|12 Months Ended|
Jan. 30, 2021
|Taxes Payable Current And Noncurrent [Abstract]|
Income tax expense (benefit) is as follows:
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:
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:
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:
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
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.
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/disclosureRef