Income Taxes

Deferred income taxes consist of the following:



	Jan 31, 2015		Feb 1, 2014
	(Dollars In Millions)
Deferred tax liabilities:
Property and equipment	$	1,385	$	1,416
Deferred tax assets:
Merchandise inventories	24		24
Accrued and other liabilities, including stock options	182		223
Capital lease and financing obligations	773		813
Accrued step rent liability	100		94
Unrealized loss on investments	—		7
Unrealized loss on interest rate swap	13		15
Federal benefit on state tax reserves	41		43
	1,133		1,219
Net deferred tax liability	$	252	$	197

The components of the provision for income taxes were as follows:



	2014			2013			2012
	(Dollars In Millions)
Current federal	$	400		$	473		$	592
Current state	36			45			60
Deferred federal	48			6			(68		)
Deferred state	(2		)	(9		)	(9		)
	$	482		$	515		$	575

The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate tax rate due to the following items:



	2014		2013		2012
Provision at statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	1.3		2.2		2.2
Tax-exempt interest income	—		(0.2	)	(0.1	)
Other federal tax credits	(0.6	)	(0.3	)	(0.3	)
Provision for income taxes	35.7	%	36.7	%	36.8	%

We have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. The only federal returns subject to examination are for the 2008 through 2014 tax years. State returns subject to examination vary depending upon the state. Generally, the 2011 through 2014

5. Income Taxes (continued)

tax years are subject to state examination. The earliest open period is 2003. Certain states have proposed adjustments which we are currently appealing. If we do not prevail on our appeals, we do not anticipate that the adjustments would result in a material change in our financial position.

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:



	2014			2013
	(Dollars In Millions)
Balance at beginning of year	$	125		$	108
Increases due to:
Tax positions taken in prior years	—			6
Tax positions taken in current year	21			21
Decreases due to:
Tax positions taken in prior years	(16		)	(4		)
Settlements with taxing authorities	(2		)	(3		)
Lapse of applicable statute of limitations	(5		)	(3		)
Balance at end of year	$	123		$	125

Not included in the unrecognized tax benefits reconciliation above are gross unrecognized accrued interest and penalties of $23 million at January 31, 2015 and $21 million at February 1, 2014. Interest and penalty expense was $2 million for 2014 and $3 million for 2013.

Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $89 million as of January 31, 2015 and $88 million as of February 1, 2014.

It is reasonably possible that our unrecognized tax positions may change within the next 12 months, primarily as a result of ongoing audits. While it is possible that one or more of these examinations may be resolved in the next year, it is not anticipated that a significant impact to the unrecognized tax benefit balance will occur.

We have both payables and receivables recorded on our balance sheet for current income taxes. The receivables are recorded within other current assets in our balance sheet. The total of the receivables was $25 million as of January 31, 2015. To conform to the current year presentation, we have reclassed $22 million from income taxes payable to other current assets for February 1, 2014.

To conform to the current year presentation on our balance sheet, we have reclassed $43 million of the federal income taxes receivable related to state tax reserves and interest from long-term other assets to deferred income taxes on the balance sheet.