Entity information:
INCOME TAXES

The U.S. Tax Reform, which was enacted on December 22, 2017, significantly changes how the U.S. taxes corporations, which includes the reduction in the federal statutory tax rate from 35% to 21% among other changes, and requires complex computations to be performed that were not previously required in U.S. tax law. The U.S. Treasury Department, the IRS, and other standard-setting bodies could interpret or issue guidance on how provisions of the U.S. Tax Reform will be applied or otherwise administered that is different from our interpretation. We have not completed our determination of the accounting implications of the U.S. Tax Reform. However, we have reasonably estimated the effects and recorded provisional amounts in our consolidated financial statements as of February 3, 2018. As we complete our analysis of the U.S. Tax Reform, collect and prepare necessary data, and interpret any additional guidance, we may make adjustments to provisional amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made.

Income tax provision consisted of the following:
 
Fiscal
 
2017
 
2016
 
2015
 
(in thousands)
Current:
 
 
 
 
 
Federal
$
60,083

 
$
61,506

 
$
64,416

Foreign
901

 
954

 
941

State and local
11,370

 
9,149

 
9,186

Total current tax expense
72,354

 
71,609

 
74,543

Deferred:
 
 
 
 
 
Federal
(10,436
)
 
4,972

 
8,035

Foreign
927

 
674

 
817

State and local
(3,228
)
 
1,598

 
411

Total deferred tax expense
(12,737
)
 
7,244

 
9,263

Income tax provision
$
59,617

 
$
78,853

 
$
83,806



The following presents a reconciliation of the income tax provision based on the U.S. federal statutory tax rate to the total tax provision (the U.S. federal statutory tax rate used below for fiscal 2017 excludes the impact of the revised rate due to the U.S. Tax Reform as that change is reflected in the net impact of implementing the U.S. Tax Reform):
 
Fiscal
 
2017
 
2016
 
2015
 
(in thousands)
Income tax provision at federal statutory rate
$
44,422

 
$
71,186

 
$
76,944

State and local taxes, net of federal benefit
3,893

 
7,212

 
7,847

Foreign
922

 
802

 
1,031

Net impact of implementing the U.S. Tax Reform
10,079

 
—

 
—

Other
301

 
(347
)
 
(2,016
)
Income tax provision
$
59,617

 
$
78,853

 
$
83,806


For fiscal 2017, our federal statutory rate, including the impact of implementing the U.S. Tax Reform, was a blended rate of 33.7% based on the applicable federal statutory rates before and after the U.S. Tax Reform and the number of days in our fiscal year.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:


February 3, 2018
 
January 28, 2017
 
(in thousands)
Deferred tax assets:
 
 
 
State bonus depreciation
$
3,171

 
$
2,989

Inventory
6,557

 
9,298

Construction and tenant allowances
1,311

 
2,386

Stock-based compensation
9,402

 
11,216

Equity earnings
2,379

 
1,560

Gift cards
2,719

 
3,928

Accrued expenses
2,184

 
2,747

Accrued rewards
3,242

 
4,568

Accrued rent
11,284

 
18,007

Other
2,507

 
3,124

 
44,756

 
59,823

Less: valuation allowance
(2,736
)
 
(1,972
)
Total deferred tax assets, net of valuation allowance
42,020

 
57,851

Deferred tax liabilities:
 
 
 
Property and equipment
(21,800
)
 
(31,923
)
Change in fair value of contingent consideration
9,108

 
(8,075
)
Prepaid expenses and other
(1,657
)
 
(2,919
)
Total deferred tax liabilities
(14,349
)

(42,917
)
Net deferred tax asset
$
27,671

 
$
14,934



We establish valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. The valuation allowance is related to a capital loss carryforward and state income tax refunds.

The U.S. Tax Reform includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been previously accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and we do not expect to incur any significant, additional taxes related to such amounts.

Changes in gross unrecognized tax benefits were as follows:
 
Fiscal
 
2017
 
2016
 
2015
 
(in thousands)
Unrecognized tax benefits - beginning of period
$
6,773

 
$
5,767

 
$
5,073

Additions for tax positions taken in the current year
1,835

 
2,513

 
2,109

Reductions for tax positions taken in prior years:
 
 
 
 
 
Lapses of applicable statutes of limitations
(233
)
 
(475
)
 
(854
)
Settlements
(450
)
 
(1,032
)
 
(561
)
Unrecognized tax benefits - end of period
$
7,925

 
$
6,773

 
$
5,767


As of February 3, 2018, January 28, 2017 and January 30, 2016, unrecognized tax benefits of $6.7 million, $4.8 million and $3.9 million, respectively, of the total unrecognized tax benefits would affect the effective tax rate if recognized. While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, any changes are not expected to have a material impact on our financial position, results of operations or cash flows. We recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision. Interest and penalties were not material for fiscal 2017, 2016 and 2015.

We are no longer subject to U.S federal income tax examinations for years prior to fiscal 2015 and state income tax examinations for years prior to 2012. We do not have state income tax returns in the process of examination at this time. We estimate the range of possible changes that may result from any future tax examinations to be insignificant at this time.