8. Income Taxes

The components of income before income taxes are as follows:


	Fiscal Year Ended January 31,
	2013		2012		2011
Domestic	$	340,536	$	261,214	$	374,777
Foreign		35,036		27,617		42,431

	$	375,572	$	288,831	$	417,208

The components of the provision for income tax expense are as follows:


	Fiscal Year Ended January 31,
	2013			2012			2011
Current:
Federal	$	93,625		$	93,244		$	127,390
State		15,746			14,199			19,492
Foreign		6,639			8,287			6,095

		116,010			115,730			152,977

Deferred:
Federal		23,285			(11,292	)		(6,698	)
State		(722	)		124			(1,906	)
Foreign		(315	)		(982	)		(123	)

		22,248			(12,150	)		(8,727	)

	$	138,258		$	103,580		$	144,250

The Company’s effective tax rate was different than the statutory U.S. federal income tax rate for the following reasons:


	Fiscal Year Ended January 31,
	2013			2012			2011
Expected provision at statutory U.S. federal tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		3.1			3.2			3.2
Foreign taxes		(1.7	)		(2.1	)		(2.1	)
Other		0.4			(0.2	)		(1.5	)

Effective tax rate		36.8	%		35.9	%		34.6	%

The significant components of deferred tax assets and liabilities as of January 31, 2013 and 2012 are as follows:


	January 31,
	2013			2012
Deferred tax liabilities:
Prepaid expenses	$	(2,794	)	$	(1,402	)
Depreciation		(56,434	)		(4,761	)

Gross deferred tax liabilities		(59,228	)		(6,163	)

Deferred tax assets:
Deferred rent		64,539			37,024
Inventories		3,357			3,093
Accounts receivable		2,093			1,166
Net operating loss carryforwards		4,356			5,684
Tax uncertainties		5,710			7,651
Accrued salaries and benefits		20,390			13,786
Other temporary differences		1,986			4,437

Gross deferred tax assets, before valuation allowances		102,431			72,841

Valuation allowances		(2,083	)		(2,754	)

Net deferred tax assets	$	41,120		$	63,924

Net deferred tax assets are attributed to the jurisdictions in which the Company operates. As of January 31, 2013 and 2012, respectively, $26,555 and $48,762 were attributable to U.S. federal, $11,436 and $12,374 were attributed to state jurisdictions and $3,129 and $2,788 were attributed to foreign jurisdictions.

As of January 31, 2013, certain non-U.S. subsidiaries of the Company had net operating loss carryforwards for tax purposes of approximately $14,983 that do not expire and certain U.S. subsidiaries of the Company had state net operating loss carryforwards for tax purposes of approximately $6,165 that expire from 2016 through 2032. As of January 31, 2013, the Company had a full valuation allowance for certain foreign and state net operating loss carryforwards where it was uncertain the carryforwards would be utilized. The Company had no valuation allowance for certain other foreign and state net operating loss carryforwards where management believes it is more likely than not the tax benefit of these carryforwards will be realized. As of January 31, 2013 and 2012, the non-current portion of net deferred tax assets aggregated $26,406 and $58,681, respectively.

The cumulative amount of the Company’s share of undistributed earnings of non-U.S. subsidiaries for which no deferred taxes have been provided was $166,798 as of January 31, 2013. These earnings are deemed to be permanently re-invested to finance growth programs. It is not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:


	January 31,
	2013			2012			2011
Balance at the beginning of the period	$	8,664		$	7,758		$	7,532
Increases in tax positions for prior years		419			3,466			43
Decreases in tax positions for prior years		(929	)		(310	)		(592	)
Increases in tax positions for current year		635			360			1,000
Settlements		(13	)		(2,259	)		(40	)
Lapse in statute of limitations		(881	)		(351	)		(185	)

Balance at the end of the period	$	7,895		$	8,664		$	7,758

The total amount of net unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $3,861 and $3,874 at January 31, 2013 and 2012 respectively. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income, which is consistent with the recognition of these items in prior reporting periods. During the years ended January 31, 2013, 2012 and 2011, the Company recognized a (expense)/benefit of ($541), $1,334 and $437, respectively, related to interest and penalties. The Company accrued $3,070 and $2,529 for the payment of interest and penalties as of January 31, 2013 and 2012, respectively.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. During the year ended January 31, 2013, the Company settled its Internal Revenue Service examination for the periods ended January 31, 2009 and 2010. The Company has recognized the tax effect of this settlement for previous and future periods in the end of year balances. The Company also began a new Internal Revenue Service audit for periods ended January 31, 2011 and 2012. The Company’s state and foreign filings are generally subject to audit from fiscal 2003 to 2012. It is possible that the Federal or any state examination may be resolved within twelve months. Due to the potential for resolution of Federal audit and state examinations, and the expiration of various statutes of limitation, it is possible that the Company’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $6,211.