NOTE 16 – INCOME TAXES

Our provision for income taxes was as follows for the periods indicated:

	Fifty-Three			Fifty-Two			Fifty-Two
	Weeks Ended			Weeks Ended			Weeks Ended
	February 3,			January 28,			January 29,
	2019			2018			2017
Current expense
Federal	$	10,537		$	12,022		$	14,470
Foreign		118			85			86
State		2,247			1,390			1,471
Total current expense		12,902			13,497			16,027

Deferred taxes
Federal		(963	)		4,038			(1,902	)
State		(222	)		(13	)		(216	)
Total deferred taxes		(1,185	)		4,025			(2,118	)
Income tax expense	$	11,717		$	17,522		$	13,909

Total tax expense for fiscal 2019 was $11.6 million, of which $11.7 million expense was allocated to continuing operations and $73,000 tax benefit was allocated to other comprehensive income. Total tax expense for fiscal 2018 was $17.5 million, of which $17.5 million was allocated to continuing operations and $26,000 tax benefit was allocated to other comprehensive income. Total tax expense for fiscal 2017 was $14.1 million, of which $13.9 million was allocated to continuing operations and $204,000 expense was allocated to other comprehensive income.

The effective income tax rate differed from the federal statutory tax rate as follows for the periods indicated:

	Fifty-Three			Fifty-Two			Fifty-Two
	Weeks Ended			Weeks Ended			Weeks Ended
	February 3,			January 28,			January 29,
	2019			2018			2017

Income taxes at statutory rate		21.0	%		33.9	%		35.0	%
Increase (decrease) in tax rate resulting from:
State taxes, net of federal benefit		3.2			2.0			2.2
Officer's life insurance		-0.7			-0.6			-1.2
Captive Life Insurance		0.0			0.0			-1.3
Tax Cuts and Jobs Act of 2017		0.0			4.0			0.0
Change in Valuation allowance		0.0			0.0			1.3
Other		-0.8			-1.0			-0.5
Effective income tax rate		22.7	%		38.3	%		35.5	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for the period indicated were:

	February 3,			January 28,
	2019			2018
Assets
Deferred compensation	$	3,572		$	3,226
Allowance for bad debts		1,236			1,437
Inventories		882			-
Capital loss carryover		339			335
Other		1,120			692
Total deferred tax assets		7,149			5,690
Valuation allowance		(339	)		(335	)
		6,810			5,355
Liabilities
Inventory		-			315
Intangible assets		923			108
Property, plant and equipment		1,288			1,520
Unrecognized pension actuarial losses		77			148
Total deferred tax liabilities		2,288			2,091
Net deferred tax assets	$	4,522		$	3,264

At February 3, 2019 and January 28, 2018 our net deferred tax asset was $4.5 million and $3.3 million, respectively. The increase in the valuation allowance of $4,000 was due to the change in deferred state tax rates. We expect to fully realize the benefit of the deferred tax assets, with the exception of the capital loss, in future periods when the amounts become deductible. The capital loss carry forward is $1.4 million and expires in fiscal 2022.

Current accounting standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also addresses de-recognition, classification, interest and penalties, accounting in interim periods and disclosures.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the fiscal years ended February 3, 2019 and January 28, 2018 are as follows:

	February 3,			January 28,
	2019			2018

Balance, beginning of year	$	91		$	248
Increase related to prior year tax positions		-			-
Decrease related to prior year tax positions		(48	)		(157	)
Increase related to current year tax positions		-			-
Balance, end of year	$	43		$	91

The net unrecognized tax benefits as of February 3, 2019, which, if recognized, would affect our effective tax rate are $38,000. We expect that $39,000 of gross unrecognized tax benefits will decrease within the next year.

We have elected to classify interest and penalties recognized with respect to unrecognized tax benefits as income tax expense. Interest expense of $5,600 and $10,000 was accrued as of February 3, 2019 and January 28, 2018, respectively.

Tax years ending February 1, 2016, through February 3, 2019 remain subject to examination by federal and state taxing authorities.