Jack In The Box 2014 Annual Report Download - page 66

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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
$ 77,170
$ 66,698
Accrued insurance
12,874
13,115
Accrued vacation pay expense
2,132
3,259
Deferred income
1,436
1,441
Impairment
25,391
27,944
Lease commitments related to closed or refranchised locations
12,686
11,361
Other reserves and allowances
1,303
3,964
Tax loss and tax credit carryforwards
10,705
4,619
Leasing transactions
7,201
7,471
Share-based compensation
9,416
13,128
Other, net
4,508
4,280
Total gross deferred tax assets
164,822
157,280
Valuation allowance
(8,624)
(4,619)
Total net deferred tax assets
156,198
152,661
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation
(38,362)
(9,753)
Intangible assets
(28,149)
(27,350)
Other
(2,069)
(40)
Total gross deferred tax liabilities
(68,580)
(37,143)
Net deferred tax assets
$ 87,618
$ 115,518
Deferred tax assets at September 28, 2014 include state net operating loss carryforwards of approximately $75.4 million expiring at various times between
2017 and 2034. At September 28, 2014 and September 29, 2013, we recorded a valuation allowance related to losses and state tax credits of $8.6 million and
$4.6 million, respectively. The current year change in the valuation allowance of $4.0 million relates primarily to increases in valuation allowance on state
net operating losses and state tax credits. We believe that it is more likely than not that these loss and credit carryforwards will not be realized and that the
remaining deferred tax assets will be realized through future taxable income or alternative tax strategies.
During the third quarter of 2014, we completed a fixed asset cost segregation study which was included in our tax return filings related to fiscal year ended
September 29, 2013. This study along with other return to provision adjustments related to fiscal year ended September 29, 2013 resulted in a $1.4 million
increase in current deferred tax assets, a $42.1 million decrease in non-current deferred tax assets, a $12.9 million decrease in income taxes payable, and a
$27.5 million increase in income tax refunds receivable of which $20.5 million was received in the quarter ended September 28, 2014. The income tax
expense impact of the other return to provision adjustments was $0.3 million.
Our gross unrecognized tax benefits associated with uncertain income tax positions decreased during fiscal 2014 and 2013 based on a preliminary assessment
of a state income tax audit. A reconciliation of the beginning and ending amounts of unrecognized tax benefits follows (in thousands):
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Balance beginning of year
$ 769
$ 905
Change related to tax positions
(395)
(136)
Balance at end of year
$ 374
$ 769
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 or state 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 2011 and forward. The Company’s
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