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Taxes
12 Months Ended
Jan. 31, 2019
Income Tax Disclosure [Abstract]  
Income tax disclosure
Taxes
The components of income before income taxes are as follows:
 
Fiscal Years Ended January 31,
(Amounts in millions)
2019
 
2018
 
2017
U.S.
15,875

 
10,722

 
15,680

Non-U.S.
(4,415
)
 
4,401

 
4,817

Total income before income taxes
11,460

 
15,123

 
20,497


A summary of the provision for income taxes is as follows:
 
Fiscal Years Ended January 31,
(Amounts in millions)
2019
 
2018
 
2017
Current:
 
 
 
 
 
U.S. federal
$
2,763

 
$
2,998

 
$
3,454

U.S. state and local
493

 
405

 
495

International
1,495

 
1,377

 
1,510

Total current tax provision
4,751

 
4,780

 
5,459

Deferred:
 
 
 
 
 
U.S. federal
(361
)
 
(22
)
 
1,054

U.S. state and local
(16
)
 
(12
)
 
51

International
(93
)
 
(146
)
 
(360
)
Total deferred tax expense (benefit)
(470
)
 
(180
)
 
745

Total provision for income taxes
$
4,281

 
$
4,600

 
$
6,204


In December 2017, the Tax Act was enacted and significantly changed U.S. income tax law. Beginning January 2018, the Tax Act reduced the U.S. statutory tax rate and created new taxes focused on foreign-sourced earnings and related-party payments, including the creation of the base erosion anti-abuse tax and a new tax on global intangible low-taxed income ("GILTI"). In addition, the Company was subject to a one-time transition tax in fiscal 2018 on accumulated foreign subsidiary earnings not previously subject to U.S. income tax.
The SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its financial statements as of January 31, 2018, in accordance with SAB 118. The Company elected to apply the measurement period provisions of this guidance to certain income tax effects of the Tax Act when it became effective. The provisional measurement period ended in the fourth quarter of fiscal 2019.  While management believes the Company's accounting for Tax Reform is complete, it is based on prevailing regulations and currently available information, and any additional guidance issued by the IRS could impact the aforementioned amounts in future periods. The net tax benefit recognized in fiscal 2018 related to the Tax Act was $207 million, and in fiscal 2019, the Company recorded $442 million of additional tax expense related to the Tax Act, included as a component of provision for income taxes .
One-time Transition Tax
The Tax Act required the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets, as defined by the Tax Act, and 8.0% on the remaining earnings. In fiscal 2018, the Company recorded a provisional amount of $1.9 billion of additional income tax expense for its one-time transitional tax liability. The Company finalized the calculations of the Transition Tax liability and increased the provisional amount by $413 million, with the increase included as a component of provision for income taxes in fiscal 2019.
Deferred Tax Effects
The Tax Act reduced the U.S. statutory tax rate from 35.0% to 21.0%, beginning January 2018. Accordingly, the Company re-measured its deferred taxes as of January 31, 2018, to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. In fiscal 2018, the Company recognized a deferred tax benefit of $2.1 billion to reflect the reduced U.S. tax rate and other effects of the Tax Act. In fiscal 2018, the Company made no provisional adjustment with respect to the GILTI provision of the Tax Act. Upon finalizing the provisional accounting for the remeasurement of U.S. deferred tax assets and liabilities in fiscal 2019, the Company recorded an additional tax benefit of $75 million, which is included as a component of provision for income taxes.

Effective Income Tax Rate Reconciliation
In the past, the Company's effective income tax rate was typically lower than the U.S. statutory tax rate primarily because of benefits from lower–taxed global operations, including the use of global funding structures and certain U.S. tax credits as further discussed in the "Cash and Cash Equivalents" section of Note 1. However, beginning January 2018, the US statutory rate of 21.0% generally falls below statutory rates in international jurisdictions. A reconciliation of the significant differences between the U.S. statutory tax rate and the effective income tax rate on pretax income from continuing operations is as follows:
 
Fiscal Years Ended January 31,
 
2019
 
2018
 
2017
U.S. statutory tax rate
21.0
 %
 
33.8
 %
 
35.0
 %
U.S. state income taxes, net of federal income tax benefit
3.3
 %
 
1.8
 %
 
1.7
 %
Impact of the Tax Act:

 

 


One-time transition tax
3.6
 %
 
12.3
 %
 
 %
Deferred tax effects
(0.7
)%
 
(14.1
)%
 
 %
Income taxed outside the U.S.
(3.5
)%
 
(6.3
)%
 
(4.5
)%
Disposition of Walmart Brazil
6.7
 %
 
 %
 
 %
Valuation allowance
6.4
 %
 
2.1
 %
 
 %
Net impact of repatriated international earnings
0.8
 %
 
(0.1
)%
 
(1.0
)%
Federal tax credits
(1.2
)%
 
(0.9
)%
 
(0.6
)%
Other, net
1.0
 %
 
1.8
 %
 
(0.3
)%
Effective income tax rate
37.4
 %
 
30.4
 %
 
30.3
 %

Deferred Taxes
The significant components of the Company's deferred tax account balances are as follows:
 
 
January 31,
(Amounts in millions)
 
2019
 
2018
Deferred tax assets:
 
 
 
 
Loss and tax credit carryforwards
 
$
2,964

 
$
1,989

Accrued liabilities
 
2,135

 
2,482

Share-based compensation
 
245

 
217

Other
 
1,131

 
1,251

Total deferred tax assets
 
6,475

 
5,939

Valuation allowances
 
(2,448
)
 
(1,843
)
Deferred tax assets, net of valuation allowances
 
4,027

 
4,096

Deferred tax liabilities:
 
 
 
 
Property and equipment
 
4,175

 
3,954

Acquired intangibles
 
2,099

 
401

Inventory
 
1,354

 
1,153

Other
 
899

 
540

Total deferred tax liabilities
 
8,527

 
6,048

Net deferred tax liabilities
 
$
4,500

 
$
1,952


The deferred taxes noted above are classified as follows in the Company's Consolidated Balance Sheets:
  
 
January 31,
(Amounts in millions)
 
2019
 
2018
Balance Sheet classification
 
 
 
 
Assets:
 
 
 
 
Other long-term assets
 
$
1,796

 
$
1,879

 
 


 


Liabilities:
 

 

Deferred income taxes and other
 
6,296

 
3,831

 
 


 


Net deferred tax liabilities
 
$
4,500

 
$
1,952


Unremitted Earnings
Prior to the Tax Act, the Company asserted that all unremitted earnings of its foreign subsidiaries were considered indefinitely reinvested.  As a result of the Tax Act, the Company reported and paid U.S. tax on the majority of its previously unremitted foreign earnings.  During fiscal 2019, the Company repatriated to the U.S. $5.3 billion of cash relating to fiscal 2019 and prior earnings at a tax cost of approximately $40 million.  As of January 31, 2019, the Company has not recorded approximately $3 billion of deferred tax liabilities associated with remaining unremitted foreign earnings considered indefinitely reinvested, for which U.S. and foreign income and withholding taxes would be due upon repatriation.
Net Operating Losses, Tax Credit Carryforwards and Valuation Allowances
As of January 31, 2019, the Company had net operating loss and capital loss carryforwards totaling $12.2 billion. Of these carryforwards, $8.0 billion will expire, if not utilized, in various years through 2039. The remaining carryforwards have no expiration. As of January 31, 2019, the Company's transition tax calculation fully utilized all foreign tax credit carryforwards.
The recoverability of these future tax deductions and credits is evaluated by assessing the adequacy of future expected taxable income from all sources, including taxable income in prior carryback years, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. To the extent the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. To the extent that a valuation allowance has been established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the valuation allowance will be released.
The Company had valuation allowances of $2.4 billion and $1.8 billion as of January 31, 2019 and 2018, respectively, on deferred tax assets associated primarily with net operating loss carryforwards for which management has determined it is more likely than not that the deferred tax assets will not be realized. Net activity in the valuation allowance during fiscal 2019 related to the acquisition of Flipkart and disposal of Walmart Brazil, changes in judgment regarding the future realization of deferred tax assets, releases arising from the use of deferred tax assets and decreases due to operating loss expirations and fluctuations in currency exchange rates. Management believes that it is more likely than not that the remaining deferred tax assets will be fully realized.
Uncertain Tax Positions
The benefits of uncertain tax positions are recorded in the Company's Consolidated Financial Statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities.
As of January 31, 2019 and 2018, the amount of unrecognized tax benefits related to continuing operations was $1.3 billion and $1.0 billion, respectively. The amount of unrecognized tax benefits that would affect the Company's effective income tax rate was $1.1 billion and $690 million as of January 31, 2019 and 2018, respectively.
A reconciliation of unrecognized tax benefits from continuing operations is as follows:
 
Fiscal Years Ended January 31,
(Amounts in millions)
2019
 
2018
 
2017
Unrecognized tax benefits, beginning of year
$
1,010

 
$
1,050

 
$
607

Increases related to prior year tax positions
620

 
130

 
388

Decreases related to prior year tax positions
(107
)
 
(254
)
 
(32
)
Increases related to current year tax positions
203

 
122

 
145

Settlements during the period
(390
)
 
(23
)
 
(46
)
Lapse in statutes of limitations
(31
)
 
(15
)
 
(12
)
Unrecognized tax benefits, end of year
$
1,305

 
$
1,010

 
$
1,050


Interest expense and penalties related to these positions were immaterial for fiscal 2019, 2018 and 2017. During the next twelve months, it is reasonably possible that tax audit resolutions could reduce unrecognized tax benefits by an immaterial amount, either because the tax positions are sustained on audit or because the Company agrees to their disallowance. The Company is focused on resolving tax audits as expeditiously as possible. As a result of these efforts, unrecognized tax benefits could potentially be reduced beyond the provided range during the next twelve months. The Company does not expect any change to have a material impact to its Consolidated Financial Statements.
The Company remains subject to income tax examinations for its U.S. federal income taxes generally for fiscal 2014 through 2019. The Company also remains subject to income tax examinations for international income taxes for fiscal 2012 through 2019, and for U.S. state and local income taxes generally for the fiscal years ended 2013 through 2019.
Other Taxes
The Company is subject to tax examinations for value added, sales-based, payroll and other non-income taxes. A number of these examinations are ongoing in various jurisdictions. In certain cases, the Company has received assessments from the respective taxing authorities in connection with these examinations. Unless otherwise indicated, the possible losses or range of possible losses associated with these matters are individually immaterial, but a group of related matters, if decided adversely to the Company, could result in a liability material to the Company's Consolidated Financial Statements.