Note 4 — Income Taxes

The Company’s income tax expense is computed based on the federal statutory rates and the state statutory rates, net of related federal benefit. Income tax expense consists of the following (in thousands):


	52 Weeks Ended January 28, 2017			52 Weeks Ended January 30, 2016		52 Weeks Ended January 31, 2015
Current
Federal	$	7,325		$	8,120	$	9,299
State		845			761		1,668
Deferred
Federal		(1,379	)		601		93
State		(862	)		42		(54	)

	$	5,929		$	9,524	$	11,006

Income tax expense differs from the amount computed by applying the statutory federal income tax rate to pre-tax income. A reconciliation of income tax expense at the statutory federal income tax rate to the amount provided is as follows (in thousands):


	52 Weeks Ended January 28, 2017			52 Weeks Ended January 30, 2016			52 Weeks Ended January 31, 2015
Tax at federal statutory rate	$	5,941		$	9,134		$	10,087
State income taxes (net of federal benefit)		598			844			1,106
Tax credits		(255	)		(506	)		(207	)
Other		(355	)		52			20

Income tax expense	$	5,929		$	9,524		$	11,006

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):


	January 28, 2017			January 30, 2016
Deferred tax assets:
Accruals	$	3,208		$	3,383
Inventory valuation		898			754
State tax credit carryforwards		190			—
Deferred rent and other		11,667			10,045

Total deferred tax assets		15,963			14,182
Valuation allowance for deferred tax assets		(56	)		—

Net deferred tax assets		15,907			14,182
Deferred tax liabilities:
Depreciation		(14,421	)		(14,887	)
Prepaid assets		(767	)		(637	)

Total deferred tax liabilities		(15,188	)		(15,524	)

Net deferred tax assets (liabilities)	$	719		$	(1,342	)

As of January 28, 2017, the Company has state tax credit carryforwards of approximately $190,000 expiring in years 2023 through 2028.

Future utilization of the deferred tax assets is evaluated by the Company and any valuation allowance is adjusted accordingly. At January 28, 2017, the Company recorded a $56,000 valuation allowance related to state tax credit carryforwards. At January 30, 2016, there were no valuation allowances against the Company’s deferred tax assets. Adjustments could be required in the future if the Company estimates that the amount of deferred tax assets to be realized is more or less than the net amount the Company has recorded.

The Company and one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by authorities for years prior to 2013. With few exceptions, the Company is no longer subject to state and local income tax examinations for years prior to 2010. The Company is not currently engaged in any U.S. federal, state or local income tax examinations.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	52 Weeks Ended January 28, 2017			52 Weeks Ended January 30, 2016
	(In thousands)
Balance at the beginning of the year	$	307		$	307
Additions based on tax positions related to the current year		—			—
Additions for tax positions of prior years		—			—
Reductions for tax positions of prior years		—			—
Reductions due to settlements		—			—
Reductions due to lapse of the statute of limitations		(163	)		—

Balance at the end of the year	$	144		$	307

Included in the January 28, 2017 and January 30, 2016 balance is $144,000 and $307,000, respectively, of unrecognized tax benefits that, if recognized, would decrease the Company’s effective tax rate. In fiscal 2017, it is reasonably possible that the Company’s unrecognized tax benefits may be reduced by $144,000 as a result of a lapse of the statute of limitations.

The Company accrues interest on unrecognized tax benefits as a component of income tax expense. Penalties, if incurred, would be recognized as a component of income tax expense. The Company had approximately $122,000 and $247,000 accrued for the payment of interest and penalties associated with unrecognized tax benefits at January 28, 2017 and January 30, 2016, respectively.