Taxes on Earnings

The provision for income taxes consisted of the following:



($000)	2016			2015		2014
Current
Federal	$	632,872		$	497,710	$	499,009
State	44,333			37,030		36,547
	677,205			534,740		535,556
Deferred
Federal	(8,350		)	55,404		23,452
State	(353		)	954		1,634
	(8,703		)	56,358		25,086
Total	$	668,502		$	591,098	$	560,642

In fiscal 2016, 2015, and 2014, the Company realized tax benefits of $23.3 million, $42.4 million and $29.8 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:



	2016		2015		2014
Federal income taxes at the statutory rate	35	%	35	%	35	%
State income taxes (net of federal benefit) and other, net	2	%	2	%	3	%
Total	37	%	37	%	38	%

The components of deferred taxes at January 28, 2017 and January 30, 2016 are as follows:



($000)	2016			2015
Deferred Tax Assets
Accrued liabilities	$	71,796		$	69,144
Deferred compensation	36,101			29,932
Stock-based compensation	44,865			41,388
Deferred rent	25,221			23,903
State taxes and credits	28,484			21,973
Employee benefits	23,987			22,156
Other	8,223			6,835
Gross Deferred Tax Assets	238,677			215,331
Less: Valuation allowance	(3,730		)	—
Deferred Tax Assets	234,947			215,331

Deferred Tax Liabilities
Depreciation	(313,526		)	(304,191		)
Merchandise inventory	(28,853		)	(28,085		)
Supplies	(13,418		)	(12,559		)
Other	(535		)	(584		)
Deferred Tax Liabilities	(356,332		)	(345,419		)
Net Deferred Tax Liabilities	$	(121,385	)	$	(130,088	)

At the end of fiscal 2016 and 2015, the Company's state tax credit carryforwards for income tax purposes were approximately $22.8 million and $16.1 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2019. The Company has provided a valuation allowance of $3.7 million for deferred tax assets related to state tax credits that are not expected to be realized.

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2016, 2015, and 2014 are as follows:



($000)	2016			2015			2014
Unrecognized tax benefits - beginning of year	$	75,372		$	78,116		$	80,323
Gross increases:
Tax positions in current period	12,394			14,990			15,441
Tax positions in prior period	2,897			—			—
Gross decreases:
Tax positions in prior periods	(3,231		)	(10,589		)	(9,432		)
Lapse of statute limitations	(6,310		)	(4,216		)	(5,732		)
Settlements	—			(2,929		)	(2,484		)
Unrecognized tax benefits - end of year	$	81,122		$	75,372		$	78,116

At the end of fiscal 2016, 2015, and 2014, the reserves for unrecognized tax benefits were $98.6 million, $94.2 million, and $101.7 million inclusive of $17.5 million, $18.8 million, and $23.6 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, $49.1 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.

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 $4.3 million.

The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2013 through 2016. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2012 through 2016. Certain federal and state tax returns are currently under audit by various tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.