7. Income Taxes

Net deferred taxes are as follows:


	*(in thousands)*
	May 3, 2014		February 1, 2014		May 4, 2013
Current Deferred Tax Asset	$	14,850	$	13,475	$	9,337
Non-Current Deferred Tax Liability		235,986		242,708		251,167

Net Deferred Tax Liability	$	221,136	$	229,233	$	241,830

Current deferred tax assets consisted primarily of certain operating costs and inventory related costs not currently deductible for tax purposes. Non-current deferred tax liabilities primarily relate to rent expense, intangible assets, and depreciation expense where the Company has a future obligation for tax purposes.

In accordance with ASC Topic No. 270, Interim Reporting (Topic No. 270), and ASC Topic No. 740, Income Taxes (Topic No. 740), at the end of each interim period the Company is required to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. As of May 3, 2014 and May 4, 2013, the Company’s best estimate of its annual effective income tax rate was 39.7% and 37.2%, respectively (before discrete items).

As of May 3, 2014, February 1, 2014 and May 4, 2013, valuation allowances amounted to $5.7 million, $5.7 million and $5.8 million, respectively, primarily related to state tax net operating losses. The Company believes that it is more likely than not that a portion of the benefit of the state tax net operating losses will not be realized. The Company has $7.8 million of deferred tax assets recorded for state net operating losses, of which $5.7 million will expire between 2013 and 2025.

In addition, management also determined that a full valuation allowance of $3.6 million, $3.4 million and $3.3 million were required against the tax benefit associated with Puerto Rico deferred tax assets as of May 3, 2014, February 1, 2014 and May 4, 2013, respectively.