Note D: Income Taxes

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


In thousands	Fiscal 2016			Fiscal 2015			Fiscal 2014
United States	$	425,517		$	462,701		$	482,739
Foreign		46,394			25,306			19,464
Total earnings before income taxes	$	471,911		$	488,007		$	502,203
The provision for income taxes consists of the following:
In thousands	Fiscal 2016			Fiscal 2015			Fiscal 2014
Current
Federal	$	125,760		$	156,812		$	157,227
State		26,197			22,969			31,959
Foreign		7,453			5,594			4,411
Total current		159,410			185,375			193,597
Deferred
Federal		8,307			(6,093	)		2,719
State		(807	)		1,258			(2,547	)
Foreign		(386	)		(2,601	)		(420	)
Total deferred		7,114			(7,436	)		(248	)
Total provision	$	166,524		$	177,939		$	193,349

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 29, 2017, the accumulated undistributed earnings of all foreign subsidiaries of $118,700,000 are needed 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 $18,000,000 to $26,000,000 at January 29, 2017.

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


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Federal income taxes at the statutory rate		35.0%			35.0%			35.0%
State income tax rate		3.5%			3.2%			4.0%
Other		(3.2%	)		(1.7%	)		(0.5%	)
Effective tax rate		35.3%			36.5%			38.5%

Significant components of our deferred income tax accounts are as follows:


Deferred tax assets (liabilities), in thousands	Jan. 29, 2017			Jan. 31, 2016
Customer deposits		$ 64,776			$ 64,742
Merchandise inventories		32,003			31,752
Deferred rent		24,182			19,952
Accrued liabilities		23,994			17,028
Stock-based compensation		17,437			21,365
Compensation		16,781			15,776
State taxes		7,107			6,723
Executive deferred compensation		7,060			6,003
Deferred lease incentives		(36,715	)		(36,475	)
Depreciation		(22,477	)		(4,527	)
Prepaid catalog expenses		(8,726	)		(10,883	)
Other		10,811			11,451
Valuation allowance		(995	)		(1,123	)
Total deferred income tax assets, net		$ 135,238			$ 141,784

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


In thousands	Fiscal 2016			Fiscal 2015			Fiscal 2014
Balance at beginning of year	$	13,290		$	14,359		$	10,765
Increases related to current year’s tax positions		11,772			2,765			3,093
Increases related to prior years’ tax positions		3,456			101			2,007
Decreases related to prior years’ tax positions		(818	)		(341	)		(138	)
Settlements		(714	)		(2,912	)		(1,144	)
Lapses in statute of limitations		(1,122	)		(682	)		(224	)
Balance at end of year	$	25,864		$	13,290		$	14,359

As of January 29, 2017, we had $25,864,000 of gross unrecognized tax benefits, of which $21,134,000 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 29, 2017 and January 31, 2016, our accruals for the payment of interest and penalties totaled $2,882,000 and $2,649,000, respectively.

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 $10,200,000.

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 2012 without any significant adjustments. Substantially all material state, local and foreign income tax examinations have been concluded through fiscal 2004.