INCOME TAXES

Due to the variability that we have experienced in our pretax earnings and the existence of a full valuation allowance on our net deferred tax assets, we have concluded that computing our actual year-to-date effective tax rate (as opposed to estimating our annual effective tax rate) provides an appropriate basis for recording income taxes in our interim periods. Additionally, we record an income tax expense or benefit that does not relate to ordinary income/(loss) in the current fiscal year discretely in the interim period in which it occurs. We also recognize the effects of changes in enacted tax laws or rates in the interim periods in which the changes occur.

In computing our income tax provision we make certain estimates and management judgments, such as estimated annual taxable income or loss, the nature and timing of permanent and temporary differences between taxable income for financial reporting and tax reporting, and the recoverability of deferred tax assets. Our estimates and assumptions may change as new events occur, additional information is obtained, or as the tax environment changes.

We recognize deferred tax assets for temporary differences that will result in deductible amounts in future years and for net operating loss (“NOL”) and credit carryforwards. We recognize a valuation allowance to reduce deferred tax assets if, based on existing facts and circumstances, it is more-likely-than-not that some portion or all of our deferred tax assets will not be realized. We continue to have a valuation allowance established against our net deferred tax assets. In future periods we will continue to recognize a valuation allowance until such time as the certainty of future tax benefits can be reasonably assured. When our results demonstrate a pattern of future profitability the valuation allowance may be adjusted, which would result in the reinstatement of all or a part of the net deferred tax assets.

Income taxes (payable)/receivable, net, which primarily included an amended return receivable as of January 28, 2012, are included in "Accrued expenses" as of April 28, 2012 and in “Prepayments and other” as of January 28, 2012 on our condensed consolidated balance sheets, and were as follows:



(In thousands)	April 28, 2012			January 28, 2012
Income taxes (payable)/receivable, net	$	(1,227	)	$	10,048

The reduction in income taxes receivable during the thirteen weeks ended April 28, 2012 was principally a result of the receipt of $10,743,000 of net Federal tax refunds that related primarily to an amended return.

As of April 28, 2012 our gross unrecognized tax benefits associated with uncertain tax positions were $33,797,000. If recognized, the portion of the liabilities for gross unrecognized tax benefits that would decrease our provision for income taxes and increase our net income was $22,101,000. The accrued interest and penalties as of April 28, 2012 were $16,968,000.

During the thirteen weeks ended April 28, 2012 our gross unrecognized tax benefits increased by $4,473,000 and the portion of the liabilities for gross unrecognized tax benefits that, if recognized, would decrease our provision for income taxes and increase our net income increased by $2,921,000. Accrued interest and penalties increased by $928,000 during the thirteen weeks ended April 28, 2012. These changes are primarily the result of the identification of a new uncertain tax position that required an accrual for multiple years.

As of April 28, 2012 it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next twelve months by as much as $10,616,000 as a result of resolutions of audits related to U.S. Federal and state tax positions and/or the expiration of applicable statutes of limitations.

Our U.S. Federal income tax returns for Fiscal 2004 and beyond remain subject to examination by the U.S. Internal Revenue Service (“IRS”) due to statute of limitations and the filing of amended returns and NOL carryback claims. We file returns in numerous state jurisdictions, with varying statutes of limitations. Our state tax returns for Fiscal 2007 and subsequent years, depending upon the jurisdiction, generally remain subject to examination. The statute of limitations on a limited number of returns for years prior to Fiscal 2007 has been extended by agreement between us and the particular state jurisdiction. The earliest year still subject to examination by state tax authorities is Fiscal 2003.