Annual report pursuant to Section 13 and 15(d)

Taxes

v3.21.1
Taxes
12 Months Ended
Jan. 30, 2021
Taxes Payable Current And Noncurrent [Abstract]  
Taxes

 

9.

Taxes

Income tax expense (benefit) is as follows:

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

Current

 

 

Deferred

 

 

Total

 

 

Current

 

 

Deferred

 

 

Total

 

 

Current

 

 

Deferred

 

 

Total

 

 

 

(millions)

 

Federal

 

$

(520

)

 

$

(179

)

 

$

(699

)

 

$

137

 

 

$

4

 

 

$

141

 

 

$

156

 

 

$

79

 

 

$

235

 

State and local

 

 

1

 

 

 

(148

)

 

 

(147

)

 

 

33

 

 

 

(10

)

 

 

23

 

 

 

54

 

 

 

33

 

 

 

87

 

 

 

$

(519

)

 

$

(327

)

 

$

(846

)

 

$

170

 

 

$

(6

)

 

$

164

 

 

$

210

 

 

$

112

 

 

$

322

 

 

The income tax expense (benefit) reported differs from the expected tax computed by applying the federal income tax statutory rate of 21% to income before income taxes net of noncontrolling interest. The reasons for this difference and their tax effects are as follows:

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

(millions)

 

Expected tax

 

$

(1,006

)

 

$

153

 

 

$

300

 

State and local income taxes, net of federal income taxes

 

 

(140

)

 

 

13

 

 

 

59

 

CARES Act carryback benefit

 

 

(205

)

 

 

 

 

 

 

Goodwill impact

 

 

492

 

 

 

 

 

 

 

Federal tax reform deferred tax remeasurement

 

 

 

 

 

 

 

 

(17

)

Tax impact of equity awards

 

 

8

 

 

 

1

 

 

 

 

Federal tax credits

 

 

(5

)

 

 

(3

)

 

 

(16

)

Change in valuation allowance

 

 

24

 

 

 

5

 

 

 

10

 

Other

 

 

(14

)

 

 

(5

)

 

 

(14

)

 

 

$

(846

)

 

$

164

 

 

$

322

 

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 2018 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:

 

 

 

January 30,

 

 

February 1,

 

 

 

2021

 

 

2020

 

 

 

(millions)

 

Deferred tax assets

 

 

 

 

 

 

 

 

Post employment and postretirement benefits

 

$

126

 

 

$

210

 

Accrued liabilities accounted for on a cash basis for tax purposes

 

 

103

 

 

 

165

 

Lease liabilities

 

 

937

 

 

 

864

 

Unrecognized state tax benefits and accrued interest

 

 

39

 

 

 

40

 

State operating loss and credit carryforwards

 

 

194

 

 

 

102

 

Other

 

 

95

 

 

 

110

 

Valuation allowance

 

 

(104

)

 

 

(80

)

Total deferred tax assets

 

 

1,390

 

 

 

1,411

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

Excess of book basis over tax basis of property and equipment

 

 

(937

)

 

 

(988

)

Right of use assets

 

 

(766

)

 

 

(707

)

Merchandise inventories

 

 

(300

)

 

 

(365

)

Intangible assets

 

 

(115

)

 

 

(309

)

Other

 

 

(180

)

 

 

(211

)

Total deferred tax liabilities

 

 

(2,298

)

 

 

(2,580

)

Net deferred tax liability

 

$

(908

)

 

$

(1,169

)

 

The valuation allowance at January 30, 2021 and February 1, 2020 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 $24 million for 2020. In 2019, the net change in the valuation allowance amounted to an increase of $5 million.

As of January 30, 2021, the Company had no federal net operating loss carryforwards, state net operating loss carryforwards, net of valuation allowances, of $1,500 million, which will expire between 2021 and 2040, and no state credit carryforwards, net of valuation allowances.

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

 

 

 

January 30,

 

 

February 1,

 

 

February 2,

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(millions)

 

Balance, beginning of year

 

$

133

 

 

$

149

 

 

$

140

 

Additions based on tax positions related to the current year

 

 

9

 

 

 

18

 

 

 

17

 

Additions for tax positions of prior years

 

 

 

 

 

11

 

 

 

13

 

Reductions for tax positions of prior years

 

 

(13

)

 

 

(20

)

 

 

(12

)

Settlements

 

 

(4

)

 

 

(16

)

 

 

 

Statute expirations

 

 

(12

)

 

 

(9

)

 

 

(9

)

Balance, end of year

 

$

113

 

 

$

133

 

 

$

149

 

Amounts recognized in the Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

Current income taxes

 

$

6

 

 

$

12

 

 

$

28

 

Deferred income taxes

 

 

3

 

 

 

4

 

 

 

4

 

Other liabilities (a)

 

 

104

 

 

 

117

 

 

 

117

 

 

 

$

113

 

 

$

133

 

 

$

149

 

 

(a)

Unrecognized tax benefits not expected to be settled within one year are included within other liabilities on the Consolidated Balance Sheets.

Additional information regarding unrecognized benefits and related interest and penalties is as follow:

Amount of unrecognized tax benefits, net of deferred tax assets, that if recognized

 

 

 

January 30,

 

 

February 1,

 

 

 

2021

 

 

2020

 

 

 

(millions)

 

Amount of unrecognized tax benefits, net of deferred tax assets, that if

   recognized would affect the effective tax rate

 

$

90

 

 

$

106

 

Accrued federal, state and local interest and penalties

 

 

60

 

 

 

60

 

Amounts recognized in the Consolidated Balance Sheets

 

 

 

 

 

 

 

 

Current income taxes

 

 

3

 

 

 

4

 

Other liabilities

 

 

57

 

 

 

56

 

 

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. The accrued federal, state and local interest and penalties primarily relate to state tax issues and the amount of penalties paid in prior periods, and the amounts of penalties accrued at January 30, 2021 and February 1, 2020, are insignificant. Federal, state and local interest and penalties amounted to an expense of $1 million for 2020, an expense of $6 million for 2019, and an expense of $5 million for 2018.

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 2017. 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 2011. 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.

As of January 30, 2021, the Company believes it is reasonably possible that certain unrecognized tax benefits ranging from zero to $55 million may be recognized by the end of 2021. It is reasonably possible that there could be other material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues or the reassessment of existing uncertain tax positions; however, the Company is not able to estimate the impact of these items at this time.