|12 Months Ended|
Jan. 28, 2017
|Taxes Payable [Abstract]|
Income tax expense is as follows:
The income tax expense reported differs from the expected tax computed by applying the federal income tax statutory rate of 35% for 2016, 2015 and 2014 to income before income taxes. The reasons for this difference and their tax effects are as follows:
The Company participates in the Internal Revenue Service (“IRS”) Compliance Assurance Program ("CAP"). As part of the CAP, tax years are audited on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return. The IRS has completed examinations of 2015 and all prior tax years.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
The valuation allowance at January 28, 2017 and January 30, 2016 relates to net deferred tax assets for state net operating loss and credit carryforwards. The net change in the valuation allowance amounted to an increase of $9 million for 2016 and an increase of $3 million for 2015.
As of January 28, 2017, the Company had no federal net operating loss carryforwards, state net operating loss carryforwards of $374 million, and state credit carryforwards of $31 million, which will expire between 2017 and 2036.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
As of January 28, 2017 and January 30, 2016, the amount of unrecognized tax benefits, net of deferred tax assets, that, if recognized would affect the effective income tax rate, was $109 million and $115 million, respectively.
The Company classifies unrecognized tax benefits not expected to be settled within one year as other liabilities on the Consolidated Balance Sheets.
The Company classifies federal, state and local interest and penalties not expected to be settled within one year as other liabilities on the Consolidated Balance Sheets and follows a policy of recognizing all interest and penalties related to unrecognized tax benefits in income tax expense. Federal, state and local interest and penalties, which amounted to an expense of $2 million for 2016, an expense of $1 million for 2015, and a credit of $3 million for 2014, are reflected in income tax expense.
The Company had $55 million and $53 million accrued for the payment of federal, state and local interest and penalties at January 28, 2017 and January 30, 2016, respectively. The accrued federal, state and local interest and penalties primarily relates to state tax issues and the amount of penalties paid in prior periods, and the amount of penalties accrued at January 28, 2017 and January 30, 2016 are insignificant. At January 28, 2017, $54 million of federal, state and local interest and penalties is included in other liabilities and $1 million is included in current income taxes on the Consolidated Balance Sheets.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2013. With respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years before 2007. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been accrued for any adjustments that are expected to result from the years still subject to examination.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef