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INCOME TAXES
6 Months Ended
Aug. 01, 2020
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block] INCOME TAXES
The Company computes income taxes using the liability method. This method requires recognition of deferred tax assets and liabilities, measured by enacted rates, attributable to temporary differences between the financial statement and income tax basis of assets and liabilities. The Company’s deferred tax assets and liabilities are comprised largely of differences relating to depreciation, rent expense, inventory, stock-based compensation, and various accruals and reserves.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, (“CARES Act”) was signed into law. The CARES Act includes changes that may benefit the Company such as a five-year net operating loss carryback, changes in the deductibility of interest expense, and accelerated depreciation on certain store leasehold improvements. The CARES Act also allows for the deferral of employer FICA taxes and an employee retention credit.
The Company’s effective tax rate for the Second Quarter 2020 was a benefit of 30.5% compared to an expense of 2.2% during the Second Quarter 2019. The Second Quarter 2020 benefit was primarily driven by a favorable benefit due to the enactment of the CARES Act. The effective tax rate during the Second Quarter 2019 was primarily driven by an excess tax benefit related to the vesting of equity shares during the Second Quarter 2019, which lowered the overall effective tax rate.
The Company’s effective tax rate for Year-To-Date 2020 was a benefit of 33.3%, compared to a benefit of 23.1% for Year-To-Date 2019. The Year-To-Date 2020 benefit was primarily driven by a favorable benefit due to the enactment of the CARES Act. The Year-To-Date 2019 benefit was primarily driven by an excess tax benefit related to the vesting of equity shares, which caused a benefit for income taxes for the year.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in provision for income taxes. The total amount of unrecognized tax benefits as of August 1, 2020, February 1, 2020, and August 3, 2019 were $6.8 million, $6.8 million, and $5.0 million, respectively, and is included within non-current liabilities. The Company recognized less than $0.1 million in each of the Second Quarter 2020 and the Second Quarter 2019, respectively, of additional interest expense related to its unrecognized tax benefits. During each of Year-To-Date 2020 and Year-To-Date 2019, the Company recognized less than $0.1 million of additional interest expense.
The Company is subject to tax in the United States and foreign jurisdictions, including Canada and Hong Kong. The Company, joined by its domestic subsidiaries, files a consolidated income tax return for federal income tax purposes. The Company, with certain exceptions, is no longer subject to income tax examinations by U.S. federal, state and local, or foreign tax authorities for tax years 2013 and prior.
Management believes that an adequate provision has been made for any adjustments that may result from tax examinations; however, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.