INCOME TAXES

Income tax expense is based on pretax financial accounting income. Deferred income taxes are recognized for the temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and such amounts for income tax purposes.

The income tax provision for the fiscal years ended 2016, 2015 and 2014, consisted of the following (in thousands):



	Fiscal Year Ended
	October 30, 2016			November 1, 2015			November 2, 2014
Current:
Federal	$	22,602		$	12,366		$	3,919
State	3,179			336			1,016
Foreign	838			1,638			516
Total current	26,619			14,340			5,451
Deferred:
Federal	105			(5,193		)	(198		)
State	1,380			91			(319		)
Foreign	(167		)	(266		)	(3,444		)
Total deferred	1,318			(5,368		)	(3,961		)
Total provision	$	27,937		$	8,972		$	1,490

The reconciliation of income tax computed at the United States federal statutory tax rate to the effective income tax rate is as follows:



	Fiscal Year Ended
	October 30, 2016		November 1, 2015		November 2, 2014
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes	3.8	%	1.6	%	4.6	%
Production activities deduction	(3.4	)%	(6.4	)%	(3.7	)%
Canadian valuation allowance	—	%	—	%	(23.3	)%
Non-deductible expenses	1.3	%	4.1	%	7.0	%
Uncertain tax position adjustment	—	%	—	%	(2.4	)%
Foreign tax benefit	—	%	—	%	(4.5	)%
Other	(1.3	)%	(0.8	)%	(0.9	)%
Effective tax rate	35.4	%	33.5	%	11.8	%

Deferred income taxes reflect the net impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of the temporary differences for fiscal 2016 and 2015 are as follows (in thousands):



	October 30, 2016			November 1, 2015
Deferred tax assets:
Inventory obsolescence	$	2,195		$	2,302
Bad debt reserve	1,094			1,044
Accrued and deferred compensation	22,339			22,203
Accrued insurance reserves	2,054			1,464
Deferred revenue	10,440			9,811
Net operating loss and tax credit carryover	4,301			4,512
Depreciation and amortization	473			60
Pension	6,568			5,770
Other reserves	502			1,098
Total deferred tax assets	49,966			48,264
Less valuation allowance	(210		)	(115		)
Net deferred tax assets	49,756			48,149
Deferred tax liabilities:
Depreciation and amortization	(44,292		)	(39,708		)
U.S. tax on unremitted foreign earnings	(1,107		)	(1,106		)
Other	(58		)	(797		)
Total deferred tax liabilities	(45,457		)	(41,611		)
Total deferred tax asset, net	$	4,299		$	6,538

We carry out our business operations through legal entities in the U.S., Canada, Mexico and China. These operations require that we file corporate income tax returns that are subject to U.S., state and foreign tax laws. We are subject to income tax audits in these multiple jurisdictions.

As of October 30, 2016, the $4.3 million net operating loss and tax credit carryforward included $0.5 million for U.S. state loss carryforwards. The state net operating loss carryforwards will expire in 1 to 19 years, if unused. As of October 30, 2016, our foreign operations have a net operating loss carryforward of approximately $12.9 million, representing $3.4 million of the $4.3 million deferred tax asset related to net operating loss and tax credit carryovers, that will start to expire in fiscal 2026, if unused. During fiscal 2014, after evaluating historical and future financial trends in our Canadian operations, we determined that it is more likely than not that we will utilize all of our current tax loss carryforwards. As a result, we reversed the entire valuation allowance on our net Canadian deferred tax asset. We have a full valuation allowance on the loss generated by our operations in China related to our CENTRIA operations.

The following table represents the rollforward of the valuation allowance on deferred taxes activity for the fiscal years ended October 30, 2016, November 1, 2015 and November 2, 2014 (in thousands):



	October 30, 2016		November 1, 2015		November 2, 2014
Beginning balance	$	115	$	—	$	4,046
(Reductions) additions	95		115		(4,046		)
Ending balance	$	210	$	115	$	—

Uncertain tax positions

There were no unrecognized tax benefits at October 30, 2016. The total amount of unrecognized tax benefits at November 1, 2015 was $0.1 million, all of which would impact our effective tax rate, if recognized. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

The following table summarizes the activity related to the Company’s unrecognized tax benefits during fiscal 2016 and 2015 (in thousands):



	October 30, 2016			November 1, 2015
Unrecognized tax benefits at beginning of year	$	143		$	143
Additions for tax positions related to prior years	—			—
Reductions resulting from expiration of statute of limitations	(143		)	—
Unrecognized tax benefits at end of year	$	—		$	143

We recognize interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. We did not have a material amount of accrued interest and penalties related to uncertain tax positions as of October 30, 2016.

We file income tax returns in the U.S. federal jurisdiction and multiple state and foreign jurisdictions. Our tax years are closed with the IRS through the year ended October 28, 2012, as the statute of limitations related to these tax years has closed. In addition, open tax years related to state and foreign jurisdictions remain subject to examination but are not considered material.