INCOME TAXES

The Company’s (loss) income before income taxes in the United States and in foreign jurisdictions is as follows:



(in thousands)	Fiscal 2016			Fiscal 2015			Fiscal 2014
(Loss) income before income taxes:
United States	$	(174,461	)	$	(31,206	)	$	114,772
Foreign	(4,419		)	1,967			5,785
Total (loss) income before income taxes	$	(178,880	)	$	(29,239	)	$	120,557

The components of the (benefit from) provision for income taxes are as follows:



(in thousands)	Fiscal 2016			Fiscal 2015			Fiscal 2014
United States	$	(70,316	)	$	(9,737	)	$	44,503
Foreign	1,218			46			2,255
Total (benefit) provision	$	(69,098	)	$	(9,691	)	$	46,758



(in thousands)	Fiscal 2016			Fiscal 2015			Fiscal 2014
Current:
Federal	$	(2,834	)	$	10,524		$	20,902
State	(229		)	2,409			6,361
Foreign	1,218			46			1,950
Total current	(1,845		)	12,979			29,213
Deferred:
Federal	(62,645		)	(20,956		)	14,579
State	(4,608		)	(1,714		)	2,661
Foreign	—			—			305
Total deferred	(67,253		)	(22,670		)	17,545
Total (benefit) provision	$	(69,098	)	$	(9,691	)	$	46,758

A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:



	Fiscal 2016		Fiscal 2015		Fiscal 2014
Tax at statutory federal tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	2.7	%	(1.6	)%	2.9	%
Other, net	0.9	%	(0.3	)%	0.9	%
Total	38.6	%	33.1	%	38.8	%

Deferred tax assets and liabilities consisted of the following:



(in thousands)	January 27, 2017		January 29, 2016
Deferred tax assets:
Deferred revenue	$	4,903	$	5,349
Legal and other reserves	1,892		1,839
Deferred compensation	4,653		3,199
Reserve for returns	3,578		4,911
Inventory	7,817		4,231
Currency translation adjustment - foreign subsidiaries	6,691		5,053
Other	8,197		6,935
Total deferred tax assets	37,731		31,517
Deferred tax liabilities:
Intangible assets	96,812		161,503
LIFO reserve	24,601		20,153
Unremitted foreign earnings	5,208		5,722
Catalog marketing	1,577		1,390
Total deferred tax liabilities	128,198		188,768
Net deferred tax liability	$	90,467	$	157,251

A reconciliation of the beginning and ending amount of UTBs for the fiscal years is as follows:



	Federal, State and Foreign Tax
(in thousands)	Fiscal 2016			Fiscal 2015			Fiscal 2014
Gross UTB balance at beginning of period	$	8,311		$	9,082		$	8,718
Tax positions related to the current period—gross increases	120			116			364
Tax positions related to the prior periods—gross decreases	(1,530		)	(697		)	—
Settlements	—			(190		)	—
Gross UTB balance at end of period	$	6,901		$	8,311		$	9,082

As of January 27, 2017, the Company had UTBs of $6.9 million. Of this amount, $4.5 million would, if recognized, impact its effective tax rate. The Company does not expect that UTBs will fluctuate in the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions. Pursuant to the Tax Sharing Agreement, Sears Holdings Corporation is generally responsible for all United States federal, state and local UTBs through the date of the Separation and, as such, the UTBs are recorded in Other liabilities in the Consolidated Balance Sheets, and an indemnification asset from Sears Holdings Corporation for the $6.5 million pre-Separation UTBs is recorded in Other assets in the Consolidated Balance Sheets. Prior to the Separation, the tax provision and related tax accounts represented the tax attributable to the Company as if the Company filed a separate tax return. However, the computed obligations were settled through Sears Holdings Corporation.

The Company classifies interest expense and penalties related to UTBs and interest income on tax overpayments as components of income tax expense. As of January 27, 2017, the total amount of interest expense and penalties recognized on the balance sheet was $4.9 million ($3.2 million net of federal benefit). As of January 29, 2016, the total amount of interest and penalties recognized on the balance sheet was $5.7 million ($3.7 million net of federal benefit). The total amount of net interest expense recognized in the Consolidated and Combined Statements of Operations were insignificant for all periods presented. Sears Holdings and Lands' End files income tax returns in both the United States and various foreign jurisdictions. The Internal Revenue Service has completed its examination of all federal income tax returns of Sears Holdings through the 2009 return, and all matters arising from such examinations have been resolved. The Company is currently under audit by the Internal Revenue Service for the year 2014. Sears Holdings and the Company are under examination by various state income tax jurisdictions for the years 2011 to 2014.

Impacts of Separation

Prior to the Separation, the tax provision and related tax accounts represented the tax attributable to the Company as if the Company filed a separate tax return. However, the computed obligations were settled through Sears Holdings Corporation. Accordingly, the taxes payable and related tax payments were reflected directly in Net parent company investment in the Consolidated Balance Sheets.

As a result of the Separation, the Company began filing its own income tax returns and, as a result certain tax attributes previously included in Net parent company investment were reclassified. Specifically, subsequent to the Separation the Company reclassified (i) $30.4 million of deferred tax assets related primarily to foreign tax credits; and (ii) a $13.7 million reserve for uncertain tax positions (including penalties and interest) out of Net parent company investment and into Deferred tax liabilities and Other liabilities, respectively, in the Consolidated Balance Sheets. As a result of the 2015 income tax return filed by the Company during Fiscal 2016, the Company recorded an increase in the deferred tax liabilities and a decrease in additional paid-in capital of $2.1 million related to the calculation of a deferred tax liability related to the LIFO inventory calculation that existed as of the date of the Separation. In addition, pursuant to the tax sharing agreement, a $13.7 million receivable was recorded by the Company to reflect the indemnification by Sears Holdings Corporation of the pre-Separation uncertain tax positions (including penalties and interest) for which Sears Holdings is responsible. This receivable is included in Other assets in the Consolidated Balance Sheets and was $11.4 million and $13.7 million at January 27, 2017 and January 29, 2016, respectively.