Taxes

12 Months Ended

Jan. 29, 2022

Taxes Payable Current And Noncurrent [Abstract]

Taxes

8. Taxes

Income tax expense (benefit) is as follows:

	2021							2020									2019
	Current		Deferred			Total		Current			Deferred			Total			Current		Deferred			Total
	(millions)
Federal	$	369	$	(21	)	$	348	$	(520	)	$	(179	)	$	(699	)	$	137	$	4		$	141
State and local		48		40			88		1			(148	)		(147	)		33		(10	)		23
	$	417	$	19		$	436	$	(519	)	$	(327	)	$	(846	)	$	170	$	(6	)	$	164

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:

	2021			2020			2019
	(millions)
Expected tax	$	392		$	(1,006	)	$	153
State and local income taxes, net of federal income taxes		84			(140	)		13
CARES Act carryback benefit		(29	)		(205	)		—
Goodwill impact		—			492			—
Tax impact of equity awards		—			8			1
Federal tax credits		(3	)		(5	)		(3	)
Change in valuation allowance		(15	)		24			5
Other		7			(14	)		(5	)
	$	436		$	(846	)	$	164

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 2020 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 29,			January 30,
	2022			2021
	(millions)
Deferred tax assets
Post employment and postretirement benefits	$	48		$	126
Accrued liabilities accounted for on a cash basis for tax purposes		100			103
Lease liabilities		917			937
Unrecognized state tax benefits and accrued interest		38			39
State operating loss and credit carryforwards		152			194
Other		95			95
Valuation allowance		(89	)		(104	)
Total deferred tax assets		1,261			1,390
Deferred tax liabilities
Excess of book basis over tax basis of property and equipment		(914	)		(937	)
Right of use assets		(751	)		(766	)
Merchandise inventories		(300	)		(300	)
Intangible assets		(116	)		(115	)
Other		(163	)		(180	)
Total deferred tax liabilities		(2,244	)		(2,298	)
Net deferred tax liability	$	(983	)	$	(908	)

The valuation allowance at January 29, 2022 and January 30, 2021 relates to net deferred tax assets for state net operating loss and credit carryforwards. The net change in the valuation allowance amounted to a decrease of $15 million for 2021. In 2020, the net change in the valuation allowance amounted to an increase of $24 million.

As of January 29, 2022, the Company had no federal net operating loss carryforwards, state net operating loss carryforwards, net of valuation allowances, of $1,044 million, which will expire between 2022 and 2041, 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 29,			January 30,			February 1,
	2022			2021			2020
	(millions)
Balance, beginning of year	$	113		$	133		$	149
Additions based on tax positions related to the current year		12			9			18
Additions for tax positions of prior years		—			—			11
Reductions for tax positions of prior years		(11	)		(13	)		(20	)
Settlements		(2	)		(4	)		(16	)
Statute expirations		(10	)		(12	)		(9	)
Balance, end of year	$	102		$	113		$	133
Amounts recognized in the Consolidated Balance Sheets
Current income taxes	$	14		$	6		$	12
Deferred income taxes		3			3			4
Other liabilities (a)		85			104			117
	$	102		$	113		$	133

(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:

	January 29,		January 30,
	2022		2021
	(millions)
Amount of unrecognized tax benefits, net of deferred tax assets, that if    recognized would affect the effective tax rate	$	81	$	90
Accrued federal, state and local interest and penalties		65		60
Amounts recognized in the Consolidated Balance Sheets
Current income taxes		32		3
Other liabilities		33		57

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 29, 2022 and January 30, 2021, are insignificant. Federal, state and local interest and penalties amounted to an expense of $5 million, $1 million, and $6 million for 2021, 2020, and 2019, respectively.

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 2018. 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 29, 2022, the Company believes it is reasonably possible that certain unrecognized tax benefits ranging from zero to $60 million may be recognized by the end of 2022. 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.

In January 2022, the Company received $582 million in tax refunds associated with the net operating loss carryback benefit as part of the CARES Act.