INCOME TAXES

Income tax expense is based on pretax financial accounting income. Deferred income taxes are recognized for the temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and such amounts for income tax purposes.

The income tax provision (benefit) for the fiscal years ended 2015, 2014 and 2013, consisted of the following (in thousands):



	Fiscal Year Ended
	November 1, 2015			November 2, 2014			November 3, 2013
Current:
Federal	$	12,366		$	3,919		$	(198	)
State	336			1,016			987
Foreign	1,638			516			946
Total current	14,340			5,451			1,735
Deferred:
Federal	(5,193		)	(198		)	(8,928		)
State	91			(319		)	(524		)
Foreign	(266		)	(3,444		)	(1,137		)
Total deferred	(5,368		)	(3,961		)	(10,589		)
Total provision (benefit)	$	8,972		$	1,490		$	(8,854	)

The reconciliation of income tax computed at the United States federal statutory tax rate to the effective income tax rate is as follows:



	Fiscal Year Ended
	November 1, 2015		November 2, 2014		November 3, 2013
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes	1.6	%	4.6	%	1.9	%
Production activities deduction	(6.4	)%	(3.7	)%	—	%
Canadian valuation allowance	—	%	(23.3	)%	1.9	%
Non-deductible expenses	4.1	%	7.0	%	(4.2	)%
Uncertain tax position adjustment	—	%	(2.4	)%	—	%
Foreign tax benefit	—	%	(4.5	)%	—	%
Other	(0.8	)%	(0.9	)%	6.1	%
Effective tax rate	33.5	%	11.8	%	40.7	%

Deferred income taxes reflect the net impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of the temporary differences for fiscal 2015 and 2014 are as follows (in thousands):



	As of November 1, 2015			As of November 2, 2014
Deferred tax assets:
Inventory obsolescence	$	2,302		$	1,453
Bad debt reserve	1,044			881
Accrued and deferred compensation	22,203			21,179
Accrued insurance reserves	1,464			1,481
Deferred revenue	9,811			9,410
Net operating loss and tax credit carryover	4,512			5,086
Depreciation and amortization	60			732
Pension	5,770			5,480
Other reserves	1,098			—
Total deferred tax assets	48,264			45,702
Less valuation allowance	(115		)	—
Net deferred tax assets	48,149			45,702
Deferred tax liabilities:
Depreciation and amortization	(39,708		)	(43,430		)
US tax on unremitted foreign earnings	(1,106		)	(969		)
Other	(797		)	(75		)
Total deferred tax liabilities	(41,611		)	(44,474		)
Total deferred tax asset, net	$	6,538		$	1,228

We carry out our business operations through legal entities in the U.S., Canada, Mexico and China. These operations require that we file corporate income tax returns that are subject to U.S., state and foreign tax laws. We are subject to income tax audits in these multiple jurisdictions.

As of November 1, 2015, the $4.5 million net operating loss and tax credit carryforward included $1.1 million for U.S. state loss carryforwards. The state net operating loss carryforwards will expire in 1 to 19 years, if unused. As of November 1, 2015, our foreign operations have a net operating loss carryforward of approximately $10.6 million, representing $2.8 million of the $4.5 million deferred tax asset related to net operating loss and tax credit carryovers, that will start to expire in fiscal 2026, if unused. During fiscal 2014, after evaluating historical and future financial trends in our Canadian operations, we determined that it is more likely than not that we will utilize all of our current tax loss carry-forwards. As a result, we reversed the entire valuation allowance on our net Canadian deferred tax asset. We have recorded a full valuation allowance on the loss generated by our operations in China related to our CENTRIA operations. The following table represents the rollforward of the valuation allowance on deferred taxes activity for the fiscal years ended November 1, 2015, November 2, 2014 and November 3, 2013 (in thousands):



	November 1, 2015		November 2, 2014			November 3, 2013
Beginning balance	$	—	$	4,046		$	4,700
(Reductions) additions	115		(4,046		)	(654		)
Ending balance	$	115	$	—		$	4,046

Uncertain tax positions

The total amount of unrecognized tax benefits at November 1, 2015 was $0.1 million, all of which would impact our effective tax rate, if recognized. The total amount of unrecognized tax benefits at November 2, 2014 was $0.1 million, all of which would impact our effective tax rate, if recognized. We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

The following table summarizes the activity related to the Company’s unrecognized tax benefits during fiscal 2015 and 2014 (in thousands):



	November 1, 2015		November 2, 2014
Unrecognized tax benefits at beginning of year	$	143	$	443
Additions for tax positions related to prior years	—		21
Reductions resulting from expiration of statute of limitations	—		(321		)
Unrecognized tax benefits at end of year	$	143	$	143

We recognize interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. We did not have a material amount of accrued interest and penalties related to uncertain tax positions as of November 1, 2015.

We file income tax returns in the U.S. federal jurisdiction and multiple state and foreign jurisdictions. Our tax years are closed with the IRS through the year ended October 31, 2010 as the statute of limitations related to these tax years has closed. In addition, open tax years related to state and foreign jurisdictions remain subject to examination but are not considered material.