Taxes on Earnings

12 Months Ended

Jan. 30, 2016

The provision for income taxes consisted of the following:



($000)	2015		2014		2013
Current
Federal	$	497,710	$	499,009	$	486,203
State	37,030		36,547		35,053
	534,740		535,556		521,256
Deferred
Federal	55,404		23,452		(11,055		)
State	954		1,634		(4,195		)
	56,358		25,086		(15,250		)
Total	$	591,098	$	560,642	$	506,006

In fiscal 2015, 2014, and 2013, the Company realized tax benefits of $42.4 million, $29.8 million and $27.7 million, respectively, related to employee equity programs that were recorded in additional paid-in capital.

The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory federal income tax rate. The differences are reconciled below:



	2015		2014		2013
Federal income taxes at the statutory rate	35	%	35	%	35	%
State income taxes (net of federal benefit) and other, net	2	%	3	%	3	%
Total	37	%	38	%	38	%

The components of deferred taxes at January 30, 2016 and January 31, 2015 are as follows:



($000)	2015			2014
Deferred Tax Assets
Accrued liabilities	$	69,144		$	77,791
Deferred compensation	29,932			33,456
Stock-based compensation	41,388			35,332
Deferred rent	23,903			26,370
California franchise taxes and credits	21,973			18,478
Employee benefits	22,156			23,136
Other	6,835			4,927
	215,331			219,490
Deferred Tax Liabilities
Depreciation	(304,191		)	(252,013		)
Merchandise inventory	(28,085		)	(26,668		)
Supplies	(12,559		)	(11,616		)
Prepaid expenses	(584		)	(2,923		)
	(345,419		)	(293,220		)
Net Deferred Tax Liabilities	$	(130,088	)	$	(73,730	)

At the end of fiscal 2015 and 2014, the Company's state tax credit carryforwards for income tax purposes were approximately $16.1 million and $12.1 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2023.

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2015, 2014, and 2013 are as follows:



($000)	2015			2014			2013
Unrecognized tax benefits - beginning of year	$	78,116		$	80,323		$	65,667
Gross increases:
Tax positions in current period	14,990			15,441			15,591
Tax positions in prior period	—			—			2,418
Gross decreases:
Tax positions in prior periods	(10,589		)	(9,432		)	(519		)
Lapse of statute limitations	(4,216		)	(5,732		)	(2,274		)
Settlements	(2,929		)	(2,484		)	(560		)
Unrecognized tax benefits - end of year	$	75,372		$	78,116		$	80,323

At the end of fiscal 2015, 2014, and 2013, the reserves for unrecognized tax benefits were $94.2 million, $101.7 million, and $104.9 million inclusive of $18.8 million, $23.6 million, and $24.6 million of related interest and penalties, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $45.9 million would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred tax assets and liabilities. These amounts are net of federal and state income taxes.

The Company believes it is reasonably possible that certain federal and state tax matters may be concluded or statutes of limitations may lapse during the next twelve months. Accordingly, the total amount of unrecognized tax benefits may decrease, reducing the provision for taxes on earnings by up to $3.7 million.

The Company is generally open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2012 through 2015. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2011 through 2015. Certain state tax returns are currently under audit by state tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.