5. Income Taxes

The income tax provision as shown in the statements of operations includes the following:

(amounts in thousands)	Year Ended February 1, 2014			Year Ended February 2, 2013			Year Ended January 28, 2012

Current:
Federal	$	2,380		$	2,807		$	2,857
State		305			397			(1,956	)
Foreign		1,174			974			770


		3,859			4,178			1,671


Deferred:
Federal	$	(154	)	$	(83	)	$	1,128
State		(22	)		5			122


		(176	)		(78	)		1,250


Benefits recorded as a decrease of paid-in capital:
Federal		(267	)		(57	)		—
State		(19	)		(4	)		—


		(286	)		(61	)		—


	$	3,397		$	4,039		$	2,921

A reconciliation of the actual income tax rates to the federal statutory rate follows:



Tax expense at U.S. statutory rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal income tax benefit	1.8		2.4		1.7
State income tax refund, net of federal income tax	—		—		(9.4	)
Nondeductible expenses	0.1		0.4		0.7
Other	—		0.3		1.0


Tax provision	35.9	%	37.1	%	28.0	%

A summary of deferred income tax assets is as follows:

	February 1, 2014					February 2, 2013

(amounts in thousands)	Current		Non-Current			Current			Non-Current
Deferred tax assets:
Amortization	$	—	$	168		$	—		$	237
Deferred revenue		—		28			—			54
Other		177		37			15			12
State income taxes		62		456			71			431
Compensation		—		1,383			—			1,277


Total deferred tax assets		239		2,072			86			2,011


Deferred tax liabilities:
Depreciation		—		(394	)		—			(318	)
Deferred revenue		—		—			(38	)		—


Total deferred tax liabilities		—		(394	)		(38	)		(318	)


Net deferred tax assets	$	239	$	1,678		$	48		$	1,693

Foreign taxes include withholding required on royalty payments from foreign jurisdictions. Deferred tax assets primarily relate to state tax benefits, deferred revenue, and stock option compensation. The Company believes that it is more likely than not that the deferred tax assets will be realized based upon expected future income.

The difference in the effective tax rate for Fiscal 2014 and 2013 in comparison to Fiscal 2012 was primarily the result of settling income tax examinations in Fiscal 2012 with the California Franchise Tax Board in regards to the apportionment of net income. The settlement resulted in a tax provision decrease of approximately $1,000 in Fiscal 2012.

The amount of unrecognized tax benefits was approximately $1,000 and $1,000, respectively, at February 1, 2014 and February 2, 2013. At February 1, 2014, approximately $700 of unrecognized tax benefits would, if recognized, affect the effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(amounts in thousands)	Year Ended February 1, 2014			Year Ended February 2, 2013			Year Ended January 28, 2012

Gross unrecognized tax benefits at beginning of year	$	1,027		$	900		$	1,100
Additions:
Tax positions taken in prior years		10			273			250
Tax positions taken in the current year		22			24			—
Reductions:
Tax positions taken in prior years		(13	)		(170	)		—
Tax positions taken in the current year		—			—			—
Settlement with taxing authorities		—			—			(450	)
Lapse in statute of limitations		(1	)		—			—


Gross unrecognized tax benefits at year end	$	1,045		$	1,027		$	900

In accordance with authoritative guidance, interest and penalties related to unrecognized tax benefits are included within the provision for taxes on the consolidated statements of income. The total amount of interest and penalties recognized in the consolidated statements of income for Fiscal 2014, Fiscal 2013 and Fiscal 2012, respectively, was $60, $100 and $40. As of February 1, 2014 and February 2, 2013, respectively, the total amount of accrued interest and penalties included in the Company's liability for unrecognized tax benefits was $300 and $300.

The Company files income tax returns in the U.S. federal and California and certain other state jurisdictions. For federal income tax purposes, the Fiscal 2011 and later tax years remain open for examination by the tax authorities under the normal three year statute of limitations. For state tax purposes, the Fiscal 2010 and later tax years remain open for examination by the tax authorities under a four year statute of limitations.

In the first quarter of Fiscal 2014, the State of California commenced an examination of the Company's California income tax returns for Fiscal 2009 and Fiscal 2010 that may be completed by the end of Fiscal 2015. As of February 1, 2014, the State has not proposed any significant adjustments to the Company's tax returns for these years. In the first quarter of Fiscal 2015, the Company settled an examination of its New York income tax returns for Fiscal 2007 through Fiscal 2010. Also in the first quarter of Fiscal 2015, the Company anticipates availing itself of a tax amnesty program offered by a state tax authority. As a result of the aforementioned events, the Company anticipates that it is reasonably possible that the total amount of unrecognized tax benefits will decrease in the next 12 months in the range of $250 to $700.

In the first quarter of Fiscal 2015, the Internal Revenue Service (IRS) commenced an examination of the Company's U.S. income tax return for Fiscal 2012. As of February 1, 2014, it not known whether the IRS examination might lead to a significant increase or decrease in unrecognized tax benefits in the next 12 months.