INCOME TAXES:

The income tax provision consisted of the following:



	Fiscal 2016			Fiscal 2015			Fiscal 2014

	(in thousands)
Current:
Federal	$	49,994		$	15,622		$	53,985
Foreign	260			210			124
State	5,654			1,683			7,152
Deferred:
Federal	(8,483		)	(25,004		)	(6,550		)
State	75			(9,411		)	(2,911		)
Income tax provision (benefit)	$	47,500		$	(16,900	)	$	51,800

The foreign component of pre-tax income (loss), arising principally from operating foreign stores and other management and cost sharing charges we are required to allocate under U.S. tax law, for fiscal 2016, 2015, and 2014 was $0.1 million, $(0.8) million, and $(2.8) million respectively.

A reconciliation between the statutory federal income tax rate and the effective income tax rate follows:



	Fiscal 2016		Fiscal 2015		Fiscal 2014
Federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal tax benefit	3.4		4.3		1.9
Goodwill impairment	—		(124.2	)	8.4
Outside basis difference - Boston Proper sale	(2.8	)	165.2		—
Other state benefits associated with sale and liquidation of Boston Proper	(0.3	)	20.1		—
Enhanced charitable contribution	(1.9	)	19.3		(2.5	)
Executive compensation limitation	1.2		(7.3	)	1.3
Foreign losses with full valuation allowance	0.2		(2.9	)	1.0
Federal tax credits	(0.5	)	3.4		(0.7	)
Other items, net	(0.1	)	0.4		0.1
Total	34.2	%	113.3	%	44.5	%

Deferred tax assets and liabilities are recorded due to different carrying amounts for financial and income tax reporting purposes arising from cumulative temporary differences. These differences consist of the following as of January 28, 2017 and January 30, 2016:



	January 28, 2017			January 30, 2016

	(in thousands)
Deferred tax assets:
Accrued liabilities and allowances	$	17,790		$	13,416
Accrued straight-line rent	20,361			19,716
Stock-based compensation	10,329			12,945
Property related	1,816			6,270
Charitable contribution limitation carryfowards	5,109			5,720
State tax credits and net operating loss carryforwards	5,105			5,384
Other	3,376			4,675
Total deferred tax assets	63,886			68,126
Valuation allowance	(749		)	(911		)
Net deferred tax assets	63,137			67,215

Deferred tax liabilities:
Other	—			(1,249		)
Prepaid expenses	(2,976		)	(4,099		)
Property related	(43,271		)	(50,601		)
Other intangible assets	(24,197		)	(23,200		)
Total deferred tax liabilities	(70,444		)	(79,149		)
Net deferred taxes	$	(7,307	)	$	(11,934	)

As of January 28, 2017, the Company had available for state income tax purposes net operating loss and tax credit carryovers which expire, if unused, in the years 2020 - 2035 and 2019 - 2026, respectively.

We have not recognized any United States (“U.S.”) tax expense on undistributed foreign earnings as they are intended to be indefinitely reinvested outside of the U.S. There were no significant undistributed earnings at January 28, 2017 and January 30, 2016.

Accumulated other comprehensive income is shown net of deferred tax assets and deferred tax liabilities. These deferred taxes are not reflected in the table above. The amount is not significant at January 28, 2017 or January 30, 2016.

A reconciliation of the beginning and ending amounts of uncertain tax positions for each of fiscal 2016, fiscal 2015 and fiscal 2014 is as follows:



	Fiscal 2016			Fiscal 2015			Fiscal 2014

	(in thousands)
Balance at beginning of year	$	4,840		$	2,532		$	3,956
Additions for tax positions of prior years	1,280			2,618			757
Reductions for tax positions of prior years	(1		)	(56		)	(736		)
Additions for tax positions for the current year	246			259			390
Settlements/payments with tax authorities	(850		)	—			(1,501		)
Reductions due to lapse of applicable statutes of limitation	(357		)	(513		)	(334		)
Balance at end of year	$	5,158		$	4,840		$	2,532

At January 28, 2017, January 30, 2016, and January 31, 2015, balances included $4.4 million, $4.0 million, and $1.6 million respectively, of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate in future periods. Included in the January 28, 2017 uncertain tax positions balance of $5.2 million is $2.8 million of unrecognized tax benefits that have been offset directly against the associated tax attributes. We do not expect any events to occur that would cause a change to our unrecognized tax benefits or income tax expense within the next twelve months.

Our continuing practice is to recognize potential accrued interest and penalties relating to unrecognized tax benefits in the income tax provision. For fiscal 2016, 2015 and 2014, we accrued $0.2 million, $0.2 million and $0.3 million, respectively for interest and penalties. We had approximately $0.5 million, $0.4 million and $0.5 million, respectively for the payment of interest and penalties accrued at January 28, 2017, January 30, 2016 and January 31, 2015, respectively. The amounts included in the reconciliation of uncertain tax positions do not include accruals for interest and penalties.

In fiscal 2006, we began participating in the IRS’s real time audit program, Compliance Assurance Process (“CAP”). Under the CAP program, material tax issues and initiatives are disclosed to the IRS throughout the year with the objective of reaching agreement as to the proper reporting treatment when the federal return is filed. For fiscal 2014, we have received a partial acceptance letter with all issues resolved with the exception of the domestic production activities deduction. The Company did not claim the domestic production activities deduction for fiscal 2015 and has received a full acceptance letter for that fiscal year.

With few exceptions, we are no longer subject to state and local examinations for years before fiscal 2012. Various state examinations are currently underway for fiscal periods spanning from 2011 through 2015; however, we do not expect any significant change to our uncertain tax positions within the next year.