Income Taxes

The components of income tax expense for fiscal years 2016, 2015 and 2014 were as follows (in thousands):



	Fiscal Year Ended
	January 28, 2017			January 30, 2016		January 31, 2015
Current:
Federal	$	7,939		$	7,614	$	6,433
State	1,602			1,439		1,517
	9,541			9,053		7,950
Deferred:
Federal	(1,121		)	1,105		1,387
State	(82		)	449		(237		)
	(1,203		)	1,554		1,150
Total income tax expense	$	8,338		$	10,607	$	9,100

A reconciliation of income tax expense to the amount computed at the federal statutory rate for fiscal years 2016, 2015 and 2014 is as follows (in thousands):



	Fiscal Year Ended
	January 28, 2017			January 30, 2016		January 31, 2015
Federal taxes at statutory rate	$	6,913		$	6,352	$	8,111
State and local income taxes, net of federal benefit	988			1,098		885
Return to provision adjustments	(40		)	130		(15		)
Stock compensation discrete items (1)	558			2,592		—
Other	(81		)	435		119
Total income tax expense	$	8,338		$	10,607	$	9,100

(1)

This amount includes the impact of discrete items related to the expiration of stock options, exercises of stock options and the settlement of restricted stock units that are recorded to income tax expense which represents stock-based compensation cost previously recognized by us that was greater than the deduction allowed for income tax purposes based on the price of our common stock on the date of expiration, exercise or vesting.

Deferred income taxes reflect the net tax effects of: (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and (b) operating loss and tax credit carry-forwards. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Significant components of deferred tax assets and liabilities as of January 28, 2017 and January 30, 2016 were as follows (in thousands):



	January 28, 2017			January 30, 2016
Deferred tax assets:
Deferred rent	$	5,343		$	5,165
Stock-based compensation	2,574			3,061
Accrued expenses	1,753			1,366
Inventories	2,712			2,307
Compensation and benefits	687			676
Capital lease	147			274
Deferred revenue	318			247
Tax credits	162			161
Total deferred tax assets	13,696			13,257
Deferred tax liabilities:
Property and equipment	(7,344		)	(8,030		)
Prepaid expenses	(606		)	(684		)
Marketable securities	(44		)	(15		)
Total deferred tax liabilities	(7,994		)	(8,729		)
Net deferred tax asset	$	5,702		$	4,528

Deferred tax assets are included in “Other assets" in the Consolidated Balance Sheets.

As of January 28, 2017 and January 30, 2016, we had approximately $0.2 million of California Enterprise Zone credit carryovers. These credits will begin to expire during fiscal year 2022 if not utilized.

Uncertain Tax Positions

As of January 28, 2017 and January 30, 2016, there were no material unrecognized tax benefits. We do not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. We did not recognize any interest or penalties related to unrecognized tax benefits during fiscal years 2016, 2015 and 2014.

In the third quarter of fiscal year 2014, the Internal Revenue Service initiated an examination of our federal income tax returns for the C-Corporation short period year ended February 2, 2013. The examination was settled in the second quarter of fiscal 2015 without a material impact to the Company.

We were notified during the first quarter of fiscal 2015 that the S-Corporation tax period ending May 1, 2012 was also selected for examination by the Internal Revenue Service. The examination was settled in the second quarter of fiscal 2015 without a material impact to the Company.

In the fourth quarter of fiscal year 2015, the Internal Revenue Service initiated an examination of our federal income tax return for the year ended January 31, 2015. The examination was completed without penalty to the Company in the first quarter of fiscal 2016.

We file income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. Fiscal year 2015 remains subject to examination for federal tax purposes and fiscal years 2012 through 2015 remain subject to examination in significant state tax jurisdictions.