Note 8 – Income Taxes

The provision for income taxes consisted of:

(In thousands)	2015			2014			2013

Current:
Federal	$	18,366		$	14,575		$	15,366
State		2,267			1,800			1,805
Puerto Rico		249			350			185
Total current		20,882			16,725			17,356

Deferred:
Federal		(3,000	)		(1,229	)		(139	)
State		(145	)		(115	)		(138	)
Puerto Rico		(318	)		(1,149	)		(444	)
Total deferred		(3,463	)		(2,493	)		(721	)

Valuation allowance		318			1,943			0
Total provision	$	17,737		$	16,175		$	16,635

We realized a tax benefit of $120,000, $69,000 and $199,000 in fiscal years 2015, 2014 and 2013, respectively, as a result of the exercise of stock options and the vesting of restricted stock, which is recorded in shareholders' equity.

Reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows:

Fiscal years	2015			2014			2013

U.S. Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		2.7			3.1			3.8
Puerto Rico		0.3			0.2			(0.6	)
Valuation allowance		0.7			4.7			0.0
Tax benefit of foreign losses		(0.6	)		(4.3	)		0.0
Other		0.0			0.1			0.0
Effective income tax rate		38.1	%		38.8	%		38.2	%

We recorded $327,000, $300,000 and $346,000 in federal employment related tax credits in fiscal 2015, 2014 and 2013, respectively.

Deferred income taxes are the result of temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The sources of these differences and the tax effect of each are as follows:

(In thousands)	January 30, 2016			January 31, 2015
Deferred tax assets:
Accrued rent	$	4,321		$	4,045
Accrued compensation		6,911			5,896
Accrued employee benefits		532			523
Inventory		737			740
Self-insurance reserves		641			592
Lease incentives		12,522			12,073
Net operating loss carry forward		2,261			1,943
Other		411			367
Total deferred tax assets		28,336			26,179
Valuation allowance		(2,261	)		(1,943	)
Total deferred tax assets – net of valuation allowance		26,075			24,236

Deferred tax liabilities:
Depreciation		16,671			17,767
Capitalized costs		1,153			1,284
Other		32			1
Total deferred tax liabilities		17,856			19,052
Net deferred tax asset		8,219			5,184
Less current deferred income tax benefit		(1,061	)		(957	)
Long-term deferred income taxes	$	7,158		$	4,227

At the end of fiscal 2015, we estimated foreign net operating loss carry forwards of $5.9 million, which expire between fiscal 2023 and fiscal 2025. At January 30, 2016, we had a valuation allowance of $2.3 million. The valuation allowance relates to foreign net operating losses that would be realizable only upon the generation of future taxable income in the jurisdiction in which the losses were incurred.

Our unrecognized tax liabilities relate to tax years encompassing our fiscal years 1999 through 2015 for the tax years that remain subject to examination by major tax jurisdictions as of January 30, 2016. At January 30, 2016, January 31, 2015 and February 1, 2014, there were no unrecognized tax liabilities or related accrued penalties or interest in Other liabilities on the Consolidated Balance Sheets. In fiscal 2013, we had a $69,000 decrease in our tax positions related to a prior period. Our policy is to record interest and penalty expense related to income taxes as a component of income tax expense in the Consolidated Statements of Income.