5.TAXES  BASED  ON  INCOME

 

The provision for taxes based on income consists of:

 

 

A reconciliation of the statutory federal rate and the effective rate follows:

 

 

The 2016 tax rate differed from the federal statutory rate primarily as a result of the recognition of excess tax benefits related to share-based payments after the adoption of ASU 2016-09 (see Note 17), the utilization of tax credits, the Domestic Manufacturing Deduction and other changes, partially offset by the effect of state income taxes. 

 

The 2015 rate for state income taxes is less than 2016 and 2014 due to filing amended returns to claim additional benefits in years still under review, the favorable resolution of state issues and an increase in state credits. 

 

The tax effects of significant temporary differences that comprise tax balances were as follows:

 

 

At January 28, 2017, the Company had net operating loss carryforwards for state income tax purposes of $1,206.  These net operating loss carryforwards expire from 2017 through 2036.  The utilization of certain of the Company’s state net operating loss carryforwards may be limited in a given year.  Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state net operating losses. 

 

At January 28, 2017, the Company had state credit carryforwards of $62, most of which expire from 2017 through 2027.  The utilization of certain of the Company’s credits may be limited in a given year. Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state credits.

 

At January 28, 2017, the Company had federal net operating loss carryforwards of $55. These net operating loss carryforwards expire from 2030 through 2035. The utilization of certain of the Company’s federal net operating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the Company has not recorded a valuation allowance against the deferred tax assets resulting from its federal net operating losses. 

 

The Company regularly reviews all deferred tax assets on a tax filer and jurisdictional basis to estimate whether these assets are more likely than not to be realized based on all available evidence.  This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.  Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned.  The expected timing of the reversals of existing temporary differences is based on current tax law and the Company’s tax methods of accounting.  Unless deferred tax assets are more likely than not to be realized, a valuation allowance is established to reduce the carrying value of the deferred tax asset until such time that realization becomes more likely than not.  Increases and decreases in these valuation allowances are included in "Income tax expense" in the Consolidated Statements of Operations.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits, including positions impacting only the timing of tax benefits, is as follows:

 

 

The Company does not anticipate that changes in the amount of unrecognized tax benefits over the next twelve months will have a significant impact on its results of operations or financial position.

 

As of January 28, 2017, January 30, 2016 and January 31, 2015, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $73,  $83 and $90, respectively.

 

To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense.  During the years ended January 28, 2017, January 30, 2016 and January 31, 2015, the Company recognized approximately $(1),  $(5) and $3, respectively, in interest and penalties (recoveries).  The Company had accrued approximately $20,  $25 and $30 for the payment of interest and penalties as of January 28, 2017, January 30, 2016 and January 31, 2015, respectively.

 

As of January 28, 2017, the Internal Revenue Service had concluded its examination of the Company’s 2012 and 2013 federal tax returns.