Ulta Beauty, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income taxes

Income taxes

12 Months Ended

Jan. 28, 2017

Income Tax Disclosure [Abstract]

Income taxes

6. Income taxes

The provision for income taxes consists of the following:


	Fiscal		Fiscal			Fiscal
(In thousands)	2016		2015			2014
Current:
Federal	$	194,199	$	163,048		$	128,159
State		24,835		18,694			16,909

Total current		219,034		181,742			145,068
Deferred:
Federal		24,480		6,981			8,392
State		2,440		(1,291	)		714

Total deferred		26,920		5,690			9,106

Provision for income taxes	$	245,954	$	187,432		$	154,174

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


	Fiscal 2016			Fiscal 2015			Fiscal 2014
Federal statutory rate		35.0	%		35.0	%		35.0	%
State effective rate, net of federal tax benefit		2.8	%		2.2	%		2.8	%
Other		(0.3	%)		(0.3	%)		(0.3	%)

Effective tax rate		37.5	%		36.9	%		37.5	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:


	January 28,			January 30,
(In thousands)	2017			2016
Deferred tax assets:
Reserves not currently deductible	$	33,805		$	27,734
Employee benefits		15,206			10,594
Credit carryforwards		398			441
Accrued liabilities		10,539			10,704
Inventory valuation		3,630			257

Total deferred tax assets		63,578			49,730
Deferred tax liabilities:
Property and equipment		73,454			48,898
Deferred rent obligation		62,252			49,548
Prepaid expenses		14,370			10,811

Total deferred tax liabilities		150,076			109,257

Net deferred tax liability	$	(86,498	)	$	(59,527	)

At January 28, 2017 and January 30, 2016, the Company had $398 and $441, respectively, of credit carryforwards for state income tax purposes.

The Company accounts for uncertainty in income taxes in accordance with the ASC rules for income taxes. The reserve for uncertain tax positions was $3,305 and $2,262 at January 28, 2017 and January 30, 2016, respectively. The balance is the Company’s best estimate of the potential liability for uncertain tax positions. A reconciliation of the Company’s unrecognized tax benefits, excluding interest and penalties, is as follows:


(In thousands)	January 28, 2017			January 30, 2016
Balance at beginning of the period	$	2,262		$	1,414
Increase due to a current year position		1,048			900
Decrease due to a prior period position		(5	)		(52	)

Balance at the end of the period	$	3,305		$	2,262

The Company acknowledges that the amount of unrecognized tax benefits may change in the next twelve months. However, it does not expect the change to have a significant impact on its consolidated financial statements. Income tax-related interest and penalties were insignificant for fiscal 2016 and 2015.

The Company files tax returns in the U.S. Federal and State jurisdictions. The Company is no longer subject to U.S. Federal examinations by the Internal Revenue Services for years before 2013 and is no longer subject to examinations by State authorities before 2012.