Income Taxes

12 Months Ended

Jan. 28, 2012

Income Taxes

Income Taxes

22. Income Taxes

Tax Rate Reconciliation	2011	2010	2009
Federal statutory rate	35.0%	35.0%	35.0%
State income taxes, net of the federal tax benefit	1.0	1.4	2.8
International	(0.7)	(0.6)	(0.3)
Other	(1.0)	(0.7)	(1.8)
Effective tax rate	34.3%	35.1%	35.7%

        Certain discrete state income tax items reduced our effective tax rate by 2.0 percentage points, 2.4 percentage points and 0.7 percentage points in 2011, 2010 and 2009, respectively.

Provision for Income Taxes (millions)	2011			2010		2009
Current:
Federal	$	1,069		$	1,086	$	877
State		74			40		141
International		13			4		2
Total current		1,156			1,130		1,020
Deferred:
Federal		427			388		339
State		—			57		25
International		(56	)		—		—
Total deferred		371			445		364
Total provision	$	1,527		$	1,575	$	1,384

Net Deferred Tax Asset/(Liability) (millions)	January 28, 2012			January 29, 2011
Gross deferred tax assets:
Accrued and deferred compensation	$	489		$	451
Allowance for doubtful accounts		157			229
Accruals and reserves not currently deductible		347			373
Self-insured benefits		257			251
Foreign operating loss carryforward		43			—
Other		149			67
Total gross deferred tax assets		1,442			1,371
Gross deferred tax liabilities:
Property and equipment		(1,930	)		(1,607	)
Deferred credit card income		(102	)		(145	)
Inventory		(162	)		(77	)
Other		(109	)		(97	)
Total gross deferred tax liabilities		(2,303	)		(1,926	)
Total net deferred tax liability	$	(861	)	$	(555	)

        Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year the temporary differences are expected to be recovered or settled. Tax rate changes affecting deferred tax assets and liabilities are recognized in income at the enactment date.

        At January 28, 2012, foreign net operating loss carryforwards of $166 million are available to offset future income. These carryforwards expire in 2031 and are expected to be fully utilized prior to expiration.

        We have not recorded deferred taxes when earnings from foreign operations are considered to be indefinitely invested outside the U.S. These accumulated net earnings relate to ongoing operations and were $300 million at January 28, 2012 and $333 million at January 29, 2011. It is not practicable to determine the income tax liability that would be payable if such earnings were not indefinitely reinvested.

        We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years before 2010 and, with few exceptions, are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before 2003.

Reconciliation of Liability for Unrecognized Tax Benefits (millions)	2011			2010			2009
Balance at beginning of period	$	302		$	452		$	434
Additions based on tax positions related to the current year		12			16			119
Additions for tax positions of prior years		31			68			47
Reductions for tax positions of prior years		(101	)		(222	)		(61	)
Settlements		(8	)		(12	)		(87	)
Balance at end of period	$	236		$	302		$	452

        If we were to prevail on all unrecognized tax benefits recorded, $155 million of the $236 million reserve would benefit the effective tax rate. In addition, the reversal of accrued penalties and interest would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During the years ended January 28, 2012, January 29, 2011 and January 30, 2010, we recorded a benefit from the reversal of accrued penalties and interest of $12 million, $28 million and $10 million, respectively. We had accrued for the payment of interest and penalties of $82 million at January 28, 2012, $95 million at January 29, 2011 and $127 million at January 30, 2010.

        It is reasonably possible that the amount of the unrecognized tax benefits with respect to our other unrecognized tax positions will increase or decrease during the next twelve months; however, an estimate of the amount or range of the change cannot be made at this time.

        The January 30, 2010 liability for uncertain tax positions included $133 million for tax positions for which the ultimate deductibility was highly certain, but for which there was uncertainty about the timing of such deductibility. During 2010, we filed a tax accounting method change that resolved the uncertainty surrounding the timing of deductions for these tax positions, resulting in a $133 million decrease to our liability for unrecognized tax benefits and no impact on income tax expense in 2010.