Income Taxes
 12 Months Ended
Dec. 28, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The income tax provision (benefit) for the fiscal years 2019, 2018 and 2017 consisted of the following:
 
2019
 
2018
 
2017
Current:
 
 
 
 
 
Federal
$
102

 
$
32

 
$
74

State
17

 
12

 
9

Current income tax provision
119

 
44

 
83

Deferred:
 
 
 
 
 
Federal
(6
)
 
31

 
(133
)
State
13

 
14

 
10

Deferred income tax provision (benefit)
7

 
45

 
(123
)
Total income tax provision (benefit)
$
126

 
$
89

 
$
(40
)


The Company’s effective income tax rates for the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017 were 25.0%, 18.0% and (10.0)%, respectively. The determination of the Company’s overall effective income tax rate requires the use of estimates. The effective income tax rate reflects the income earned and taxed in U.S. federal and various state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company’s change in relative income in each jurisdiction. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company’s effective income tax rate in the future.
The reconciliation of the provision (benefit) for income taxes from continuing operations at the U.S. federal statutory income tax rate (21% in both 2019 and 2018, and 35% in 2017) to the Company’s income tax provision (benefit) for the fiscal years 2019, 2018 and 2017 is shown below: 
 
2019
 
2018
 
2017
Federal income taxes computed at statutory rate
$
107

 
$
104

 
$
141

State income taxes, net of federal income tax benefit
24

 
20

 
16

Stock-based compensation
(4
)
 
(6
)
 
(26
)
Non-deductible expenses
4

 
3

 
5

Change in the valuation allowance for deferred tax assets
6

 
1

 
(1
)
Net operating loss expirations
—

 
3

 
1

Tax credits
(10
)
 
(6
)
 
(3
)
Change in unrecognized tax benefits
(1
)
 
(21
)
 
(1
)
Change in U.S. federal statutory tax rate
—

 
(8
)
 
(173
)
Other
—

 
(1
)
 
1

Total income tax provision (benefit)
$
126

 
$
89

 
$
(40
)


Temporary differences and carryforwards that created significant deferred tax assets and liabilities were as follows:
 
December 28, 2019
 
December 29, 2018
Deferred tax assets:
 
 
 
Operating lease liabilities
$
38

 
$
—

Workers’ compensation, general and fleet liabilities
36

 
40

Financing lease and other long term liabilities
90

 
—

Net operating loss carryforwards
64

 
73

Other deferred tax assets
63

 
48

Total gross deferred tax assets
291

 
161

Less valuation allowance
(36
)
 
(30
)
Total net deferred tax assets
255

 
131

Deferred tax liabilities:
 
 
 
Property and equipment
(221
)
 
(121
)
Operating lease assets
(37
)
 
—

Inventories
(35
)
 
(39
)
Intangibles
(259
)
 
(262
)
Other deferred tax liabilities
(11
)
 
—

Total deferred tax liabilities
(563
)
 
(422
)
Net deferred tax liability
$
(308
)
 
$
(291
)


The net deferred tax liabilities presented in the Company's Consolidated Balance Sheets were as follows:
 
December 28, 2019
 
December 29, 2018
Noncurrent deferred tax assets
$
—

 
$
7

Noncurrent deferred tax liability
(308
)
 
(298
)
Net deferred tax liability
$
(308
)
 
$
(291
)


The Company had tax affected state net operating loss carryforwards of $64 million as of December 28, 2019, which will expire at various dates from 2020 to 2039. The Company’s net operating loss carryforwards expire as follows:
 
State
2020-2024
$
32

2025-2029
20

2030-2034
8

2035-2039
4

 
$
64


The Company also has state credit carryforwards of $20 million.
The U.S. federal and state net operating loss carryforwards in the income tax returns filed included unrecognized tax benefits taken in prior years. The net operating losses for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740, Income Taxes, are presented net of these unrecognized tax benefits.
Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of the Company’s domestic net operating losses and tax credit carryforwards may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.
The Company maintained a valuation allowance on certain state net operating loss and tax credit carryforwards expected to expire unutilized as a result of insufficient forecasted taxable income in the carryforward period or the utilization of which is subject to limitation.
A summary of the activity in the valuation allowance for the fiscal years 2019, 2018 and 2017 is as follows:
 
2019
 
2018
 
2017
Balance as of beginning of year
$
30

 
$
29

 
24

Expense recognized
6

 
1

 
5

Balance as of end of year
$
36

 
$
30

 
$
29


The calculation of the Company’s tax liabilities involves uncertainties in the application of complex tax laws and regulations in U.S. federal and state jurisdictions. The Company (1) records unrecognized tax benefits as liabilities in accordance with ASC 740, Income Taxes and (2) adjusts these liabilities when the Company’s judgment changes because of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of liabilities for unrecognized tax benefits. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. The Company recognizes an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits.
Reconciliation of the beginning and ending amount of unrecognized tax benefits as of fiscal years 2019, 2018, and 2017 was as follows:
Balance as of December 31, 2016
$
49

Gross increases due to positions taken in prior years
72

Gross decreases due to positions taken in prior years
(4
)
Gross decreases due to positions taken in current year
(5
)
Decreases due to changes in tax rates
(4
)
Balance as of December 30, 2017
108

Gross increases due to positions taken in prior years
2

Gross decreases due to positions taken in prior years
(64
)
Decreases due to lapses of statute of limitations
(1
)
Decreases due to changes in tax rates
(5
)
Balance as of December 29, 2018
40

Decreases due to lapses of statute of limitations
(1
)
Balance as of December 28, 2019
$
39



The Company does not expect the liability for unrecognized tax benefits to change significantly in the next 12 months.
Included in the balance of unrecognized tax benefits as of the end of fiscal years 2019, 2018 and 2017 was $35 million, $36 million and $60 million, respectively, of tax benefits that, if recognized, would affect the effective income tax rate. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had accrued interest and penalties of approximately $5 million as of both December 28, 2019 and December 29, 2018.
The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. Our 2007 through 2018 U.S. federal income tax years, and various state income tax years from 2000 through 2018, remain subject to income tax examinations by the relevant taxing authorities. Prior to 2007, the Company was owned by Royal Ahold N.V. (“Ahold”). Ahold indemnified the Company for 2007 pre-closing consolidated U.S. federal and certain combined state income taxes, and the Company is responsible for all other taxes, interest and penalties.