NOTE 17 – INCOME TAXES

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

	Fifty-Two		Fifty-Three			Fifty-Two
	Weeks Ended		Weeks Ended			Weeks Ended
	February 2,		February 3,			January 28,
	2020		2019			2018
Current expense
Federal	$	2,312	$	10,537		$	12,022
Foreign		255		118			85
State		334		2,247			1,390
Total current expense		2,901		12,902			13,497

Deferred taxes
Federal		1,645		(963	)		4,038
State		298		(222	)		(13	)
Total deferred taxes		1,943		(1,185	)		4,025
Income tax expense	$	4,844	$	11,717		$	17,522

Total tax expense for fiscal 2020 was $4.5 million, of which $4.8 million expense was allocated to continuing operations and $ 300,000 tax benefit was allocated to other comprehensive income. 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.

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

	Fifty-Two			Fifty-Three			Fifty-Two
	Weeks Ended			Weeks Ended			Weeks Ended
	February 2,			February 3,			January 28,
	2020			2019			2018

Income taxes at statutory rate		21.0	%		21.0	%		33.9	%
Increase (decrease) in tax rate resulting from:
State taxes, net of federal benefit		2.4			3.2			2.0
Officer's life insurance		-1.1			-0.7			-0.6
Tax Cuts and Jobs Act of 2017		0.0			0.0			4.0
Other		-0.2			-0.8			-1.0
Effective income tax rate		22.1	%		22.7	%		38.3	%

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 2,			February 3,
	2020			2019
Assets
Deferred compensation	$	2,673		$	3,572
Allowance for bad debts		1,050			1,236
Employee benefits		607			335
Inventories		600			882
Capital loss carryover		393			339
Accrued liabilities		338			448
Deferred rent		231			168
Other		431			169
Total deferred tax assets		6,323			7,149
Valuation allowance		(393	)		(339	)
		5,930			6,810
Liabilities
Intangible assets		1,737			923
Property, plant and equipment		1,313			1,288
Unrecognized pension actuarial losses		-			77
Total deferred tax liabilities		3,050			2,288
Net deferred tax assets	$	2,880		$	4,522

At February 2, 2020 and February 3, 2019 our net deferred asset was $2.9 million and $4.5, respectively. The increase in the valuation allowance of $54,000 was due to foreign tax credit limitations. We expect to fully realize the benefit of the deferred tax assets, with the exception of the capital loss carry forward and foreign tax credit carry forward, in future periods when the amounts become deductible. The capital loss carry-forward is $1.4 million and expires in fiscal 2022. The foreign tax credit carry-forward is $54,000 and expires beginning in fiscal 2029.

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 2, 2020 and February 3, 2019 are as follows:

	February 2,			February 3,
	2020			2019

Balance, beginning of year	$	43		$	91
Decrease related to prior year tax positions		(39	)		(48	)
Balance, end of year	$	4		$	43

The net unrecognized tax benefits as of February 2, 2020 which, if recognized, would affect our effective tax rate are $3,000. We expect that $4,000 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 $1,000 and $5,600 was accrued as of February 2, 2020 and February 3, 2019, respectively.

Tax years ending January 29, 2017, through February 2, 2020 remain subject to examination by federal and state taxing authorities.