9. INCOME TAXES

 

 The reconciliation of income tax expense computed at the U.S. federal statutory tax rate to income tax expense reported in our consolidated statements of comprehensive income is as follows (in thousands):

 

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the U.S.  The Tax Act includes a number of changes to U.S. tax laws that impact the Company, including the reduction of the federal statutory tax rate from 35% to 21% effective January 1, 2018.  As a result of the Tax Act, we recorded an $8.5 million charge in fiscal 2017.  The charge consists of provisional adjustments of $10.8 million related to repatriation taxes for accumulated earnings of foreign subsidiaries and $3.8 million related to the revaluation of net deferred tax assets, partially offset by a $6.1 million benefit due to the decrease in the federal statutory tax rate.  The U.S. Treasury is expected to issue additional regulations and guidance in connection with the Tax Act, which may alter interpretations of the new tax law and could materially change our estimated provisional adjustments.

 

In addition, the Tax Act subjects us to a tax on global intangible low-taxed income (“GILTI”) related to certain foreign subsidiaries.  Given the complexity of the GILTI tax regulations, we are still evaluating the impact of its provisions and have not reflected any adjustments related to the GILTI tax in our financial statements for the year ended February 3, 2018.

The components of our income tax expense are as follows (in thousands):

 

 

The pretax income from foreign operations for fiscal 2017, fiscal 2016 and fiscal 2015 totaled $119.9 million,  $48.2 million and $33.2 million, respectively.

 

Significant components of deferred income tax assets and liabilities are as follows (in thousands):

 

 

A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. In evaluating our ability to realize our deferred tax assets we considered sources of future taxable income, including future reversals of existing taxable temporary differences, forecast of future profitability and tax-planning strategies.

 

At February 3, 2018, we had state net operating loss carryforwards to reduce future taxable income of $6.2 million, net of federal tax benefits, expiring at various dates between fiscal 2018 and fiscal 2037. Cash paid for income taxes totaled $181.3 million, $162.4 million and $154.9 million in fiscal 2017, fiscal 2016 and fiscal 2015, respectively.

 

Unrecognized Tax Benefits

 

We operate in a number of tax jurisdictions and are subject to examination of our income tax returns by tax authorities in those jurisdictions who may challenge any item on these tax returns. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. In accordance with ASC 740, Income Taxes, we recognize these tax benefits in our consolidated financial statements only after determining that it is more likely than not that the tax benefits will be sustained.

 

A reconciliation of gross unrecognized tax benefits from the end of fiscal 2016 through the end of fiscal 2017 is as follows (in thousands):

 

Included in the balance of unrecognized tax benefits at February 3, 2018 is $25.4 million which, if recognized, would affect income tax expense. We do not expect any material changes to our liability for uncertain tax positions during the next 12 months. At February 3, 2018 and January 28, 2017, the total amount of interest accrued within the tax liability was $3.0 million and $2.1 million, respectively. There was no material interest or penalty expense recognized in the consolidated statements of comprehensive income in fiscal 2017, fiscal 2016 or fiscal 2015.

 

Our income tax returns are subject to examination by taxing authorities in the jurisdictions in which we operate. The periods subject to examination for our federal returns are fiscal 2013 to fiscal 2016 and fiscal 2010 to fiscal 2016 for our Canadian returns. State income tax returns are generally subject to examination for a period of three to five years after filing. We have various state income tax returns in the process of examination, appeals or settlements. Our income tax returns for fiscal 2011 and fiscal 2012 are currently under examination by the Canadian tax authorities. Our federal returns for fiscal 2013 and fiscal 2014 are currently under examination by the Internal Revenue Service. We are not aware of any issues which would result in a material assessment of net tax obligations.