INCOME TAXES

Income before taxes was comprised of:



(in thousands)	Fiscal 2015		Fiscal 2014			Fiscal 2013
Domestic	$	8,412	$	100,115		$	37,325
Foreign	46,178		(961		)	35,952
Total	$	54,590	$	99,154		$	73,277

Domestic income above includes intercompany charges to foreign affiliates for management fees, cost-sharing, royalties, including those related to international direct-to-consumer operations and interest through October 31, 2015.

The provision for tax expense consisted of:



(in thousands)	Fiscal 2015			Fiscal 2014			Fiscal 2013
Current:
Federal	$	(3,124	)	$	21,287		$	52,579
State	(434		)	1,944			(4,988		)
Foreign	12,120			28,614			17,851
	8,562			51,845			65,442
Deferred:
Federal	9,224			8,971			(36,732		)
State	3,297			1,783			(4,606		)
Foreign	(5,052		)	(15,266		)	(5,455		)
	7,469			(4,512		)	(46,793		)
Total provision	$	16,031		$	47,333		$	18,649

Reconciliation between the statutory federal income tax rate and the effective tax rate is as follows:



	Fiscal 2015		Fiscal 2014		Fiscal 2013
U.S. Federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of U.S. federal income tax effect	4.6		4.3		(4.1	)
Foreign taxation of non-U.S. operations	(10.2	)	5.4		2.0
U.S. taxation of non-U.S. operations	20.0		—		—
Net change in valuation allowances	(8.7	)	6.6		0.1
Audit and other adjustments to prior years' accruals	(8.7	)	(1.3	)	(5.6	)
Statutory tax rate and law changes	4.2		0.2		—
Permanent items	(4.6	)	(1.1	)	—
Credit items	(2.3	)	(1.2	)	(2.8	)
Other items, net	0.1		(0.2	)	0.9
Total	29.4	%	47.7	%	25.5	%

The jurisdictional location of pre-tax income (loss) may represent a significant component of the Company's effective tax rate as income tax rates outside the U.S. are generally lower than the U.S. statutory income tax rate. Furthermore, the impact of changes in the jurisdictional location of pre-tax income (loss) on the Company's effective tax rate will be greater at lower levels of consolidated pre-tax income (loss). The taxation of non-U.S. operations line item in the table above excludes items related to the Company's non-U.S. operations reported separately in the appropriate corresponding line items.

For Fiscal 2015, the impact of taxation of non-U.S. operations on the Company's effective income tax rate was primarily related to the Company's subsidiaries in Australia, Switzerland and Hong Kong. For Fiscal 2015, the Company's Australian subsidiary incurred pre-tax losses of $4.9 million, with no jurisdictional tax effect, related to the closure of the Company’s Australian operations. For Fiscal 2015, the Company’s Swiss subsidiary earned pre-tax income of $1.9 million with a jurisdictional effective tax rate of negative 745%. The Swiss jurisdictional effective tax rate included the impact of the Company’s omnichannel restructuring as well as the release of a valuation allowance. For Fiscal 2015, the Company's subsidiary in Hong Kong incurred pre-tax losses of $6.8 million with a jurisdictional effective tax rate of 15.8%, slightly below the statutory tax rate of 16.5%.

For Fiscal 2014, the impact of taxation of non-U.S. operations on the Company's effective income tax rate was primarily related to the Company's Australian and Swiss subsidiaries. For Fiscal 2014, the Company's Australian subsidiary incurred pre-tax losses of $8.4 million with a jurisdictional effective tax rate of negative 5.6%. The Australian jurisdictional effective tax rate included the impact of the closure of the Company's Australian operations. For Fiscal 2014, the Company's Swiss subsidiary incurred pretax losses of $2.6 million with a jurisdictional effective tax rate of negative 218.4%. The Swiss jurisdictional effective tax rate included the impact of the establishment of a valuation allowance.

For Fiscal 2013, the impact of taxation of non-U.S. operations on the Company's effective income tax rate was primarily related to the Company's Japanese subsidiary. For Fiscal 2013, the Company's Japanese subsidiary reported $3.4 million of pretax income with a jurisdictional effective tax rate of 127.8%, which included the impact of discrete tax items.

The effect of temporary differences which gives rise to deferred income tax assets (liabilities) were as follows:



(in thousands)	January 30, 2016			January 31, 2015
Deferred tax assets:
Deferred compensation	$	62,679		$	83,157
Accrued expenses and reserves	19,862			17,695
Rent	36,929			38,881
Net operating losses (NOL) and credit carryforwards	14,248			14,897
Investments in subsidiaries	2,895			—
Other	619			1,403
Valuation allowances	(1,643		)	(6,730		)
Total deferred tax assets	$	135,589		$	149,303
Deferred tax liabilities:
Property, equipment and intangibles	$	(20,708	)	$	(16,059	)
Inventory	(9,480		)	(11,332		)
Store supplies	(6,054		)	(7,046		)
Prepaid expenses	(3,653		)	(2,438		)
Undistributed net income of non-U.S. subsidiaries	(4,390		)	—
Other	(1,011		)	(1,424		)
Total deferred tax liabilities	(45,296		)	(38,299		)
Net deferred income tax assets	$	90,293		$	111,004

Accumulated other comprehensive (loss) is shown net of deferred tax assets and deferred tax liabilities, resulting in a deferred tax liability of $1.7 million and a deferred tax liability of $1.6 million as of January 30, 2016 and January 31, 2015, respectively. Accordingly, these deferred taxes are not reflected in the table above.

As of January 30, 2016, the Company had deferred tax assets related to foreign and state NOL of $13.2 million and $0.2 million, respectively, that could be utilized to reduce future years’ tax liabilities. If not utilized, a portion of the foreign NOL carryovers will begin to expire in 2017 and a portion of state NOL will begin to expire in 2021. Some foreign NOL have an indefinite carryforward period.

As of January 30, 2016, the Company had deferred tax assets related to state credit carryforwards of $0.9 million, net of valuation allowances that could be utilized to reduce future years’ tax liabilities. If not utilized, the credit carryforwards will begin to expire in 2017. The utilization of credit carryforwards may be limited in a given year.

The Company believes it is more likely than not that NOL and credit carryforwards would reduce future years’ tax liabilities in various states and certain foreign jurisdictions less any associated valuation allowance. All valuation allowances have been reflected through the Consolidated Statements of Operations and Comprehensive (Loss) Income. No other valuation allowances have been provided for deferred tax assets because management believes that it is more likely than not that the full amount of the net deferred tax assets will be realized in the future. While the Company does not expect material adjustments to the total amount of valuation allowances within the next 12 months, changes in assumptions may occur based on the information then currently available. In such case, the Company will record an adjustment in the period in which a determination is made.

A reconciliation of the beginning and ending amounts of uncertain tax positions is as follows:



(in thousands)	Fiscal 2015			Fiscal 2014			Fiscal 2013
Uncertain tax positions, beginning of the year	$	3,212		$	4,182		$	11,116
Gross addition for tax positions of the current year	13			152			449
Gross addition for tax positions of prior years	598			33			30
Reductions of tax positions of prior years for:
Lapses of applicable statutes of limitations	(986		)	(348		)	(2,880		)
Settlements during the period	(64		)	(4		)	(3,936		)
Changes in judgment/ excess reserve	(318		)	(803		)	(597		)
Uncertain tax positions, end of year	$	2,455		$	3,212		$	4,182

The amount of the above uncertain tax positions at January 30, 2016, January 31, 2015 and February 1, 2014, which would impact the Company’s effective tax rate if recognized, was $2.5 million, $3.2 million and $4.2 million, respectively.

The Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense. During Fiscal 2015, the Company recognized a $0.9 million benefit related to net interest and penalties, compared to a $0.2 million benefit recognized during Fiscal 2014. Interest and penalties of $0.5 million were accrued at the end of Fiscal 2015, compared to $1.4 million accrued at the end of Fiscal 2014.

The Internal Revenue Service (“IRS”) is currently conducting an examination of the Company’s U.S. federal income tax return for Fiscal 2015 as part of the IRS’ Compliance Assurance Process program. The IRS examinations for Fiscal 2014 and prior years have been completed and settled. State and foreign returns are generally subject to examination for a period of three to five years after the filing of the respective return. The Company has various state and foreign income tax returns in the process of examination, administrative appeals or litigation. The outcome of the examinations is not expected to have a material impact on the Company's financial statements. The Company believes that some of these audits and negotiations will conclude within the next 12 months and that it is reasonably possible the amount of uncertain income tax positions, including interest, may decrease in the range of $1.3 million to $1.8 million due to settlements of audits and expiration of statutes of limitations.

The Company does not expect material adjustments to the total amount of uncertain tax positions within the next 12 months, but the outcome of tax matters is uncertain and unforeseen results can occur.

As of January 30, 2016, a provision for U.S. income tax has not been recorded on approximately $126.6 million of unremitted net income generated through the third quarter of Fiscal 2015 of non-U.S. subsidiaries that the Company has determined to be indefinitely reinvested outside the U.S. The potential U.S. deferred income tax liability if the foreign net income were to be repatriated in the future, net of any foreign income or withholding taxes previously paid, is approximately $25 million. Unremitted net income of $20.8 million generated after October 31, 2015 is not considered to be invested indefinitely, and the Company has recorded $4.4 million of deferred U.S. income taxes on this net income.