Income Taxes

12 Months Ended

Feb. 01, 2020

The provision for federal and state income taxes is summarized as follows:



(in thousands of dollars)	Fiscal 2019			Fiscal 2018			Fiscal 2017
Current:
Federal	$	27,684		$	34,960		$	91,799
State	541			2,436			2,466
	28,225			37,396			94,265
Deferred:
Federal	(5,293		)	2,353			(100,954		)
State	(122		)	(2,019		)	(1,111		)
	(5,415		)	334			(102,065		)
	$	22,810		$	37,730		$	(7,800	)

The Tax Cuts and Jobs Act (“the Act”) was signed into law on December 22, 2017. The Act’s primary impact to the Company’s consolidated financial statements was its reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The resulting blended federal statutory income tax rate in effect for the Company’s fiscal 2017 was 33.72%. The Company determined a reasonable estimate of the income tax effects of the Act and recorded provisional amounts within its consolidated financial statements during 2017. During fiscal 2018, the Company finalized its accounting of the income tax effects of the Act, within the one-year measurement period provided under SEC Staff Accounting Bulletin No. 118.

The rate reconciliation presented below reconciles the Company’s income tax provision to income taxes using the federal statutory income tax rate. As noted above, the federal statutory rates are 21% for fiscal 2019 and 2018 and 33.72% for fiscal 2017. Included in fiscal 2019 state income taxes below is $2.8 million in tax benefits for amended state tax return filings and related decreases to accrued state income taxes.



(in thousands of dollars)	Fiscal 2019			Fiscal 2018			Fiscal 2017
Income tax at the statutory federal rate (inclusive of income on and equity in earnings of joint ventures)	$	28,117		$	43,679		$	72,000
State income taxes, net of federal benefit (inclusive of income on and equity in earnings of joint ventures)	(2,782		)	2,538			(22		)
Net changes in unrecognized tax benefits, interest and penalties /reserves	1,017			(421		)	(448		)
Tax benefit of federal credits	(5,094		)	(4,563		)	(4,440		)
Changes in cash surrender value of life insurance policies	(404		)	(410		)	(441		)
Changes in valuation allowance	2,017			(2,039		)	222
Tax benefit of dividends paid to ESOP	(684		)	(621		)	(810		)
Estimated adjustments to net deferred tax liabilities for enacted changes in tax laws and rates	—			(1,521		)	(74,216		)
Other	623			1,088			355
	$	22,810		$	37,730		$	(7,800	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of February 1, 2020 and February 2, 2019 are as follows:



(in thousands of dollars)	February 1, 2020			February 2, 2019
Property and equipment bases and depreciation differences	$	14,985		$	22,942
Prepaid expenses	47,181			45,101
Joint venture bases differences	6,512			6,889
Differences between book and tax bases of inventory	22,705			18,770
Operating lease assets	11,323			—
Other	3,301			2,953
Total deferred tax liabilities	106,007			96,655
Accruals not currently deductible	(79,575		)	(66,325		)
Operating lease liabilities	(11,184		)	—
Net operating loss carryforwards	(64,270		)	(67,512		)
State income taxes	(749		)	(236		)
Other	(3,715		)	(2,267		)
Total deferred tax assets	(159,493		)	(136,340		)
Valuation allowance	55,671			53,172
Net deferred tax assets	(103,822		)	(83,168		)
Net deferred income taxes	$	2,185		$	13,487

For fiscal 2019 and 2018, deferred tax assets and liabilities were measured using the federal statutory income tax rate of 21% and the appropriate state statutory income tax rates.

At February 1, 2020, the Company had a deferred tax asset related to state net operating loss carryforwards of approximately $64.3 million that could be utilized to reduce the tax liabilities of future years. These carryforwards will expire between fiscal 2020 and 2040. State deferred tax assets were reduced by a valuation allowance of approximately $55.7 million primarily for the net operating loss carryforwards of various members of the affiliated group in states for which the Company determined that it is "more likely than not" that the benefit of the net operating losses will not be realized.

Deferred tax assets and liabilities are presented as follows in the accompanying consolidated balance sheets:



(in thousands of dollars)	February 1, 2020			February 2, 2019
Net deferred tax assets—other assets	$	(1,305	)	$	—
Net deferred tax liabilities—deferred income taxes	3,490			13,487
Net deferred income taxes	$	2,185		$	13,487

The total amount of unrecognized tax benefits as of February 1, 2020 was $5.2 million, of which $3.5 million would, if recognized, affect the Company’s effective tax rate. The total amount of unrecognized tax benefits as of February 2, 2019 was $2.7 million, of which $1.6 million would, if recognized, affect the Company's effective tax rate. The Company does not expect a significant change in unrecognized tax benefits in the next twelve months. Where applicable, associated interest and penalties are also recorded. The total amounts of interest and penalties were not material.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



(in thousands of dollars)	Fiscal 2019			Fiscal 2018			Fiscal 2017
Unrecognized tax benefits at beginning of period	$	2,688		$	3,189		$	4,013
Gross increases—tax positions in prior period	1,865			37			2
Gross decreases—tax positions in prior period	(538		)	(606		)	(710		)
Gross increases—current period tax positions	1,453			483			417
Settlements	—			—			(81		)
Lapse of statutes of limitation	(277		)	(415		)	(452		)
Unrecognized tax benefits at end of period	$	5,191		$	2,688		$	3,189

The fiscal tax years that remain subject to examination for the federal tax jurisdiction and major state tax jurisdictions are 2016 and forward. At this time, the Company does not expect the results from any income tax audit to have a material impact on the Company's consolidated financial statements.

Income taxes paid, net of income tax refunds received, during fiscal 2019, 2018 and 2017 were approximately $15.7 million, $68.4 million and $93.9 million, respectively.