(6)      Income Taxes

 

Income tax (expense) benefit for fiscal 2016, 2015 and 2014 consists of the following (in thousands):

 

 

Income tax expense computed using the federal statutory rate is reconciled to the reported income tax expense as follows for fiscal 2016, 2015 and 2014 (in thousands):

 

 

The components of deferred tax assets and deferred tax liabilities as of January 28, 2017 and January 30, 2016 are as follows (in thousands):

 

 

The Company files income tax returns in U.S. federal and state jurisdictions where it does business and is subject to examinations by the Internal Revenue Service (“IRS”) and other taxing authorities. With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to fiscal 2011.  The Company reviews and assesses uncertain tax positions, if any, with recognition and measurement of tax benefit based on a “more-likely-than-not” standard with respect to the ultimate outcome, regardless of whether this assessment is favorable or unfavorable.  As of January 28, 2017, there were no benefits taken on the Company’s income tax returns that do not qualify for financial statement recognition.   If a tax position does not meet the minimum statutory threshold to avoid payment of penalties and interest, a company is required to recognize an expense for the amount of the interest and penalty in the period in which the company claims or expects to claim the position on its tax return.  For financial statement purposes, companies are allowed to elect whether to classify such charges as either income tax expense or another expense classification.  Should such expense be incurred in the future, the Company will classify such interest as a component of interest expense and penalties as a component of income tax expense.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible and income tax credits may be utilized, management believes it is more likely than not that the Company will realize the benefits of these deductible differences with the exception of certain tax credits available in one state. Losses incurred in 2011 caused the Company to conclude that its ability to utilize a portion of such state’s tax credits was no longer more likely than not, necessitating a charge to income tax expense and a reduction in deferred tax assets totaling $0.8 million in connection with the establishment of a valuation allowance.  In 2013, the Company increased the valuation allowance by $0.4 million when it concluded that its ability to utilize most of the remaining portion of such credits was no longer more likely than not. In 2014, additional jobs credits became available in this state, and the Company concluded that a portion of such credits was not likely to be utilized, resulting in an additional increase in the valuation allowance of $0.1 million.

 

The effective income tax rate for fiscal 2016,  2015 and 2014 included the recognition of benefits arising from various federal and state tax credits.  Under current IRS and state income tax regulations, these credits may be carried back for two years or carried forward for periods up to 20 years.  The income tax benefit in fiscal 2016 included $1.8 million related to such credits.  The income tax benefit in fiscal 2015 included $1.2 million related to such credits.  The income tax benefit in fiscal 2014 included $2.1 million related to such credits, partially offset by the aforementioned $0.1 million increase in a valuation allowance.