4. Income taxes

The provision (benefit) for income taxes consists of the following:


(In thousands)	2016		2015		2014
Current:
Federal	$	613,009	$	590,120	$	543,089
Foreign		135		1,678		1,245
State		88,990		84,021		81,816
		702,134		675,819		626,150
Deferred:
Federal		11,053		6,410		(7,697)
State		1,308		5,715		(2,937)
		12,361		12,125		(10,634)
	$	714,495	$	687,944	$	615,516

A reconciliation between actual income taxes and amounts computed by applying the federal statutory rate to income before income taxes is summarized as follows:


(Dollars in thousands)	2016				2015				2014
U.S. federal statutory rate on earnings before income taxes	$	687,969	35.0	%	$	648,558	35.0	%	$	588,303	35.0	%
State income taxes, net of federal income tax benefit		60,168	3.1			59,700	3.2			49,819	3.0
Jobs credits, net of federal income taxes		(18,952)	(1.0)			(21,366)	(1.2)			(18,961)	(1.1)
Increase (decrease) in valuation allowances		(1,474)	(0.1)			(1,371)	(0.1)			1,453	0.1
Stock-based compensation programs		(9,915)	(0.5)			—	—			—	—
Decrease in income tax reserves		(2,161)	(0.1)			(2,037)	(0.1)			(6,449)	(0.4)
Other, net		(1,140)	(0.1)			4,460	0.3			1,351	—
	$	714,495	36.3	%	$	687,944	37.1	%	$	615,516	36.6	%

The 2016 effective tax rate was an expense of 36.3%. This expense was greater than the federal statutory tax rate of 35% due primarily to the inclusion of state income taxes in the total effective tax rate. The effective income tax rate was lower in 2016 due principally to the adoption of a change in accounting guidance related to employee share-based payments, as further discussed in Note 1, requiring the recognition of excess tax benefits in the statement of income rather than in the balance sheet, as reported in prior years.

The 2015 effective tax rate was an expense of 37.1%. This expense was greater than the federal statutory tax rate of 35% due primarily to the inclusion of state income taxes in the total effective tax rate. The 2015 effective income tax rate increased from 2014 due principally to federal and state reserve releases in 2014 that did not reoccur, to the same extent, in 2015.

The 2014 effective tax rate was an expense of 36.6%. This expense was greater than the federal statutory tax rate of 35% due primarily to the inclusion of state income taxes in the total effective tax rate.

Deferred taxes reflect the effects of temporary differences between 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:


	February 3,		January 29,
(In thousands)	2017		2016
Deferred tax assets:
Deferred compensation expense	$	7,626	$	8,200
Accrued expenses		6,958		8,139
Accrued rent		24,077		20,793
Accrued insurance		72,990		72,676
Accrued incentive compensation		15,170		19,902
Share based compensation		18,908		17,988
Interest rate hedges		3,175		3,702
Tax benefit of income tax and interest reserves related to uncertain tax positions		746		1,371
Deferred gain on sale-leaseback		20,872		22,637
Other		12,591		9,440
State tax credit carry forwards, net of federal tax		8,765		10,711
		191,878		195,559
Less valuation allowances		—		(1,474)
Total deferred tax assets		191,878		194,085
Deferred tax liabilities:
Property and equipment		(334,430)		(320,619)
Inventories		(65,844)		(72,456)
Trademarks		(434,045)		(433,548)
Other		(10,400)		(7,417)
Total deferred tax liabilities		(844,719)		(834,040)
Net deferred tax liabilities	$	(652,841)	$	(639,955)

The Company has state tax credit carry forwards of approximately $13.5 million that will expire beginning in 2022 through 2026.

The Company reversed the remaining valuation allowance for state tax credit carry forwards in the amount of $1.5 million, which was recorded as a reduction in income tax expense in 2016. Based upon expected future income, management believes that it is more likely than not that the results of operations will generate sufficient taxable income to realize the deferred tax assets. The 2015 decrease of $1.4 million and 2014 increase of $1.5 million were recorded as a reduction and an increase in income tax expense, respectively.

The Company’s 2012 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”). The IRS, at its discretion, may choose to examine the Company’s 2013 through 2015 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, the Company’s 2012 and later tax years remain open for examination by the various state taxing authorities.

As of February 3, 2017, accruals for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $3.1 million, $0.8 million and $0.9 million, respectively, for a total of $4.8 million. This total amount is reflected in noncurrent Other liabilities in the consolidated balance sheet.

As of January 29, 2016, accruals for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were $7.0 million, $0.9 million and $0.8 million, respectively, for a total of $8.7 million. This total amount is reflected in noncurrent Other liabilities in the consolidated balance sheet.

The Company believes that it is reasonably possible that the reserve for uncertain tax positions may be reduced by approximately $2.2 million in the coming twelve months principally as a result of the expiration of applicable statutes of limitations. Also, as of February 3, 2017, approximately $3.1 million of the uncertain tax positions would impact the Company’s effective income tax rate if the Company were to recognize the tax benefit for these positions.

The amounts associated with uncertain tax positions included in income tax expense consists of the following:


(In thousands)	2016		2015		2014
Income tax expense (benefit)	$	(3,795)	$	(2,379)	$	(9,497)
Income tax related interest expense (benefit)		(31)		(23)		(1,445)
Income tax related penalty expense (benefit)		50		373		51

A reconciliation of the uncertain income tax positions from January 31, 2014 through February 3, 2017 is as follows:


(In thousands)	2016		2015		2014
Beginning balance	$	6,964	$	9,343	$	19,583
Increases—tax positions taken in the current year		41		214		198
Increases—tax positions taken in prior years		52		17		62
Decreases—tax positions taken in prior years		(1,435)		(106)		(8,636)
Statute expirations		(2,453)		(2,504)		(1,121)
Settlements		(52)		—		(743)
Ending balance	$	3,117	$	6,964	$	9,343