
	Fiscal 2020		Fiscal 2019		Fiscal 2018

	(in thousands)
Current:
Federal	$	(102,046)	$	4,593	$	5,903
State	468		(261)		3,378
Foreign	48		315		282
Total	(101,530)		4,647		9,563
Deferred:
Federal	(3,902)		(4,392)		(1,949)
State	5,532		545		86
Total	1,630		(3,847)		(1,863)
Income tax (benefit) provision	$	(99,900)	$	800	$	7,700

The foreign component of pre-tax (loss) income, arising principally from operating foreign stores and other management and cost sharing charges we are required to allocate under U.S. tax law, for fiscal 2020, 2019 and 2018 was $(4.8) million, $(1.6) million and $(1.7) million, respectively.

On March 27, 2020, the CARES Act was enacted to provide economic relief to those impacted by the COVID-19 pandemic. The CARES Act made various tax law changes including among other things (i) modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2020, 2019 and 2018 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes (ii) enhanced recoverability of AMT tax credit carryforwards and (iii) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k).

As a result of the CARES Act, the Company recorded an income tax receivable of $55.2 million as it is expecting to carryback its current year estimated taxable losses for fiscal year 2020 and recover prior taxes paid. During fiscal 2020, the Company received a tax refund of $42.7 million related to the carryback of 2019 net operating losses. The Company recorded an income tax benefit of $39.2 million related to the 2019 and 2020 carrybacks as the Company was subject to higher federal corporate income tax rates in prior periods than the current statutory tax rate of 21%.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective January 1, 2018. As a result, the Company’s fiscal 2020, 2019 and 2018 federal tax rate was 21%.

As a result of the Tax Act and in accordance with SEC Staff Accounting Bulletin 118, the Company recorded provisional tax expense in the fourth quarter of fiscal 2018 related to executive compensation and other deferred tax balances. During fiscal 2019, the Company made a $4.9 million reduction, or 11.2% benefit to the effective tax rate, to the provisional tax expense related to the acceleration of certain tax deductions into fiscal 2018 and the subsequent revaluation of the associated deferred tax liabilities to reflect the new rate. The change was a result of additional analysis, changes in interpretation and assumptions, as well as additional regulatory guidance that was issued.

The Tax Act requires a one-time transition tax that is based on total post-1986 earnings and profits (“E & P”) previously deferred from U.S. income taxes. As the Company does not have any post-1986 E & P in its foreign subsidiaries, no one-time transition tax was recorded.

No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the one-time transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. There were no significant undistributed foreign earnings at January 30, 2021, February 1, 2020 and February 2, 2019.


	Fiscal 2020		Fiscal 2019 (1)		Fiscal 2018
Federal income tax rate	21.0	%	21.0	%	21.0	%
State income tax, net of federal tax benefit	3.3		(1.4)		5.7
Goodwill impairment with no tax basis	(3.3)		—		—
Impact of the CARES Act	8.6		—		—
Impact of the Tax Act	—		—		(11.2)
Excess share-based compensation	(0.3)		(19.3)		3.2
Provision-to-tax return adjustments	—		(8.9)		—
Valuation allowance	(7.6)		(4.9)		—
Enhanced charitable contribution	—		—		(3.0)
Executive compensation limitations	—		(3.8)		2.1
Foreign losses with full valuation allowance	(0.1)		(3.8)		1.1
Federal tax credits	—		6.0		(1.1)
Changes in uncertain tax positions	—		4.2		(0.1)


Other items, net	0.1		4.2		0.1
Total	21.7	%	(6.7)	%	17.8	%

(1) Given the low level of pre-tax income in absolute dollars in fiscal 2019, effective tax rate reconciling items that may have been considered de minimis in prior years in terms of absolute dollars and on a percentage basis are amplified on a percentage basis in the current year even though the absolute dollar value of the reconciling items are similar to prior year. As such, comparability of information disclosed for fiscal 2019 in comparison to fiscal 2018 and fiscal 2020 may be difficult as a result of the amplifying effect of the lower level of pre-tax income.

Deferred tax assets and liabilities are recorded due to different carrying amounts for financial and income tax reporting purposes arising from cumulative temporary differences. These differences consist of the following as of January 30, 2021 and February 1, 2020:


	January 30, 2021		February 1, 2020

	(in thousands)
Deferred tax assets:
Operating lease liabilities	$	182,875	$	192,392
Accrued liabilities and allowances	13,529		15,335

Share-based compensation	1,774		3,557
Property related	1,200		379
Charitable contribution limitation carryforwards	706		1,400
State and foreign net operating loss carryforwards	11,808		2,192
Federal and state tax credit carryforwards	4,429		4,035
Other	2,900		1,909
Total deferred tax assets	219,221		221,199
Valuation allowance	(36,081)		(2,162)
Net deferred tax assets	183,140		219,037

Deferred tax liabilities:
Operating lease assets	(153,791)		(169,900)
Inventories	—		(2,785)
Prepaid and other expenses	(1,572)		(1,603)
Property related	(24,371)		(26,628)

Other intangible assets	(4,718)		(17,827)
Total deferred tax liabilities	(184,452)		(218,743)
Net deferred taxes	$	(1,312)	$	294

As of January 30, 2021, the Company had deferred tax assets for state and local net operating losses and federal and state tax credit carryovers in the amounts of $210.8 million and $5.4 million, respectively, on a gross basis that could be utilized to reduce future years' tax liabilities. The net operating losses and tax credit carryovers expire, if unused, in the years 2021 - 2040 and 2021 - 2028, respectively. As of January 30, 2021, the Company had deferred tax assets related to foreign net operating loss carryforwards in the amount of $4.3 million on a gross basis. The foreign carryforwards will begin to expire, if unused, in 2022. Some foreign net operating losses have an indefinite carryforward. We also have net operating loss carryforwards in Canada for which we have not recorded a deferred tax asset or corresponding valuation allowance because we no longer conduct business in Canada as of the year ended January 30, 2021.

We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We consider tax planning strategies available to accelerate taxable amounts if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized.

We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our state and local net operating losses and credit carryforwards. These forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of the pandemic, on our profitability. Macroeconomic factors, including the impact of the pandemic, possess a high degree of volatility and can significantly impact our profitability. Given this uncertainty and the Company’s cumulative three year losses, we believe we cannot rely on forecasts of future profitability

for purposes of our assessment of the realizability of deferred tax assets and as such, we conclude that it is not more likely than not that, at January 30, 2021, our U.S. net deferred tax assets will be utilized and a full valuation allowance has been recorded.

For the fiscal years 2020 and 2019, the Company maintained a valuation allowance of $36.1 million and $2.2 million, respectively, attributable to deferred tax assets, state, local and foreign net operating loss carryforwards and federal and state tax credits which are not realizable on a more likely than not basis. The net valuation allowance increased by $33.9 million from the amount recorded as of February 1, 2020, after considering a reduction to the fiscal 2019 valuation allowance of $1.3 million due to charitable contribution carryovers and state credit carryforwards that expired during fiscal 2020. While the Company does not expect material adjustments to the total amount of valuation allowances within the next twelve months, changes in assumptions may occur based on the information then currently available. In such case, the Company will record an adjustment in the period in which a determination is made.


	Fiscal 2020		Fiscal 2019		Fiscal 2018

	(in thousands)
Balance at beginning of year	$	747	$	1,505	$	1,522
Additions for tax positions of prior years	—		82		117
Reductions for tax positions of prior years	—		(45)		(24)
Additions for tax positions for the current year	—		—		87
Settlements/payments with tax authorities	—		(538)		(197)
Reductions due to lapse of applicable statutes of limitation	(80)		(257)		—
Balance at end of year	$	667	$	747	$	1,505

At January 30, 2021, February 1, 2020 and February 2, 2019, balances included $0.5 million, $0.6 million and $1.2 million respectively, of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate in future periods. We do not expect any events to occur that would cause a change to our unrecognized tax benefits or income tax expense within the next twelve months.

Our continuing practice is to recognize potential accrued interest and penalties relating to unrecognized tax benefits in the income tax provision. We accrued $0.1 million for interest and penalties for each of the fiscal years 2020, 2019 and 2018. We had approximately $0.0 million, $0.1 million and $0.3 million, respectively, for the payment of interest and penalties accrued at January 30, 2021, February 1, 2020 and February 2, 2019, respectively. The amounts included in the reconciliation of uncertain tax positions do not include accruals for interest and penalties.

In fiscal 2006, we began participating in the IRS’s real time audit program, Compliance Assurance Process (“CAP”). Under the CAP program, material tax issues and initiatives are disclosed to the IRS throughout the year with the objective of reaching an agreement as to the proper reporting treatment when the federal return is filed. Previous years through fiscal 2018 have been accepted. Fiscal 2019 is in the post-filing review process.