PROVISION FOR INCOME TAXES

The components of the provision for income taxes are as follows:

	FISCAL YEAR ENDED
(in thousands)	February 27, 2016		February 28, 2015			March 1, 2014

Current:
Federal	$	389,039	$	504,154		$	514,818
State and local		39,991		64,486			64,581
		429,030		568,640			579,399

Deferred:
Federal		42,592		(18,245	)		11,221
State and local		14,334		(4,034	)		537
		56,926		(22,279	)		11,758
	$	485,956	$	546,361		$	591,157

At February 27, 2016, included in other current assets is a net current deferred income tax asset of $201.5 million and included in deferred rent and other liabilities is a net noncurrent deferred income tax liability of $2.4 million. At February 28, 2015, included in other current assets is a net current deferred income tax asset of $207.3 million and included in other assets is a net noncurrent deferred income tax asset of $49.7 million. These amounts represent the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities consist of the following:

(in thousands)	February 27, 2016			February 28, 2015

Deferred tax assets:
Inventories	$	30,470		$	35,169
Deferred rent and other rent credits		74,182			77,878
Insurance		51,238			62,668
Stock-based compensation		39,417			35,591
Merchandise credits and gift card liabilities		66,496			65,055
Accrued expenses		46,226			42,328
Obligations on distribution centers		40,704			41,175
Net operating loss carryforwards and other tax credits		22,253			30,453
Other		90,776			89,933

Deferred tax liabilities:
Depreciation		(104,781	)		(74,051	)
Goodwill		(62,252	)		(55,888	)
Intangibles		(81,150	)		(80,515	)
Other		(14,525	)		(12,780	)
	$	199,054		$	257,016

At February 27, 2016, the Company has federal net operating loss carryforwards of $11.4 million (tax effected), which will begin expiring in 2025, state net operating loss carryforwards of $5.0 million (tax effected), which will expire between 2015 and 2031, California state enterprise zone credit carryforwards of $4.8 million (tax effected), which will expire in 2023, but require taxable income in the enterprise zone to be realizable and other tax credits of $1.0 million (tax effected).

The Company has not established a valuation allowance for the net deferred tax asset as it is considered more likely than not that it is realizable through a combination of future taxable income and the deductibility of future net deferred tax liabilities.

The following table summarizes the activity related to the gross unrecognized tax benefits from uncertain tax positions:

(in thousands)	February 27, 2016			February 28, 2015

Balance at beginning of year	$	79,985		$	92,614

Increase related to current year positions		16,662			17,333
Increase related to prior year positions		2,104			6,549
Decrease related to prior year positions		(14,698	)		(20,082	)
Settlements		(5,865	)		(11,762	)
Lapse of statute of limitations		(5,381	)		(4,667	)

Balance at end of year	$	72,807		$	79,985

At February 27, 2016, the Company has recorded approximately $72.8 million of gross unrecognized tax benefits in non-current income taxes payable on the consolidated balance sheet of which approximately $72.7 million would impact the Company’s effective tax rate. At February 28, 2015, the Company has recorded approximately $80.0 million of gross unrecognized tax benefits in non-current income taxes payable on the consolidated balance sheet of which approximately $79.9 million would impact the Company’s effective tax rate. As of February 27, 2016 and February 28, 2015, the liability for gross unrecognized tax benefits included approximately $10.5 million and $13.0 million, respectively, of accrued interest. The Company recorded a decrease of interest of approximately $2.5 million and $3.9 million, respectively, for the years ended February 27, 2016 and February 28, 2015 for gross unrecognized tax benefits in the consolidated statement of earnings.

The Company anticipates that any adjustments to gross unrecognized tax benefits which will impact income tax expense, due to the expiration of statutes of limitations, could be approximately $4 to $5 million in the next twelve months. However, actual results could differ from those currently anticipated.

As of February 27, 2016, the Company operated in all 50 states, the District of Columbia, Puerto Rico, Canada and several other international countries and files income tax returns in the United States and various state, local and international jurisdictions. The Company is open to examination for state and local jurisdictions with varying statutes of limitations, generally ranging from three to five years.

For fiscal 2015, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00%, the State income tax rate, net of Federal benefit, of 3.07%, provision for uncertain tax positions of .07% and other income tax benefits of 1.53%. For fiscal 2014, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00%, the State income tax rate, net of Federal benefit, of 3.01%, provision for uncertain tax positions of 0.04% and other income tax benefits of 1.72%. For fiscal 2013, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00%, the State income tax rate, net of Federal benefit, of 3.07%, benefit for uncertain tax positions of 0.05% and other income tax benefits of 1.42%.