Income Taxes

12 Months Ended

Jan. 28, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The provision for income taxes was comprised of the following:

(In thousands)	2022		2021		2020
Current:
U.S. Federal	$	(1,862)	$	26,888	$	206,883
U.S. State and local	(1,105)		8,138		60,947
Total current tax (benefit) expense	(2,967)		35,026		267,830
Deferred:
U.S. Federal	(57,054)		13,651		(40,848)
U.S. State and local	(9,688)		5,356		(11,567)
Total deferred tax (benefit) expense	(66,742)		19,007		(52,415)
Income tax provision	$	(69,709)	$	54,033	$	215,415

Reconciliation between the statutory federal income tax rate and the effective income tax rate was as follows:

	2022 (a)		2021		2020
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
Effect of:
State and local income taxes, net of federal tax benefit	3.0		4.6		4.6
Work opportunity tax and other employment tax credits	1.0		(1.4)		(0.3)
Executive compensation limitations - permanent difference	(0.3)		1.8		0.2
Share-based compensation	(0.2)		(2.3)		0.2
Other, net	0.4		(0.4)		(0.2)
Effective income tax rate	24.9	%	23.3	%	25.5	%

(a) The reconciliation between the statutory federal income tax rate and effective income tax rate for 2022 is not directly comparable to the reconciliations for 2021 and 2020 due to the loss before income taxes in 2022 compared to the income before income taxes in 2021 and 2020.

Income tax payments and refunds were as follows:

(In thousands)	2022		2021		2020
Income taxes refunded	$	(27,759)	$	(546)	$	(1,522)
Income taxes paid	4,318		111,206		217,308
Net income taxes (refunded) paid	$	(23,441)	$	110,660	$	215,786

Deferred taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax, including income tax uncertainties. Significant components of our deferred tax assets and liabilities were as follows:

(In thousands)	January 28, 2023		January 29, 2022
Deferred tax assets:
Lease liabilities, net of lease incentives	$	458,293	$	474,584
Net operating losses, tax credits, and other carryforwards	64,513		2,307
Depreciation and fixed asset basis differences	39,218		40,302
Sale and leaseback financing liability	32,251		33,508
Uniform inventory capitalization	23,660		22,734
Workers’ compensation and other insurance reserves	20,868		22,097
Compensation related	5,376		12,703
Accrued operating liabilities	3,032		2,145
Accrued state taxes	1,581		2,557
Accrued payroll taxes related to CARES Act	—		4,674
Other	16,074		13,718
Valuation allowances, net of federal tax benefit	(2,102)		(2,093)
Total deferred tax assets	662,764		629,236
Deferred tax liabilities:
Right-of-use assets, net of amortization	409,979		441,786
Accelerated depreciation and fixed asset basis differences	113,469		120,224
Synthetic lease obligation	38,464		38,582
Deferred gain on like-kind exchange	13,930		14,476
Lease construction reimbursements	11,368		8,333
Prepaid expenses	5,548		5,143
Workers’ compensation and other insurance reserves	4,067		4,493
Other	9,638		6,639
Total deferred tax liabilities	606,463		639,676
Net deferred tax assets (liabilities)	$	56,301	$	(10,440)

Our deferred tax assets and deferred tax liabilities, netted by tax jurisdiction, are summarized in the table below:

(In thousands)	January 28, 2023		January 29, 2022
U.S. Federal	$	35,640	$	(21,413)
U.S. State and local	20,661		10,973
Net deferred tax assets (liabilities)	$	56,301	$	(10,440)

We have the following income tax loss and credit carryforwards at January 28, 2023 (amounts are shown net of tax excluding the federal income tax effect of the state and local items):

(In thousands)
U.S. Federal:
Federal net operating loss carryforward	$	45,590	Indefinite carryforward
Other carryforwards	4,867		Predominately indefinite carryforward
Employment tax credits	3,807		Carryback to 2021, remainder expires 2024
Total U.S. Federal	54,264
U.S. State and local:
State and local net operating loss carryforwards	10,073		Various carryforward periods ranging from 5 to 20 years including some jurisdictions with no expirations
California enterprise zone credits	2,769		Predominately expires fiscal year 2023
Other state credits	131		Expires fiscal years through 2026
Total U.S. State and local	12,973
Total net operating losses, tax credits, and other carryforwards	$	67,237

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for 2022, 2021, and 2020:

(In thousands)	2022		2021		2020
Unrecognized tax benefits - beginning of year	$	9,862	$	9,465	$	10,760
Gross increases - tax positions in current year	357		410		728
Gross increases - tax positions in prior period	424		1,864		745
Gross decreases - tax positions in prior period	(1,555)		(1,039)		(1,871)
Settlements	(333)		(125)		(20)
Lapse of statute of limitations	(1,222)		(713)		(877)
Unrecognized tax benefits - end of year	$	7,533	$	9,862	$	9,465

At the end of 2022 and 2021, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is $4.9 million and $7.2 million, respectively, after considering the federal tax benefit of state and local income taxes of $1.1 million and $1.5 million, respectively. Unrecognized tax benefits of $1.6 million and $1.3 million in 2022 and 2021, respectively, relate to tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The uncertain timing items could result in the acceleration of the payment of cash to the taxing authority to an earlier period.

We recognized an expense (benefit) associated with interest and penalties on unrecognized tax benefits of approximately $(0.8) million, $(1.1) million, and $(0.4) million during 2022, 2021, and 2020, respectively, as a component of income tax expense. The amount of accrued interest and penalties recognized in the accompanying consolidated balance sheets at January 28, 2023 and January 29, 2022 was $1.8 million and $2.8 million, respectively.

We are subject to U.S. federal income tax, and income tax of multiple state and local jurisdictions. The statute of limitations for assessments on our federal income tax returns for periods prior to 2019 has lapsed. In addition, the state income tax returns filed by us are subject to examination generally for periods beginning with 2018, although state income tax carryforward attributes generated prior to 2018 and non-filing positions may still be adjusted upon examination. We have various state returns in the process of examination or administrative appeal.

We have estimated the reasonably possible expected net change in unrecognized tax benefits through February 3, 2024, based on expected cash and noncash settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations for unrecognized tax benefits. The estimated net decrease in unrecognized tax benefits for the next 12 months is approximately $2.0 million. Actual results may differ materially from this estimate.