On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States. The Act includes a number of changes to existing U.S. tax laws that impact us including the reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The Act also provides for a one-time transition tax on indefinitely reinvested foreign earnings and the acceleration of depreciation for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including the elimination of certain domestic deductions and credits and additional limitations on the deductibility of executive compensation. Our Fiscal 2020 and 2019 financial results reflected all tax effects from the Act.

The changes to existing U.S. tax laws as a result of the Act, which have the most significant impact on our provision for income taxes as of February 1, 2020 and February 2, 2019 are as follows:

We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, our deferred tax assets and liabilities were adjusted to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a $5.3 million increase in income tax expense for the year ended February 3, 2018 and a corresponding $5.3 million decrease in net deferred tax assets as of February 3, 2018.

We recognized a provisional income tax expense of $4.5 million for the year ended February 3, 2018 related to the one-time transition tax on indefinitely reinvested foreign earnings.

The adjustments to the deferred tax assets and liabilities and the liability for the transition tax on indefinitely reinvested foreign earnings, including the analysis of our ability to fully utilize foreign tax credits associated with the transition tax, were provisional amounts estimated based on information reviewed as of February 3, 2018. We recorded an additional expense of $1.3 million in Fiscal 2019, as the one-time transition tax of $5.8 million was finalized.

The Act established new tax rules designed to tax U.S. companies on GILTI earned by foreign subsidiaries. We elected to treat any future GILTI tax liabilities as period costs and will expense those liabilities in the period incurred. Therefore, we will not record deferred taxes associated with the GILTI provision for the Act. Because of tax losses in foreign jurisdictions, there was no liability for GILTI in any period.



(In thousands)	2020			2019			2018
United States	$	83,871		$	84,807		$	58,137
Foreign	(1,436		)	(6,548		)	10,852
Total Earnings from Continuing Operations before Income Taxes	$	82,435		$	78,259		$	68,989



(In thousands)	2020			2019		2018
Current
U.S. federal	$	16,313		$	13,657	$	25,093
International	322			1,649		5,421
State	3,383			4,029		3,828
Total Current Income Tax Expense	20,018			19,335		34,342
Deferred
U.S. federal	(463		)	3,632		1,491
International	1,145			2,594		(3,498		)
State	(22		)	1,474		(54		)
Total Deferred Income Tax Expense (Benefit)	660			7,700		(2,061		)
Total Income Tax Expense – Continuing Operations	$	20,678		$	27,035	$	32,281



	2020		2019		2018
U. S. federal statutory rate of tax	21.00	%	21.00	%	33.72	%
State taxes (net of federal tax benefit)	3.62		5.67		3.58
Foreign rate differential	(2.21	)	(2.56	)	(5.66	)
Change in valuation allowance	3.64		11.51		1.95
Impact of statutory rate change	—		—		7.74
Credits	(0.93	)	(2.65	)	(1.80	)
Permanent items	1.72		2.27		2.77
Uncertain federal, state and foreign tax positions	(2.01	)	(1.68	)	(1.36	)
Transition tax	—		2.23		6.47
Other	0.25		(1.24	)	(0.62	)
Effective Tax Rate	25.08	%	34.55	%	46.79	%



	February 1,			February 2,
(In thousands)	2020			2019
Pensions	$	332		$	—
Lease obligation	188,590			11,081
Book over tax depreciation	4,558			2,739
Expense accruals	7,386			5,061
Uniform capitalization costs	7,292			7,938
Provisions for discontinued operations and restructurings	674			730
Inventory valuation	810			908
Tax net operating loss and credit carryforwards	11,972			15,766
Allowances for bad debts and notes	181			318
Deferred compensation and restricted stock	3,344			3,814
Other	144			39
Gross deferred tax assets	225,283			48,394
Deferred tax asset valuation allowance	(23,333		)	(20,354		)
Deferred tax asset net of valuation allowance	201,950			28,040
Identified intangibles	(3,616		)	(3,265		)
Prepaids	(1,929		)	(1,638		)
Right of use asset	(176,930		)	—
Pensions	—			(1,802		)
Gross deferred tax liabilities	(182,475		)	(6,705		)
Net Deferred Tax Assets	$	19,475		$	21,335

As of February 1, 2020 and February 2, 2019, we had state net operating loss carryforwards of $3.4 million and $5.7 million, respectively. We provided a valuation allowance against these attributes of $3.2 million and $3.3 million, respectively, as of February 1, 2020 and February 2, 2019. The attributes expire in fiscal years 2022 through 2039.

As of February 1, 2020, we have provided a total valuation allowance of approximately $23.3 million on deferred tax assets associated primarily with foreign and state net operating losses for which management has determined it is more likely than not that the deferred tax assets will not be realized. The $2.9 million net increase in valuation allowance during Fiscal 2020 from the $20.4 million provided for as of February 2, 2019 relates to increases of $0.5 million related to state tax attributes and $2.4 million related to foreign tax attributes. Management believes that it is more likely than not that the remaining deferred tax assets will be fully realized.

As of February 1, 2020, no deferred taxes have been provided on the accumulated undistributed earnings of our foreign operations beyond the amounts recorded for deemed repatriation of such earnings, as required by U.S. Tax Reform. An actual repatriation of earnings from our foreign operations could still be subject to additional foreign withholding and U.S. state taxes. Based upon evaluation of our foreign operations, undistributed earnings are intended to remain permanently reinvested to finance anticipated future growth and expansion, and accordingly, deferred taxes have not been provided. If undistributed earnings of our foreign operations were not considered permanently reinvested as of February 1, 2020, an immaterial amount of additional deferred taxes would have been provided.



(In thousands)	2020			2019			2018
Unrecognized Tax Benefit – Beginning of Period	$	1,835		$	3,701		$	5,622
Gross Increases (Decreases) – Tax Positions in a Prior Period	—			—			(15		)
Gross Increases (Decreases) – Tax Positions in a Current Period	178			(638		)	(166		)
Settlements	(931		)	—			—
Lapse of Statutes of Limitations	(904		)	(1,228		)	(1,740		)
Unrecognized Tax Benefit – End of Period	$	178		$	1,835		$	3,701

The amount of unrecognized tax benefits as of February 1, 2020, February 2, 2019 and February 3, 2018 which would impact the annual effective rate if recognized were $0.2 million, $0.6 million and $0.6 million, respectively. The amount of unrecognized tax benefits may change during the next twelve months but we do not believe the change, if any, will be material to our consolidated financial position or results of operations.

We recognize interest expense and penalties related to the above unrecognized tax benefits within income tax expense on the Consolidated Statements of Operations and it was not material for Fiscal 2020, 2019 or 2018.