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.

Since the fourth quarter of fiscal 2013, the Company has maintained a valuation allowance against its deferred tax assets. While the Company has projected it will return to profitability, generate taxable income and ultimately emerge from a three-year cumulative loss, based on operating results for fiscal 2016 and the Company’s forecast for fiscal 2017, 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 2036, is dependent on generating sufficient taxable income in the near term.

As of January 28, 2017, the Company had net operating loss carryforwards of $141.2 million for federal income tax purposes and $84.3 million for state income tax purposes that are available to offset future taxable income through fiscal year 2036. 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 $2.2 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 $13.3 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 28, 2017 and January 30, 2016 are as follows (in thousands):

	January 28, 2017			January 30, 2016

Deferred tax assets:
Net operating loss carryforward	$	50,399		$	50,199
Gain on sale-leaseback		5,170			5,744
Accrued Expenses and other		4,340			5,667
Lease accruals		4,358			4,732
Goodwill and intangibles		1,513			3,694
Unrecognized loss on pension and pension expense		3,311			3,379
Capital loss carryforward		3,021			3,021
Inventory reserves		2,659			2,561
Alternative minimum tax credit carryforward		2,292			2,292
Foreign tax credit carryforward		901			963
Federal wage tax credit carryforward		707			521
Unrecognized loss on foreign exchange		328			234
State tax credits		124			102
Excess of tax over book depreciation/amortization		(15,192	)		(19,977	)
Subtotal	$	63,931		$	63,132
Valuation allowance ⁽¹⁾		(63,931	)		(63,132	)
Net deferred tax assets	$	—		$	—

Deferred tax liabilities:
Goodwill and intangibles	$	(222	)	$	(196	)
Deferred tax liabilities	$	(222	)	$	(196	)

(1)	For fiscal 2016, the Company had total deferred tax assets of $79.1 million, total deferred tax liabilities of $15.4 million and a valuation allowance of $63.9 million.

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

	FISCAL YEARS ENDED
	January 28, 2017		January 30, 2016		January 31, 2015

(in thousands)
Current:
Federal and state	$	91	$	104	$	97
Foreign		49		51		55
		140		155		152
Deferred:
Federal and state		23		94		91
Foreign		3		11		—
		26		105		91

Total provision ⁽²⁾	$	166	$	260	$	243

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

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 28, 2017			January 30, 2016			January 31, 2015

(in thousands)
Federal income tax at the statutory rate	$	(732	)	$	(2,852	)	$	(3,827	)
State income and other taxes, net of federal tax benefit		(1	)		(177	)		(72	)
Permanent items		225			137			141
Change in uncertain tax provisions		—			—			—
Charge for valuation allowance		775			3,200			4,034
Other, net		(101	)		(48	)		(33	)
Provision for income tax from continuing operations	$	166		$	260		$	243

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 28, 2017 and 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.

The Company made tax payments of $0.1 million, $0.1 million and $0.1 million for fiscal 2016, 2015 and 2014, respectively.