Entity information:
Income Taxes
The provision for federal and state income taxes is summarized as follows:
(in thousands of dollars)
Fiscal 2017
 
Fiscal 2016
 
Fiscal 2015
Current:
 
 
 
 
 
Federal
$
91,799

 
$
120,872

 
$
173,786

State
2,466

 
3,331

 
2,959

 
94,265

 
124,203

 
176,745

Deferred:
 
 
 
 
 
Federal
(100,954
)
 
(34,797
)
 
(33,708
)
State
(1,111
)
 
(906
)
 
(2,267
)
 
(102,065
)
 
(35,703
)
 
(35,975
)
 
$
(7,800
)
 
$
88,500

 
$
140,770



The Tax Cuts and Jobs Act (“the Act”) was signed into law on December 22, 2017. The Act’s primary impact to the Company’s consolidated financial statements was its reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The resulting blended federal statutory income tax rate in effect for the Company’s fiscal year ended February 3, 2018 was 33.72%. For prior years, the federal statutory tax rate was 35%. The Company has determined a reasonable estimate of the income tax effects of the Act and recorded provisional amounts within its consolidated financial statements. The Company continues to analyze additional information and guidance related to certain aspects of the Tax Act, including, but not limited to, increased expensing of business assets, limitations on the deductibility of executive compensation, conformity or changes by state taxing authorities in response to the Tax Act, and any impact on the final determination of the net deferred tax liabilities. The final income tax effects of the Act may differ from the provisional amounts recorded due to, among other factors, anticipated guidance to be released in the coming year, including IRS notices, and any resulting changes in the Company’s interpretation and application of the Act. The Company will finalize its accounting for the income tax effects of the Act within the one-year measurement period provided under SEC Staff Accounting Bulletin No. 118.

During fiscal 2017, income taxes included estimated tax benefits of approximately $77.4 million related to the Act. The Company’s estimate of this benefit is comprised of: (1) approximately $74.2 million for the effect of reduced future corporate income tax rates on existing net deferred tax liabilities; and (2) approximately $3.2 million due to the lower blended federal statutory income tax rate in effect for fiscal 2017.

The rate reconciliation presented below reconciles the Company’s income tax provision to income taxes using the federal statutory income tax rate; therefore, the tax reform benefit described in (2) above is inherently included within the fiscal 2017 reconciling amounts and not presented on a separate line.
(in thousands of dollars)
Fiscal 2017
 
Fiscal 2016
 
Fiscal 2015
Income tax at the statutory federal rate (inclusive of income on and equity in losses of joint ventures)
$
72,000

 
$
90,202

 
$
143,549

State income taxes, net of federal benefit (inclusive of income on and equity in losses of joint ventures)
(22
)
 
954

 
2,488

Net changes in unrecognized tax benefits, interest and penalties /reserves
(448
)
 
(323
)
 
(367
)
Tax benefit of federal credits
(4,440
)
 
(2,434
)
 
(2,018
)
Changes in cash surrender value of life insurance policies
(441
)
 
(914
)
 
(705
)
Changes in valuation allowance
222

 
1,857

 
(1,473
)
Tax benefit of dividends paid to ESOP
(810
)
 
(785
)
 
(763
)
Estimated adjustments to net deferred tax liabilities for enacted changes in tax laws and rates
(74,216
)
 
—

 
—

Other
355

 
(57
)
 
59

 
$
(7,800
)
 
$
88,500

 
$
140,770



Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of February 3, 2018 and January 28, 2017 are as follows:
(in thousands of dollars)
February 3,
2018
 
January 28,
2017
Property and equipment bases and depreciation differences
$
126,401

 
$
213,658

Prepaid expenses
41,124

 
54,343

Joint venture bases differences
7,889

 
11,994

Differences between book and tax bases of inventory
22,436

 
40,489

Other
3,436

 
7,114

Total deferred tax liabilities
201,286

 
327,598

Accruals not currently deductible
(66,941
)
 
(87,066
)
Net operating loss carryforwards
(72,452
)
 
(74,593
)
State income taxes
(419
)
 
(968
)
Other
(1,525
)
 
(1,165
)
Total deferred tax assets
(141,337
)
 
(163,792
)
Net operating loss valuation allowance
56,172

 
55,774

Net deferred tax assets
(85,165
)
 
(108,018
)
Net deferred income taxes
$
116,121

 
$
219,580


Deferred tax assets and liabilities presented for fiscal 2017 above reflect the Company’s reasonable estimate of the effects of the Act. For fiscal 2017, deferred tax assets and liabilities were measured using the future federal statutory income tax rate of 21% and the appropriate state statutory income tax rates. For fiscal 2016, deferred tax assets and liabilities were measured using the prior federal statutory income tax rate of 35% and the appropriate state statutory income tax rates.
At February 3, 2018, the Company had a deferred tax asset related to state net operating loss carryforwards of approximately $72.5 million that could be utilized to reduce the tax liabilities of future years. These carryforwards will expire between fiscal 2018 and 2038. A portion of the deferred tax asset attributable to state net operating loss carryforwards was reduced by a valuation allowance of approximately $56.2 million for the losses of various members of the affiliated group in states for which the Company determined that it is "more likely than not" that the benefit of the net operating losses will not be realized.
Deferred tax assets and liabilities are presented as follows in the accompanying consolidated balance sheets:
(in thousands of dollars)
February 3,
2018
 
January 28,
2017
Net deferred tax assets—other assets
$
(710
)
 
$
(6,104
)
Net deferred tax liabilities—deferred income taxes
116,831

 
225,684

Net deferred income taxes
$
116,121

 
$
219,580


The total amount of unrecognized tax benefits as of February 3, 2018 was $3.2 million, of which $2.3 million would, if recognized, affect the Company's effective tax rate. The total amount of unrecognized tax benefits as of January 28, 2017 was $4.0 million, of which $2.5 million would, if recognized, affect the effective tax rate. The Company does not expect a significant change in unrecognized tax benefits in the next twelve months. Where applicable, associated interest and penalties are also recorded. The total amounts of interest and penalties were not material.





A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands of dollars)
Fiscal 2017
 
Fiscal 2016
 
Fiscal 2015
Unrecognized tax benefits at beginning of period
$
4,013

 
$
4,265

 
$
4,806

Gross increases—tax positions in prior period
2

 
43

 
—

Gross decreases—tax positions in prior period
(710
)
 
(538
)
 
(734
)
Gross increases—current period tax positions
417

 
386

 
317

Settlements
(81
)
 
—

 
—

Lapse of statutes of limitation
(452
)
 
(143
)
 
(124
)
Unrecognized tax benefits at end of period
$
3,189

 
$
4,013

 
$
4,265


The fiscal tax years that remain subject to examination for the federal tax jurisdiction and major state tax jurisdictions are 2014 and forward. At this time, the Company does not expect the results from any income tax audit to have a material impact on the Company's consolidated financial statements.
Income taxes paid, net of income tax refunds received, during fiscal 2017, 2016 and 2015 were approximately $93.9 million, $129.4 million and $183.6 million, respectively.