Jack In The Box 2012 Annual Report Download - page 58

A reconciliation of the federal statutory income tax rate to our effective tax rate of continuing operations is as follows:
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Computed at federal statutory rate
35.0%
35.0%
35.0%
State income taxes, net of federal tax benefit
3.3
3.4
3.2
Benefit of jobs tax credits
(1.2)
(1.5)
(1.8)
Expense/(benefit) related to COLIs
(5.0)
0.3
(2.2)
Others, net
0.6
(0.9)
(0.2)
32.7%
36.3%
34.0%
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each year-end are presented
below (in thousands):
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Deferred tax assets:
Accrued pension and postretirement benefits
$109,443
$82,706
Accrued insurance
12,096
14,263
Accrued vacation pay expense
4,611
6,605
Deferred income
1,969
2,268
Other reserves and allowances
32,504
29,127
Tax loss and tax credit carryforwards
5,093
4,025
Leasing transactions
10,893
9,348
Share-based compensation
18,722
18,853
Other, net
3,297
4,620
Total gross deferred tax assets
198,628
171,815
Valuation allowance
(5,093)
(4,025)
Total net deferred tax assets
193,535
167,790
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation
(27,230)
(32,677)
Intangible assets
(23,837)
(24,021)
Total gross deferred tax liabilities
(51,067)
(56,698)
Net deferred tax assets
$142,468
$111,092
Deferred tax assets at September 30, 2012 include state net operating loss carryforwards of approximately $77.5 million expiring at various times between
2012 and 2032. At September 30, 2012 and October 2, 2011, we recorded a valuation allowance related to state net operating losses of $5.1 million and $4.0
million, respectively. The current year change in the valuation allowance of $1.1 million relates to net operating losses. We believe that it is more likely than not
that these loss carryforwards will not be realized and that the remaining deferred tax assets will be realized through future taxable income or alternative tax
strategies.
At October 2, 2011, our gross unrecognized tax benefits associated with uncertain income tax positions were $0.6 million, and increased by $0.3 million by
September 30, 2012 based on a preliminary assessment of a state income tax audit. A reconciliation of the beginning and ending amount of unrecognized tax
benefits follows (in thousands):
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Balance beginning of year
$ 629
$ 629
Increases to tax positions recorded during current years
276
—
Balance at end of year
$905
$ 629
From time to time, we may take positions for filing our tax returns which may differ from the treatment of the same item for financial reporting purposes. The
ultimate outcome of these items will not be known until the IRS has completed its examination or until the statute of limitations has expired.
It is reasonably possible that changes of approximately $0.4 million to the gross unrecognized tax benefits will be required within the next twelve months.
These changes relate to the possible settlement of state tax audits.
The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax.
The federal statutes of limitations have not expired for fiscal years 2009 and forward. The statutes of limitations for California and Texas, which constitute
the Company’s major state tax jurisdictions, have not expired for fiscal years 2001 and 2007, respectively, and forward. Generally, the statutes of limitations
for the other state jurisdictions have not expired
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