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Income Taxes | 12 Months Ended
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Jan. 28, 2018
Income Taxes | Note D: Income Taxes The 2017 Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and significantly changed U.S. tax law by, among other things, reducing the corporate income tax rate to 21% as of January 1, 2018, and introducing a modified territorial tax system that includes a transition tax on deemed repatriated earnings of foreign subsidiaries. In response to the Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allows issuers to recognize provisional estimates of the impact of the Tax Act in their financial statements and provides a one-year measurement period for a registrant to adjust the estimates and complete the accounting required under FASB Accounting Standards Codification (“ASC”) 740, Income Taxes. Our U.S. federal statutory rate for fiscal 2017 was a blended rate of 33.9%, and our rate will be 21% for future fiscal years. Based on information available as of January 28, 2018, we recorded a net tax expense of $13,200,000 for the transition tax and $28,300,000 for the re-measurement of our deferred tax assets. The components of earnings before income taxes, by tax jurisdiction, are as follows:
In thousands |  | Fiscal 2017 |  |  | Fiscal 2016 |  |  | Fiscal 2015 |
United States |  |  | $ 379,000 |  |  |  | $ 425,517 |  |  |  | $ 462,701 |
Foreign |  |  | 73,439 |  |  |  | 46,394 |  |  |  | 25,306 |
Total earnings before income taxes |  |  | $ 452,439 |  |  |  | $ 471,911 |  |  |  | $ 488,007 |
The provision for income taxes consists of the following:
In thousands |  | Fiscal 2017 |  |  | Fiscal 2016 |  |  | Fiscal 2015 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | $ 97,202 |  |  |  | $ 125,760 |  |  |  | $ 156,812 |
State |  |  | 19,552 |  |  |  | 26,197 |  |  |  | 22,969 |
Foreign |  |  | 12,759 |  |  |  | 7,453 |  |  |  | 5,594 |
Total current |  |  | 129,513 |  |  |  | 159,410 |  |  |  | 185,375 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 62,893 |  |  |  | 8,307 |  |  |  | (6,093 | )
State |  |  | 460 |  |  |  | (807 | ) |  |  | 1,258 |
Foreign |  |  | 28 |  |  |  | (386 | ) |  |  | (2,601 | )
Total deferred |  |  | 63,381 |  |  |  | 7,114 |  |  |  | (7,436 | )
Total provision |  |  | $ 192,894 |  |  |  | $ 166,524 |  |  |  | $ 177,939 |
As part of the modified territorial tax system, the Tax Act implemented a new tax on Global Intangible Low-Taxed Income (“GILTI”). A company can elect an accounting policy to account for GILTI as either a periodic expense when the tax arises or as part of deferred taxes related to the investment in the subsidiary. We are currently in the process of analyzing this provision and, as a result, are not yet able to reasonably estimate its effect. Therefore, we have not yet made a policy election regarding the accounting for GILTI. We will continue to assess the impact of the Tax Act on our Consolidated Financial Statements during the measurement period under SAB 118. 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 a result of the Tax Act, we are deemed to have remitted all of the post-1986 accumulated earnings of our foreign subsidiaries to the U.S. as of December 31, 2017 as part of the transition tax. No additional U.S. income tax or foreign withholding taxes have been provided. In light of the Tax Act, we continue to evaluate our permanent reinvestment assertion and expect our evaluation of the impact to be completed within the one-year measurement period under SAB 118. A reconciliation of income taxes at the federal statutory corporate rate to the effective rate is as follows:
|  | Fiscal 2017 |  |  | Fiscal 2016 |  |  | Fiscal 2015 |
Federal income taxes at the statutory rate |  |  | 33.9% |  |  |  | 35.0% |  |  |  | 35.0% |
Re-measurement of deferred tax assets and liabilities |  |  | 6.7% |  |  |  | — |  |  |  | — |
Transition tax |  |  | 2.9% |  |  |  | — |  |  |  | — |
State income tax rate |  |  | 2.5% |  |  |  | 3.5% |  |  |  | 3.2% |
Change in uncertain tax positions |  |  | (1.6% | ) |  |  | 2.8% |  |  |  | (0.1% | )
Rate differential |  |  | (2.9% | ) |  |  | (5.7% | ) |  |  | (1.8% | )
Other |  |  | 1.1% |  |  |  | (0.3% | ) |  |  | 0.2% |
Effective tax rate |  |  | 42.6% |  |  |  | 35.3% |  |  |  | 36.5% |
Significant components of our deferred income tax accounts are as follows:
Deferred tax assets (liabilities), in thousands |  | Jan. 28, 2018 |  |  | Jan. 29, 2017 |
Customer deposits |  |  | $ 23,601 |  |  |  | $ 64,776 |
Merchandise inventories |  |  | 23,314 |  |  |  | 32,003 |
Deferred rent |  |  | 18,387 |  |  |  | 24,182 |
Compensation |  |  | 14,127 |  |  |  | 16,781 |
Accrued liabilities |  |  | 13,626 |  |  |  | 23,994 |
Stock-based compensation |  |  | 9,024 |  |  |  | 17,437 |
Federal and state net operating loss |  |  | 6,026 |  |  |  | 2,797 |
Executive deferred compensation |  |  | 5,886 |  |  |  | 7,060 |
State taxes |  |  | 5,099 |  |  |  | 7,107 |
Deferred lease incentives |  |  | (24,854 | ) |  |  | (36,715 | )
Depreciation |  |  | (17,361 | ) |  |  | (22,477 | )
Prepaid catalog expenses |  |  | (5,386 | ) |  |  | (8,726 | )
Other |  |  | (3,116 | ) |  |  | 8,014 |
Valuation allowance |  |  | (1,067 | ) |  |  | (995 | )
Total deferred income tax assets, net |  |  | $ 67,306 |  |  |  | $ 135,238 |
As the result of the acquisition of Outward, Inc. (see Note O), we had net operating loss carry-forwards of $14,904,000 and $4,838,000 for U.S. federal and state, respectively, as of January 28, 2018. The carry-forwards are expected to be fully utilized in future years and, therefore, no valuation allowance has been provided to the related deferred tax assets. The following table summarizes the activity related to our gross unrecognized tax benefits:
In thousands |  | Fiscal 2017 |  |  | Fiscal 2016 |  |  | Fiscal 2015 |
Balance at beginning of year |  |  | $ 25,864 |  |  |  | $ 13,290 |  |  |  | $ 14,359 |
Increases related to current year’s tax positions |  |  | 3,345 |  |  |  | 11,772 |  |  |  | 2,765 |
Increases related to prior years’ tax positions |  |  | 808 |  |  |  | 3,456 |  |  |  | 101 |
Decreases related to prior years’ tax positions |  |  | (10,610 | ) |  |  | (818 | ) |  |  | (341 | )
Settlements |  |  | — |  |  |  | (714 | ) |  |  | (2,912 | )
Lapses in statute of limitations |  |  | (1,356 | ) |  |  | (1,122 | ) |  |  | (682 | )
Balance at end of year |  |  | $ 18,051 |  |  |  | $ 25,864 |  |  |  | $ 13,290 |
As of January 28, 2018, we had $18,051,000 of gross unrecognized tax benefits, of which $13,286,000 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 28, 2018 and January 29, 2017, our accruals for the payment of interest and penalties totaled $3,719,000 and $2,882,000, 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 $3,800,000. We file income tax returns in the U.S. and foreign jurisdictions and are therefore subject to examination by the tax authorities in these jurisdictions. Our U.S. federal taxable years for which the statute of limitations has not expired are fiscal years 2013 to 2016. Substantially all material states, local and foreign jurisdictions’ statutes of limitations are closed for taxable years prior to fiscal 2013.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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