D. INCOME TAXES

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The accounting regulation requires current recognition of net deferred tax assets to the extent it is more likely than not such net assets will be realized. To the extent that the Company believes its net deferred tax assets will not be realized, a valuation allowance must be recorded against those assets.

In the fourth quarter of fiscal 2013, the Company entered into a three-year cumulative loss position and based on forecasts at that time, the Company expected the cumulative three-year loss to increase as of the end of fiscal 2014. Management determined that this represented significant negative evidence at February 1, 2014. While the Company has projected it will return to profitability, generate taxable income and ultimately emerge from a three-year cumulative loss, based on a consideration of all positive and negative evidence as of February 1, 2014, the Company recorded a charge of $51.3 million to establish a full allowance against its net deferred tax assets. Based on operating results for fiscal 2015 and the Company’s forecast for fiscal 2016, the Company believes that a full allowance remains appropriate at this time. Realization of the Company’s deferred tax assets, which relate principally to federal net operating loss carryforwards, which expire from 2022 through 2035, is dependent on generating sufficient taxable income in the near term.

As of January 30, 2016, the Company had net operating loss carryforwards of $141.2 million for federal income tax purposes and $78.1 million for state income tax purposes that are available to offset future taxable income through fiscal year 2035. Additionally, the Company has alternative minimum tax credit carryforwards of $2.3 million, which are available to further reduce income taxes over an indefinite period. Additionally, the Company has $0.1 million and $2.3 million of net operating loss carryforwards related to the Company’s operations in the Hong Kong and Canada, respectively, though both are expected to expire largely unutilized.

The utilization of net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and tax credit carryforwards which may be used in future years.

Included in the net operating loss carryforwards for both federal and state income tax is approximately $13.1 million relating to stock compensation deductions, the tax benefit from which, if realized, will be credited to additional paid-in capital.

The components of the net deferred tax assets as of January 30, 2016 and January 31, 2015 are as follows (in thousands):

	January 30, 2016			January 31, 2015

Deferred tax assets:
Net operating loss carryforward	$	50,199		$	46,048
Gain on sale-leaseback		5,744			6,319
Accrued Expenses and other		5,667			5,035
Lease accruals		4,732			5,257
Goodwill and intangibles		3,694			5,768
Unrecognized loss on pension and pension expense		3,379			3,840
Capital loss carryforward		3,021			3,021
Inventory reserves		2,561			2,602
Alternative minimum tax credit carryforward		2,292			2,292
Foreign tax credit carryforward		963			907
Federal wage tax credit carryforward		521			361
Unrecognized loss on foreign exchange		234			196
State tax credits		102			95
Excess of tax over book depreciation/amortization		(19,977	)		(21,170	)
Subtotal	$	63,132		$	60,571
Valuation allowance ⁽¹⁾		(63,132	)		(60,571	)
Net deferred tax assets	$	—		$	—

Deferred tax liabilities:
Goodwill and intangibles	$	(196	)	$	(91	)
Deferred tax liabilities	$	(196	)	$	(91	)

(1)	For fiscal 2015, the Company had total deferred tax assets of $83.1 million, total deferred tax liabilities of $20.2 million and a valuation allowance of $63.1 million.

The provision for income taxes from continuing operations consists of the following:

	FISCAL YEARS ENDED
	January 30, 2016		January 31, 2015		February 1, 2014

(in thousands)
Current:
Federal and state	$	104	$	97	$	77
Foreign		51		55		66
		155		152		143
Deferred:
Federal and state		94		91		45,518
Foreign		11		—		—
		105		91		45,518

Total provision ⁽²⁾	$	260	$	243	$	45,661

(2)	There was no provision (benefit) recognized on the income (loss) from discontinued operations for fiscal 2014 or fiscal 2013.

The following is a reconciliation between the statutory and effective income tax rates in dollars for the provision for income tax from continuing operations:

	FISCAL YEARS ENDED
	January 30, 2016			January 31, 2015			February 1, 2014

(in thousands)
Federal income tax at the statutory rate	$	(2,852	)	$	(3,827	)	$	(5,108	)
State income and other taxes, net of federal tax benefit		(177	)		(72	)		(810	)
Permanent items		137			141			171
Change in uncertain tax provisions		—			—			—
Charge for valuation allowance		3,200			4,034			52,463
Other, net		(48	)		(33	)		(1,055	)
Provision for income tax from continuing operations	$	260		$	243		$	45,661

As discussed in Note A, the Company’s financial statements reflect the expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return, based solely on the technical merits of the tax position. The liability for unrecognized tax benefits at January 30, 2016 was approximately $3.1 million, and is associated with a prior tax position related to exiting the Company’s direct business in Europe during fiscal 2013. The amount of unrecognized tax benefits has been presented as a reduction in the reported amounts of our federal and state net operating losses (“NOL”) carryforwards. No penalties or interest have been accrued on this liability because the carryforwards have not yet been utilized. The reversal of this liability would result in a tax benefit being recognized in the period in which the Company determines the liability is no longer necessary. At January 30, 2016, the Company had no material unrecognized tax benefits based on the provisions of ASC 740.

The Company made tax payments of $0.1 million, $0.1 million and $0.2 million for fiscal 2015, 2014 and 2013, respectively.