Income Taxes

The Company records deferred taxes for differences between the financial reporting and income tax bases of assets and liabilities, computed in accordance with tax laws in effect at that time. The deferred taxes related to such differences as of January 28, 2012 and January 29, 2011 were as follows (in thousands):



	January 28, 2012			January 29, 2011
Accruals and reserves not currently deductible for tax purposes	$	4,663		$	6,747
Inventory capitalization	763			665
Basis differences in intangible assets	(3,709		)	(2,881		)
Differences in depreciation lives and methods	2,727			2,617
Differences in investments and other items	495			1,900
Net operating loss carryforwards	109,538			98,270
Valuation allowance	(114,477		)	(107,318		)
Net deferred tax asset	$	—		$	—

The (provision) benefit from income taxes consisted of the following:



	For the Years Ended
	January 28, 2012			January 29, 2011		January 30, 2010
Current	$	(84,000	)	$	577,000	$	91,000
Deferred	—			—		—
	$	(84,000	)	$	577,000	$	91,000

A reconciliation of the statutory tax rates to the Company’s effective tax rate is as follows:



	For the Years Ended
	January 28, 2012		January 29, 2011		January 30, 2010
Taxes at federal statutory rates	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	0.4		1.3		1.9
Non-cash stock option vesting expense	(0.9	)	(3.7	)	(1.6	)
Non-deductible interest	(1.2	)	(10.6	)	(4.0	)
Non-deductible loss on debt extinguishment	(18.7	)	(1.6	)	—
Other	0.1		0.5		0.8
Valuation allowance and NOL carryforward benefits	(14.9	)	(18.7	)	(31.9	)
Effective tax rate	(0.2	)%	2.2	%	0.2	%

Based on the Company’s recent history of losses, the Company has recorded a full valuation allowance for its net deferred tax assets as of January 28, 2012 and January 29, 2011 in accordance with GAAP, which places primary importance on the Company’s most recent operating results when assessing the need for a valuation allowance. The ultimate realization of these deferred tax assets depends on the ability of the Company to generate sufficient taxable income in the future, as well as the timing of such income. The Company intends to maintain a full valuation allowance for its net deferred tax assets until sufficient positive evidence exists to support reversal of the allowance. As of January 28, 2012, the Company has federal net operating loss carryforwards (NOL's) of approximately $285 million which are available to offset future taxable income. The Company's federal NOLs expire in varying amounts each year from 2023 through 2031 in accordance with applicable federal tax regulations and the timing of when the NOLs were incurred. During the quarter ending April 30, 2011, the Company had a change in ownership (as defined in Section 382 of the Internal Revenue Code) as a result of the issuance of common stock coupled with the redemption of all the Series B preferred stock held by GE Equity. Sections 382 and 383 limit the annual utilization of certain tax attributes, including NOL carryforwards incurred prior to a change in ownership. The limitations imposed by Sections 382 and 383 are not expected to impair the Company's ability to fully realize its NOL's; however, the annual usage of NOL's incurred prior to the change in ownership will be limited. As of January 28, 2012 and January 29, 2011, there were no unrecognized tax benefits for uncertain tax positions.

The Company is subject to U.S. federal income taxation and the taxing authorities of various states. The Company’s tax years for 2008, 2009, and 2010 are currently subject to examination by taxing authorities. With limited exceptions, the Company is no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2008.