Income Taxes

Domestic and foreign pretax loss is as follows (in thousands):



	Fiscal
	2015			2014			2013
Domestic	$	(113,352	)	$	(196,394	)	$	(154,148	)
Foreign	(18,978		)	(25,527		)	(31,971		)
Total loss before (benefit) provision for income taxes	$	(132,330	)	$	(221,921	)	$	(186,119	)

The expense (benefit) provision for income taxes consists of the following (in thousands):



	Fiscal
	2015		2014			2013
Current:
Federal	$	2,159	$	(19,313	)	$	(45,615	)
State and local	761		(1,823		)	2,035
Foreign	1,191		1,269			1,052
	$	4,111	$	(19,867	)	$	(42,528	)
Deferred:
Federal	$	—	$	—		$	(5,981	)
State and local	—		4,440			1,707
Foreign	502		(36		)	2,514
	$	502	$	4,404		$	(1,760	)
	$	4,613	$	(15,463	)	$	(44,288	)

Reconciliation of the U.S. statutory tax rate with our effective tax rate is summarized as follows:



	Fiscal
	2015		2014		2013
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
(Decrease) increase in tax resulting from:
Foreign income taxes	(1.7	)%	(0.8	)%	(4.2	)%
State income taxes, net of federal tax benefit	(0.4	)%	(1.2	)%	(1.8	)%
Federal income tax valuation allowance	(40.4	)%	(25.2	)%	(4.8	)%
Other	4.0	%	(0.8	)%	(0.4	)%
Effective tax (expense) benefit rate	(3.5	)%	7.0	%	23.8	%

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



	January 30, 2016			January 31, 2015

Net operating loss carry-forwards (“NOL’s”)	$	126,650		$	70,118
Furniture, equipment and improvements	6,993			9,474
Stock-based compensation	7,112			8,786
Tax credit carryovers	8,150			7,666
Deferred rent and tenant allowances	6,228			5,444
Retirement benefit plan liabilities	2,223			4,356
Unredeemed gift cards	3,120			3,251
Accrued compensation	1,293			4,085
Other	5,470			6,731
Inventory	(10,229		)	(8,861		)
Total net deferred tax assets before valuation allowance	157,010			111,050
Valuation allowance	(157,010		)	(110,548		)
Net deferred income tax assets	$	—		$	502

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. ASU 2015-17 amended ASC 740, Income Taxes, to simplify the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. We have retrospectively adopted this ASU for the year ended January 30, 2016. As a result, less than $0.1 million of current deferred tax assets have been reclassified from other current assets to deferred income taxes in our Consolidated Statements of Financial Position as of January 31, 2015.

As of January 30, 2016, we had an aggregate of approximately $868.3 million of U.S. federal, state, Canadian and Puerto Rico NOL’s that will expire between 2020 and 2036. As of January 30, 2016, we recorded income taxes receivable of $3.9 million primarily for the portion of the NOL's available to carry back. We also recorded deferred tax assets of $126.7 million, before valuation allowance, for the portion of the NOL's available to carry forward. As of January 30, 2016, we recorded a valuation allowance of $126.7 million against these NOL carry forward deferred tax assets. We also recorded a valuation allowance of $30.3 million against other U.S. federal, state, Canadian and Puerto Rico net deferred tax assets due to losses incurred through fiscal 2015 and projections of future operating results. Subsequent recognition of these deferred tax assets that were previously reduced by the valuation allowance would result in an income tax benefit in the period of such recognition.

We have not recognized any U.S. tax expense on undistributed Puerto Rico earnings as they are intended to be indefinitely reinvested outside of the U.S. There were no undistributed earnings at January 30, 2016.

We follow the provisions of FASB ASC Topic 740, “Income Taxes” (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in income taxes. Uncertain tax position liabilities, inclusive of interest and penalties, were $6.9 million as of January 30, 2016, $7.2 million as of January 31, 2015 and $9.9 million as of February 1, 2014. Reversal of these liabilities, along with reversal of related deferred tax assets, would favorably impact our effective tax rate.

The amount of unrecognized tax benefits relating to our tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statues of limitations. Although the outcomes and timing of such events are highly uncertain, we anticipate that the balance of the liability for unrecognized tax benefits and related deferred tax assets will not significantly change during the next twelve months. However, changes in the occurrence, expected outcomes and timing of those events could cause our current estimate to change materially in the future. Our portion of gross unrecognized tax benefits that would affect our effective tax rate, including interest and penalties, is $6.9 million. Of this amount, $4.8 million was recorded as a direct reduction of the related deferred tax assets.

We recognize interest and, if applicable, penalties, which could be assessed, related to uncertain tax positions in income tax expense. Interest and penalties recorded in fiscal 2015, fiscal 2014 and fiscal 2013 were not material to the Consolidated Financial Statements. We had liabilities for accrued interest and penalties of $0.7 million as of January 30, 2016 and $0.6 million as of January 31, 2015.

Below is a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits relating to uncertain tax positions (excluding interest and penalties), which are recorded in our Consolidated Balance Sheets.



	Unrecognized Tax Benefits
	(In thousands)
Balance at February 2, 2013	$	1,880
Increases due to tax positions related to prior years	730
Increases due to tax positions related to current year	6,158
Increases due to settlements with taxing authorities	56
Decreases due to settlements with taxing authorities	(195		)
Decreases due to tax positions related to prior years	(9		)
Balance at February 1, 2014	$	8,620
Increases due to tax positions related to prior years	362
Decreases due to settlements with taxing authorities	(304		)
Decreases due to tax positions related to prior years	(2,046		)
Balance at January 31, 2015	$	6,632
Increases due to tax positions related to prior years	$	471
Decreases due to tax positions related to prior years	(764		)
Decreases due to lapse of statute of limitations	(150		)
Balance at January 30, 2016	$	6,189

We file U.S., Canada and Puerto Rico federal, various state and provincial income tax returns. Our 2010 through 2014 returns are currently under audit by the IRS in relation to our NOL carryback refund claims. Currently, no significant issues have been identified and we expect the audit to be completed in 2016. Generally, tax returns remain open for examination for our 2010 through 2014 tax years by various taxing authorities. However, certain states may keep their statute open for six to ten years.