The tax effects of temporary differences that give rise to the net deferred income tax assets and liabilities are presented below:

	December 26, 2015			December 27, 2014
Deferred tax assets:
Accounts receivable and lease reserves	$	345,200		$	169,600
Accrued restructuring charge	—			64,200
Non-qualified stock option expense	1,926,400			1,382,400
Deferred franchise and software license fees	810,900			720,900
Trademarks	85,700			91,100
Lease deposits	1,373,000			1,228,300
Loss from and impairment of equity and note investments	4,051,400			4,055,800
Valuation allowance	(4,051,400		)	(4,055,800		)
Other	372,800			420,100

Total deferred tax assets	4,914,000			4,076,600

Deferred tax liabilities:
Lease revenue and initial direct costs	(8,277,600		)	(9,579,400		)
Depreciation and amortization	(251,200		)	(254,100		)

Total deferred tax liabilities	(8,528,800		)	(9,833,500		)

Total net deferred tax liabilities	$	(3,614,800	)	$	(5,756,900	)

During the years ended December 26, 2015, December 27, 2014 and December 28, 2013, $26,300, $91,100 and $413,600 respectively, was directly credited to stockholders’ equity to account for excess tax benefits related to stock option exercises.

The Company has assessed its taxable earnings history and prospective future taxable income. Based upon this assessment, the Company has determined that it is more likely than not that its deferred tax assets will be realized in future periods and no valuation allowance is necessary, except for the deferred tax assets related to the loss from and impairment of equity and note investments (which are capital losses for tax purposes). As a result, valuation allowances of $4.1 million and $4.1 million as of December 26, 2015 and December 27, 2014, respectively, have been recorded.

The amount of unrecognized tax benefits, including interest and penalties, as of December 26, 2015 and December 27, 2014, was $489,200 and $465,500, respectively, primarily for potential state taxes.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense for all periods presented. The Company had accrued approximately $19,300 and $16,500 for the payment of interest and penalties at December 26, 2015 and December 27, 2014, respectively.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Total
Balance at December 28, 2013	$	383,700

Increases related to current year tax positions	136,500
Additions for tax positions of prior years	1,600
Expiration of the statute of limitations for the assessment of taxes	(72,800		)

Balance at December 27, 2014	449,000

Increases related to current year tax positions	114,700
Subtractions for tax positions of prior years	(8,000		)
Expiration of the statute of limitations for the assessment of taxes	(85,800		)

Balance at December 26, 2015	$	469,900

The Company and its subsidiaries file income tax returns in the U.S. federal, numerous state and certain foreign jurisdictions. 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 before 2011. We expect various statutes of limitation to expire during the next 12 months. Due to the uncertain response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time.