Note D: Income Taxes

The components of earnings before income taxes, by tax jurisdiction, are as follows:


In thousands	Fiscal 2015		Fiscal 2014		Fiscal 2013
United States	$	462,701	$	482,739	$	448,764
Foreign		25,306		19,464		3,918
Total earnings before income taxes	$	488,007	$	502,203	$	452,682

The provision for income taxes consists of the following:


In thousands	Fiscal 2015			Fiscal 2014			Fiscal 2013
Current
Federal	$	156,812		$	157,227		$	173,686
State		22,969			31,959			25,748
Foreign		5,594			4,411			2,690
Total current		185,375			193,597			202,124
Deferred
Federal		(6,093	)		2,719			(26,324	)
State		1,258			(2,547	)		(1,277	)
Foreign		(2,601	)		(420	)		(743	)
Total deferred		(7,436	)		(248	)		(28,344	)
Total provision	$	177,939		$	193,349		$	173,780

We have historically elected not to provide for U.S. income taxes with respect to the undistributed earnings of our foreign subsidiaries as we intended to utilize those earnings in our foreign operations for an indefinite period of time. As of January 31, 2016, the accumulated undistributed earnings of all foreign subsidiaries were approximately $66,500,000 and are sufficient to support our anticipated future cash needs for our foreign operations. We currently intend to utilize those undistributed earnings for an indefinite period of time and will only repatriate such earnings when it is tax effective to do so. If we did not consider these earnings to be indefinitely reinvested, the deferred tax liability would have been in the range of $8,000,000 to $12,000,000 at January 31, 2016.

A reconciliation of income taxes at the federal statutory corporate rate to the effective rate is as follows:


	Fiscal 2015			Fiscal 2014			Fiscal 2013
Federal income taxes at the statutory rate		35.0%			35.0%			35.0%
State income tax rate		3.2%			4.0%			3.7%
Other		(1.7%	)		(0.5%	)		(0.3%	)
Effective tax rate		36.5%			38.5%			38.4%

Significant components of our deferred tax accounts are as follows:


Deferred tax assets (liabilities), in thousands	Jan. 31, 2016			Feb. 1, 2015
Customer deposits	$	64,742		$	60,989
Merchandise inventories		31,752			30,328
Stock-based compensation		21,365			19,857
Deferred rent		19,952			18,925
Accrued liabilities		17,028			28,866
Compensation		15,776			15,968
State taxes		6,723			7,061
Executive deferral plan		6,003			5,437
Deferred lease incentives		(36,475	)		(37,098	)
Prepaid catalog expenses		(10,883	)		(12,753	)
Depreciation		(4,527	)		(9,888	)
Other		11,451			8,759
Valuation allowance		(1,123	)		(1,568	)
Total deferred tax assets, net	$	141,784		$	134,883

As of January 31, 2016, we adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes. We have adopted this ASU prospectively and have presented both deferred tax assets and deferred tax liabilities as noncurrent in our Consolidated Balance Sheet as of January 31, 2016. Prior balance sheets have not been retrospectively adjusted (see Note A).

The following table summarizes the activity related to our gross unrecognized tax benefits:


In thousands	Fiscal 2015			Fiscal 2014			Fiscal 2013
Balance at beginning of year	$	14,359		$	10,765		$	8,990
Increases related to current year’s tax positions		2,765			3,093			3,351
Increases related to prior years’ tax positions		101			2,007			328
Decreases related to prior years’ tax positions		(341	)		(138	)		(42	)
Settlements		(2,912	)		(1,144	)		(170	)
Lapses in statute of limitations		(682	)		(224	)		(1,692	)
Balance at end of year	$	13,290		$	14,359		$	10,765

As of January 31, 2016, we had $13,290,000 of gross unrecognized tax benefits, of which $8,948,000 would, if recognized, affect the effective tax rate.

We accrue interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of January 31, 2016 and February 1, 2015, our accruals for the payment of interest and penalties totaled $2,649,000 and $2,412,000, respectively, primarily related to the payment of interest.

Due to the potential resolution of state issues, it is reasonably possible that the balance of our gross unrecognized tax benefits could decrease within the next twelve months by a range of $0 to $2,100,000.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Internal Revenue Service (IRS) has concluded examination of our U.S. federal income tax returns for years prior to fiscal 2011 without any significant adjustments. Substantially all material state, local and foreign income tax examinations have been concluded through fiscal 2004.