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. 30, 2016

Income Tax Disclosure [Abstract]

Income taxes

6. Income taxes

The provision for income taxes consists of the following:


(In thousands)	Fiscal 2015			Fiscal 2014		Fiscal 2013
Current:
Federal	$	163,048		$	128,159	$	105,731
State		18,694			16,909		15,310

Total current		181,742			145,068		121,041
Deferred:
Federal		6,981			8,392		3,891
State		(1,291	)		714		(75	)

Total deferred		5,690			9,106		3,816

Provision for income taxes	$	187,432		$	154,174	$	124,857

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


	Fiscal 2015			Fiscal 2014			Fiscal 2013
Federal statutory rate		35.0	%		35.0	%		35.0	%
State effective rate, net of federal tax benefit		2.2	%		2.8	%		3.0	%
Other		(0.3	%)		(0.3	%)		0.1	%

Effective tax rate		36.9	%		37.5	%		38.1	%

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


(In thousands)	January 30, 2016			January 31, 2015
Deferred tax assets:
Reserves not currently deductible	$	27,734		$	22,380
Employee benefits		10,594			8,782
Credit carryforwards		441			338
Accrued liabilities		10,704			8,231
Inventory valuation		257			617

Total deferred tax assets		49,730			40,348
Deferred tax liabilities:
Property and equipment		48,898			44,882
Deferred rent obligation		49,548			38,409
Prepaid expenses		10,811			10,775

Total deferred tax liabilities		109,257			94,066

Net deferred tax liability	$	(59,527	)	$	(53,718	)

The Company adopted ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, prospectively, in the fourth quarter of fiscal 2015. As a result of the adoption at January 30, 2016, current deferred income tax assets were classified as non-current liabilities on the Company’s consolidated balance sheet.

At January 30, 2016 and January 31, 2015, the Company had $441 and $338, respectively, 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 $2,262 and $1,414 at January 30, 2016 and January 31, 2015, 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 30, 2016			January 31, 2015
Balance at beginning of the period	$	1,414		$	795
Increase due to a current year position		900			670
Decrease due to a prior period position		(52	)		(51	)

Balance at the end of the period	$	2,262		$	1,414

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 2015 and 2014.

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 2012 and is no longer subject to examinations by State authorities before 2011.