Income Taxes
 12 Months Ended
Jan. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 5 | INCOME TAXES
The provision (benefit) for income taxes consists of the following:

202020192018
Current:(in thousands)
U.S. federal$(109,627)$(602)$7,644 
U.S. state and local(1,240)(363)2,480 
Total(110,867)(965)10,124 
Deferred:
U.S. federal37,292 (39,272)371 
U.S. state and local17,675 (10,289)165 
Total54,967 (49,561)536 
Income tax (benefit)/expense$(55,900)$(50,526)$10,660 
The following table provides a reconciliation between the statutory federal income tax rate and the effective tax rate:

 202020192018
Federal income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal income tax effect5.2 %3.4 %13.2 %
Change in uncertain tax positions0.1 %0.4 %(1.5)%
Share-based compensation(0.3)%(1.3)%5.5 %
Non-deductible executive compensation(0.2)%(0.4)%13.8 %
Change in valuation allowance(22.9)%(0.1)%6.3 %
Change in tax law9.1 %— %(1.0)%
Tax credits0.1 %0.3 %(5.0)%
Other items, net— %0.2 %0.2 %
Effective tax rate12.1 %23.5 %52.5 %
On March 27, 2020, the CARES Act was enacted into law. The CARES Act provides several provisions that impact the Company including the establishment of a five-year carryback of net operating losses originating in the tax years 2018, 2019, and 2020, temporarily suspending the 80% limitation on the use of net operating losses, relaxing limitation rules on business interest deductions, and retroactively clarifying that businesses may immediately write-off certain qualified leasehold improvement property dating back to January 1, 2018.

The decrease in the tax rate in 2020 compared to 2019 is primarily attributable to the impact of establishing a valuation allowance against the Company's net deferred tax assets. This was partially offset by the impact from the CARES Act of the 2019 and 2020 U.S. federal net operating losses that are able to be carried back to years with a higher federal statutory tax rate than is currently enacted.

The decrease in the tax rate in 2019 compared to 2018 is primarily attributable to the large pre-tax loss from the impairment of intangible assets, partially offset by the impact on the tax rate of the share-based compensation, non-deductible executive compensation, and valuation allowance recorded in 2018.

The following table provides the effect of temporary differences that created deferred income taxes as of January 30, 2021 and February 1, 2020. Deferred tax assets and liabilities represent the future effects on income taxes resulting from temporary differences and carry-forwards at the end of the respective periods.

 January 30, 2021February 1, 2020
(in thousands)
Deferred tax assets:
Accrued expenses and deferred compensation$10,478 $9,984 
Lease liability249,819 304,942 
Intangible assets24,592 26,059 
Inventory1,154 1,974 
Deferred revenue7,582 9,040 
Net operating losses, tax credit and other carryforwards51,204 2,265 
Valuation allowance(108,418)(2,313)
Total deferred tax assets236,411 351,951 
Deferred tax liabilities:
Prepaid expenses3,861 3,702 
Right of use asset210,796 268,779 
Other1,200 464 
Property and equipment20,554 24,039 
Total deferred tax liabilities236,411 296,984 
Net deferred tax asset$— $54,967 
Due to the ongoing impact of the COVID-19 pandemic, the Company no longer believes it is able to objectively forecast taxable income in future years, which provides significant negative evidence when assessing whether the Company will more likely than not realize the full amount of the U.S. net deferred tax assets. As such, the Company recorded a valuation allowance against the full amount of the U.S. net deferred tax assets that were not utilized with the 2020 net operating loss carryback under the CARES Act. We will continue to evaluate the Company's ability to realize the deferred tax assets on a quarterly basis.
As of January 30, 2021, the Company had U.S. federal net operating loss carryforwards of $92.8 million and U.S. state net operating loss carryforwards of $490.0 million. The U.S. federal net operating losses have an indefinite carryforward period. The U.S. state net operating losses have carryforward periods of five to twenty years with varying expiration dates and certain jurisdictions have an unlimited carryforward. The Company had U.S. federal and state capital loss carryforwards of $10.2 million, which, if unused, will expire in five years. In addition, certain U.S. federal tax credits generated in tax years 2015 to 2019 in the amount of $3.8 million will no longer be utilized due to the net operating loss carryback claims under the CARES Act. These tax credits can be carried forward 20
years and expire starting in 2035. The Company also has $0.1 million in foreign tax credits, which can be carried forward 10 years and expire starting in 2027. A valuation allowance has been recorded on all of these tax attributes.

The following table summarizes the presentation of the Company’s net deferred tax assets on the Consolidated Balance Sheets:

January 30, 2021February 1, 2020
(in thousands)
Deferred tax assets$— $54,973 
Other long-term liabilities— (6)
Net deferred tax assets$— $54,967 

The following table summarizes the changes in the valuation allowance:

202020192018
(in thousands)
Valuation allowance, beginning of year$2,313 $2,108 $832 
Changes in related gross deferred tax assets/liabilities410 — — 
Charge105,695 205 1,276 
Valuation allowance, end of year$108,418 $2,313 $2,108 
Uncertain Tax Positions
The Company evaluates tax positions using a more likely than not recognition criterion.

A reconciliation of the beginning to ending unrecognized tax benefits is as follows:

January 30, 2021February 1, 2020February 2, 2019
(in thousands)
Unrecognized tax benefits, beginning of year$1,305 $1,928 $2,398 
Gross addition for tax positions of the current year— — 42 
Gross addition for tax positions of the prior year327 300 — 
Settlements — (2)— 
Reduction for tax positions of prior years— (240)(28)
Lapse of statute of limitations(244)(681)(484)
Unrecognized tax benefits, end of year$1,388 $1,305 $1,928 
The amount of the above unrecognized tax benefits as of January 30, 2021, February 1, 2020, and February 2, 2019 that would impact the Company's effective tax rate, if recognized, is $1.4 million, $1.3 million, and $1.9 million, respectively.

During 2020 and 2019, the Company released gross uncertain tax positions of $0.2 million and $0.7 million, respectively, and the related accrued interest and penalties of $0.2 million and $0.3 million, respectively, as a result of the expiration of associated statutes of limitation.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. The total amount of net interest in tax expense related to interest and penalties included in the Consolidated Statements of Income and Comprehensive Income was $(0.1) million for 2020, $(0.1) million for 2019, and $0.1 million for 2018. As of January 30, 2021 and February 1, 2020, the Company had accrued interest and penalties of $0.4 million and $0.5 million, respectively.
The Company is subject to examination by the IRS for years subsequent to 2013. The Company is also generally subject to examination by various U.S. state and local and non-U.S. tax jurisdictions for the years subsequent to 2013. The Company does not expect the results from any income tax audit to have a material impact on the Company’s financial statements.

The Company believes that over the next twelve months, it is reasonably possible that up to $0.1 million of unrecognized tax benefits could be resolved as the result of settlements of audits and the expiration of statutes of limitation. Final settlement of these issues may result in payments that are more or less than this amount, but the Company does not anticipate that the resolution of these matters will result in a material change to its consolidated financial position or results of operations.