(6) Income Taxes

Income tax expense for fiscal 2017, 2016 and 2015 consists of the following (in thousands):


	2017		2016		2015
Current:
Federal	$	(5,249)	$	(3,759)	$	(6,805)
State		(948)		(779)		(1,283)
Total current		(6,197)		(4,538)		(8,088)
Deferred:
Federal		(3,078)		(1,541)		(806)
State		349		59		107
Total deferred		(2,729)		(1,482)		(699)
Total income tax expense	$	(8,926)	$	(6,020)	$	(8,787)

Income tax expense computed using the federal statutory rate is reconciled to the reported income tax expense as follows for fiscal 2017, 2016 and 2015 (in thousands):


	2017		2016		2015
Statutory rate applied to income before income taxes	$	(7,924)	$	(6,773)	$	(8,510)
Revaluation of net deferred tax assets due to the Tax Cuts and Jobs Act		(1,925)		—		—
State income taxes, net of federal benefit		(549)		(903)		(950)
State tax credits		252		226		186
State tax credits - valuation allowance (net of federal benefit)		(79)		—		—
Tax exempt interest		24		20		6
General business credits		1,273		1,605		978
Excess compensation		—		—		(263)
Excess tax benefits from stock based compensation		70		—		—
Other		(68)		(195)		(234)
Income tax expense	$	(8,926)	$	(6,020)	$	(8,787)

The components of deferred tax assets and deferred tax liabilities as of February 3, 2018 and January 28, 2017 are as follows (in thousands):


	February 3,		January 28,
	2018		2017
Deferred tax assets:
Deferred rent amortization	$	558	$	722
Inventory capitalization		1,863		2,895
Federal jobs credits		—		95
Book and tax depreciation differences		312		526
Vacation liability		585		921
State tax credits		2,676		2,161
Stock compensation		834		1,340
Legal expense reserve		73		407
Insurance liabilities		537		845
Other		342		481
Subtotal deferred tax assets		7,780		10,393
Less: State tax credits valuation allowance - net		(1,624)		(1,272)
Total deferred tax assets		6,156		9,121

Deferred tax liabilities:
Prepaid expenses		(379)		(615)
Total deferred tax liabilities		(379)		(615)
Net deferred tax asset	$	5,777	$	8,506

The Company files income tax returns in U.S. federal and state jurisdictions where it does business and is subject to examinations by the Internal Revenue Service (“IRS”) and other taxing authorities. With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to fiscal 2012. The Company reviews and assesses uncertain tax positions, if any, with recognition and measurement of tax benefit based on a “more-likely-than-not” standard with respect to the ultimate outcome, regardless of whether this assessment is favorable or unfavorable. As of February 3, 2018, there were no benefits taken on the Company’s income tax returns that do not qualify for financial statement recognition. If a tax position does not meet the minimum statutory threshold to avoid payment of penalties and interest, a company is required to recognize an expense for the amount of the interest and penalty in the period in which the company claims or expects to claim the position on its tax return. For financial statement purposes, companies are allowed to elect whether to classify such charges as either income tax expense or another expense classification. Should such expense be incurred in the future, the Company will classify such interest as a component of interest expense and penalties as a component of income tax expense.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible and income tax credits may be utilized, management believes it is more likely than not that the Company will realize the benefits of these deductible differences with the exception of certain tax credits available in one state. Beginning in 2011, the Company concluded that its ability to utilize a portion of such state’s tax credits was no longer more likely than not. Such recognition resulted in the establishment of a valuation allowance which necessitated a charge to income tax expense and a reduction in deferred tax assets. Subsequent to 2011, the Company has continued to earn such state credits and has further adjusted the related valuation allowance. At February 3, 2018, the valuation allowance, net of federal tax benefit, totaled $1.6 million.

The effective income tax rate for fiscal 2017, 2016 and 2015 included the recognition of benefits arising from various federal and state tax credits. Under current IRS and state income tax regulations, these credits may be carried back for one year or carried forward for periods up to 20 years. The income tax benefit included $1.3 million related to such credits in fiscal 2017, $1.8 million related to such credits in fiscal 2016 and $1.2 million related to such credits in fiscal 2015.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. The legislation was effective January 1, 2018 and made significant changes to U.S. tax law including a reduction in the corporate income tax rate, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the federal statutory tax rate from 35% to 21% and required corporations with fiscal years spanning periods before and after the effective date to use a blended federal tax rate for fiscal years which include January 1, 2018. As a result of the provision requiring a blended rate, the Company’s federal statutory rate was reduced from 35% to 33.7% with a commensurate reduction in income tax expense of $0.3 million for fiscal year 2017. In addition, the Company was required to revalue its deferred tax assets and liabilities to reflect the reduced federal income tax rate expected to be in effect at the time of future reversals. Such revaluation resulted in the reduction of net deferred tax assets and a charge to income tax expense in the fourth quarter of $1.9 million. The other provisions of the Tax Cuts and Jobs Act did not have a material impact on the fiscal 2017 consolidated financial statements.