Note 8 – Income Taxes
The provision for income taxes consisted of:
| (In thousands) | 2016 | 2015 | 2014 | |||||||||
| Current: | ||||||||||||
| Federal | $ | 13,366 | $ | 18,366 | $ | 14,575 | ||||||
| State | 1,997 | 2,267 | 1,800 | |||||||||
| Puerto Rico | 250 | 249 | 350 | |||||||||
| Total current | 15,613 | 20,882 | 16,725 | |||||||||
| Deferred: | ||||||||||||
| Federal | (153 | ) | (3,000 | ) | (1,229 | ) | ||||||
| State | (1,228 | ) | (145 | ) | (115 | ) | ||||||
| Puerto Rico | (1,494 | ) | (318 | ) | (1,149 | ) | ||||||
| Total deferred | (2,875 | ) | (3,463 | ) | (2,493 | ) | ||||||
| Valuation allowance | 1,494 | 318 | 1,943 | |||||||||
| Total provision | $ | 14,232 | $ | 17,737 | $ | 16,175 | ||||||
We realized a tax benefit of $2,900, $120,000 and $68,000 in fiscal years 2016, 2015 and 2014, respectively, as a result of the exercise of stock options and the vesting of restricted stock, which is recorded in shareholders’ equity.
Reconciliation between the statutory federal
income tax rate and the effective income tax rate is as follows:
| Fiscal years | 2016 | 2015 | 2014 | |||||||||
| U.S. Federal statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
| State and local income taxes, net of federal tax benefit | 2.1 | 2.7 | 3.1 | |||||||||
| Puerto Rico | 0.2 | 0.3 | 0.2 | |||||||||
| Valuation allowance | 4.0 | 0.7 | 4.7 | |||||||||
| Tax benefit of foreign losses | (3.6 | ) | (0.6 | ) | (4.3 | ) | ||||||
| 0.0 | 0.0 | 0.1 | ||||||||||
| Effective income tax rate | 37.7 | % | 38.1 | % | 38.8 | % | ||||||
We recorded $224,000, $327,000 and $300,000 in federal employment related tax credits in fiscal 2016, 2015 and 2014, respectively.
Deferred income taxes are the result of temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The sources of these differences and the tax effect of each are as follows:
| (In thousands) | January 28, 2017 | January 30, 2016 | ||||||
| Deferred tax assets: | ||||||||
| Accrued rent | $ | 4,333 | $ | 4,321 | ||||
| Accrued compensation | 8,552 | 6,911 | ||||||
| Accrued employee benefits | 555 | 532 | ||||||
| Inventory | 1,125 | 737 | ||||||
| Self-insurance reserves | 758 | 641 | ||||||
| Lease incentives | 11,996 | 12,522 | ||||||
| Net operating loss carry forward | 3,719 | 2,261 | ||||||
| Other | 638 | 411 | ||||||
| Total deferred tax assets | 31,676 | 28,336 | ||||||
| Valuation allowance | (3,717 | ) | (2,261 | ) | ||||
| Total deferred tax assets – net of valuation allowance | 27,959 | 26,075 | ||||||
| Deferred tax liabilities: | ||||||||
| Property and equipment | 17,256 | 16,671 | ||||||
| Capitalized costs | 1,103 | 1,153 | ||||||
| Other | 0 | 32 | ||||||
| Total deferred tax liabilities | 18,359 | 17,856 | ||||||
| Net deferred tax asset | 9,600 | 8,219 | ||||||
| Less current deferred income tax benefit | 0 | (1,061 | ) | |||||
| Long-term deferred income taxes | $ | 9,600 | $ | 7,158 | ||||
At the end of fiscal 2016, we estimated foreign net operating loss carry forwards of $9.8 million, which expire between fiscal 2023 and fiscal 2026. At January 28, 2017, we had a valuation allowance of $3.7 million against these net operating losses that would be realizable only upon the generation of future taxable income in the jurisdiction in which the losses were incurred.
Our unrecognized tax liabilities relate to tax years encompassing our fiscal years 1999 through 2016 for the tax years that remain subject to examination by major tax jurisdictions as of January 28, 2017. At January 28, 2017, January 30, 2016 and January 31, 2015, there were no unrecognized tax liabilities or related accrued penalties or interest in Other liabilities on the Consolidated Balance Sheets.