Note 7: Income Taxes
The following table sets forth our provision for income taxes for the fiscal years ended:
| January 29, 2017 |
January 31, 2016 |
February 1, 2015 |
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Current provision: |
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Federal |
$ | 35,596 | $ | 18,342 | $ | 739 | ||||||
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State and local |
10,107 | 5,810 | 4,617 | |||||||||
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Foreign |
72 | 126 | 117 | |||||||||
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Total current provision |
45,775 | 24,278 | 5,473 | |||||||||
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Deferred provision (benefit): |
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Federal |
7,318 | 8,384 | (730 | ) | ||||||||
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State and local |
(287 | ) | (623 | ) | (978 | ) | ||||||
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Foreign |
(70 | ) | 92 | 93 | ||||||||
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Total deferred provision (benefit) |
6,961 | 7,853 | (1,615 | ) | ||||||||
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Provision for income taxes |
$ | 52,736 | $ | 32,131 | $ | 3,858 | ||||||
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The following tables set forth the significant components of our deferred assets and liabilities as of the fiscal years ended:
| January 29, 2017 |
January 31, 2016 |
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Deferred tax assets: |
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Deferred revenue and redemption ticket liability |
$ | 18,318 | $ | 14,938 | ||||
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Leasing transactions |
13,735 | 10,578 | ||||||
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Accrued liabilities |
3,990 | 5,143 | ||||||
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Workers compensation and general liability insurance |
4,698 | 4,235 | ||||||
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Tax credit carryovers |
— | 4,490 | ||||||
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Share-based compensation |
5,284 | 3,538 | ||||||
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Net operating loss carryovers |
2,040 | 2,241 | ||||||
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Indirect benefit of unrecognized tax benefits |
563 | 536 | ||||||
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Other |
3,108 | 2,672 | ||||||
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Total |
51,736 | 48,371 | ||||||
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Valuation allowance |
(821 | ) | (1,006 | ) | ||||
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Total deferred tax assets, net of valuation allowance |
50,915 | 47,365 | ||||||
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Deferred tax liabilities: |
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Trademark/tradename |
(31,545 | ) | (31,907 | ) | ||||
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Property and equipment |
(30,956 | ) | (20,115 | ) | ||||
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Other |
(465 | ) | (433 | ) | ||||
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Total deferred tax liabilities |
(62,966 | ) | (52,455 | ) | ||||
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Net deferred tax liabilities |
$ | (12,051 | ) | $ | (5,090 | ) | ||
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Reported as: |
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Deferred tax assets, net—current |
— | 30,257 | ||||||
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Deferred tax assets, net—noncurrent |
2,446 | — | ||||||
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Deferred tax liablities, net—noncurrent |
(14,497 | ) | (35,347 | ) | ||||
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Net deferred tax liabilities |
$ | (12,051 | ) | $ | (5,090 | ) | ||
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At January 29, 2017, we had a valuation allowance of $821 against our deferred tax assets. The ultimate realization of our deferred tax assets is dependent on the generation of future taxable income in the jurisdiction and during periods in which temporary differences become deductible. In assessing the realizability of our deferred tax assets, we considered whether it is more likely than not that some or all of the deferred tax assets will not be realized. Based on the level of recent historical taxable income; consistent generation of annual taxable income, and estimations of future taxable income we have concluded that it is more likely than not that we will realize the federal tax benefits associated with our deferred tax assets. We assessed the realizability of the deferred tax assets associated with state taxes, foreign taxes and uncertain tax positions and have concluded that it is more likely than not that we will realize only a portion of these benefits. Accordingly, we have established a valuation allowance to reduce those deferred tax assets to an amount which we believe will ultimately be realized.
As of January 29, 2017, we have $63,245 of state net operating loss carryforwards. Included in state net operating loss carryforwards is approximately $22,233 of state net operating loss carryforwards related to excess stock compensation. Generally, state net operating losses can be carried forward 20 years. State net operating loss carryforwards do not begin to expire until 2018. As of January 29, 2017, we could not conclude that it was more likely than not that all of our state net operating loss carryforwards, when considered on a state by state basis, will be fully utilized prior to their expiration. Included in our total valuation allowance is $646 related to state net operating losses that may not be realized.
The following table sets forth the change in unrecognized tax benefits excluding interest, penalties and related income tax benefits for the fiscal years ended:
| January 29, 2017 | January 31, 2016 | February 1, 2015 | ||||||||||
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Balance at beginning of year |
$ | 1,263 | $ | 566 | $ | 476 | ||||||
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Additions for tax positions of prior years |
240 | 711 | 90 | |||||||||
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Reductions for tax positions of prior years |
(76 | ) | — | — | ||||||||
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Lapse of statute of limitations |
(79 | ) | (14 | ) | — | |||||||
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Balance at end of year |
$ | 1,348 | $ | 1,263 | $ | 566 | ||||||
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As of January 29, 2017 and January 31, 2016, the accrued interest and penalties on the unrecognized tax benefits were $355 and $399, respectively, excluding any related income tax benefits. The Company recorded accrued interest related to the unrecognized tax benefits and penalties as a component of the provision for income taxes recognized in the Consolidated Statements of Comprehensive Income.
We currently anticipate that approximately $39 of unrecognized tax benefits will be settled through federal and state audits or will be recognized as a result of the expiration of statute of limitations during fiscal 2018. Future recognition of potential interest or penalties, if any, will be recorded as a component of income tax expense. Because of the impact of deferred tax accounting, $980 of unrecognized tax benefits, if recognized, would affect the effective tax rate.
The following table sets forth the reconciliation of the federal statutory rate to the effective income tax rate for the fiscal years ended:
| January 29, 2017 | January 31, 2016 | February 1, 2015 | ||||||||||
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Federal corporate statutory rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
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State and local income taxes, net of federal income tax benefit |
4.4 | % | 2.8 | % | 20.7 | % | ||||||
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Foreign taxes |
— | % | (0.1 | )% | — | % | ||||||
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Nondeductible expenses |
1.5 | % | 1.7 | % | 11.3 | % | ||||||
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Tax credits |
(4.1 | )% | (5.4 | )% | (31.4 | )% | ||||||
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Valuation allowance |
(0.1 | )% | 0.1 | % | (4.0 | )% | ||||||
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Change in reserve |
— | % | 0.8 | % | 1.2 | % | ||||||
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Other |
— | % | 0.1 | % | 0.9 | % | ||||||
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Effective tax rate |
36.7 | % | 35.0 | % | 33.7 | % | ||||||
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We file consolidated income tax returns with all our domestic subsidiaries, which are periodically audited by various federal, state and foreign jurisdictions. We are generally no longer subject to federal, state, or foreign income tax examinations for years prior to 2012.