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Income Taxes | 12 Months Ended
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Jan. 28, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Our earnings before the provision for income taxes follow.
in millions | Fiscal |  | Fiscal |  | Fiscal
2017 |  | 2016 |  | 2015
U.S. | $ | 12,682 |  |  | $ | 11,568 |  |  | $ | 10,207 |
Foreign | 1,016 |  |  | 923 |  |  | 814 |
Total | $ | 13,698 |  |  | $ | 12,491 |  |  | $ | 11,021 |
Our provision for income taxes follows.
in millions | Fiscal |  | Fiscal |  | Fiscal
2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
Federal | $ | 4,128 |  |  | $ | 3,870 |  |  | $ | 3,228 |
State | 499 |  |  | 462 |  |  | 466 |
Foreign | 331 |  |  | 315 |  |  | 296 |
Total current | 4,958 |  |  | 4,647 |  |  | 3,990 |
Deferred: |  |  |  |  |
Federal | (67 | ) |  | (102 | ) |  | 21 |
State | 89 |  |  | 13 |  |  | 10 |
Foreign | 88 |  |  | (24 | ) |  | (9 | )
Total deferred | 110 |  |  | (113 | ) |  | 22 |
Provision for income taxes | $ | 5,068 |  |  | $ | 4,534 |  |  | $ | 4,012 |
Our combined federal, state, and foreign effective tax rates follow.
| Fiscal |  | Fiscal |  | Fiscal
| 2017 |  | 2016 |  | 2015
Combined federal, state, and foreign effective tax rates | 37.0 | % |  | 36.3 | % |  | 36.4 | %
The reconciliation of our provision for income taxes at the federal statutory rates of 34% for fiscal 2017, 35% for fiscal 2016, and 35% for fiscal 2015 to the actual tax expense follows.
in millions | Fiscal |  | Fiscal |  | Fiscal
2017 |  | 2016 |  | 2015
Income taxes at federal statutory rate | $ | 4,648 |  |  | $ | 4,372 |  |  | $ | 3,857 |
State income taxes, net of federal income tax benefit | 369 |  |  | 309 |  |  | 309 |
Tax on mandatory deemed repatriation | 400 |  |  | — |  |  | — |
Other, net | (349 | ) |  | (147 | ) |  | (154 | )
Total | $ | 5,068 |  |  | $ | 4,534 |  |  | $ | 4,012 |
On December 22, 2017, the U.S. enacted comprehensive tax legislation with the Tax Act, making broad and complex changes to U.S. tax law, including lowering the U.S. corporate income tax rate to 21%, transitioning to a modified territorial system, and providing for current expensing of certain qualifying capital expenditures. As a result of enactment of the Tax Act, our fiscal 2017 tax provision reflects additional net tax expense of $127 million. As part of the transition to the new territorial tax system, the Tax Act imposes a one-time tax on deemed repatriation of historical earnings of foreign subsidiaries. For fiscal 2017, these impacts resulted in a provisional charge in the fourth quarter of approximately $400 million, comprising U.S. repatriation taxes, foreign withholding taxes, and state taxes. The lower corporate income tax rate of 21% is effective January 1, 2018, resulting in a U.S. statutory federal tax rate of approximately 34% for fiscal 2017, and 21% for subsequent fiscal years, which provided a benefit to our fiscal 2017 tax provision of approximately $126 million. The reduction of the U.S. corporate tax rate requires a remeasurement of our U.S. deferred tax assets and liabilities to the lower federal base rate of 21%. This resulted in a provisional benefit of $147 million for fiscal 2017. The Tax Act also added a new provision for a tax on global intangible low-taxed income (“GILTI”). Due to the complexity of the new tax rules, we are considering available accounting policy alternatives to adopt, to either record the U.S. income tax effect of future GILTI inclusions in the period in which they arise or establish deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusions. We have not made an accounting policy election and will do so after we complete an analysis of those provisions. On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional amounts for the remeasurement of deferred tax assets and liabilities and the tax on the mandatory deemed repatriation of foreign earnings. For the remeasurement of our deferred tax assets and liabilities, we have recorded a provisional benefit of $147 million for the year ended January 28, 2018. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, it may be affected by other factors, including, but not limited to, changes to our calculation of deemed repatriation of deferred foreign income and changes to the current year deferred tax balance estimates. To determine the amount of the income tax on mandatory deemed repatriation of foreign earnings, we must determine, in addition to other factors, the amount of post-1986 earnings and profits ("E&P") of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the tax and recorded a provisional obligation of $400 million. However, we are continuing to gather additional information to more precisely compute the amount of the tax. We expect additional regulatory guidance and technical clarifications from the U.S. Department of the Treasury and IRS within the next 12 months. Any subsequent adjustment to these amounts will be recorded to income tax expense from continuing operations in the quarter of fiscal year 2018 in which the analysis is complete. The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities follow.
in millions | January 28, 2018 |  | January 29, 2017
Assets: |  |  |
Deferred compensation | $ | 185 |  |  | $ | 284 |
Accrued self-insurance liabilities | 295 |  |  | 440 |
State income taxes | 109 |  |  | 152 |
Non-deductible reserves | 220 |  |  | 328 |
Net operating losses | 19 |  |  | 33 |
Other | 124 |  |  | 268 |
Total deferred tax assets | 952 |  |  | 1,505 |
Valuation allowance | — |  |  | (3 | )
Total deferred tax assets after valuation allowance | 952 |  |  | 1,502 |
Liabilities: |  |  |
Merchandise inventories | (9 | ) |  | (64 | )
Property and equipment | (770 | ) |  | (1,128 | )
Goodwill and other intangibles | (243 | ) |  | (368 | )
Other | (251 | ) |  | (147 | )
Total deferred tax liabilities | (1,273 | ) |  | (1,707 | )
Net deferred tax liabilities | $ | (321 | ) |  | $ | (205 | )
Our noncurrent deferred tax assets and noncurrent deferred tax liabilities, netted by tax jurisdiction, follow.
in millions | January 28, 2018 |  | January 29, 2017
Other assets | $ | 119 |  |  | $ | 91 |
Deferred income taxes | (440 | ) |  | (296 | )
Net deferred tax liabilities | $ | (321 | ) |  | $ | (205 | )
We believe that the realization of the deferred tax assets is more likely than not, based upon the expectation that we will generate the necessary taxable income in future periods. At January 28, 2018, we had federal, state, and foreign net operating loss carryforwards available to reduce future taxable income, expiring at various dates beginning in 2018 to 2037. We have concluded that it is more likely than not that the tax benefits related to the federal and state net operating losses will be realized. As of January 29, 2017, a valuation allowance of $3 million had been provided to reduce the deferred tax asset related to foreign net operating losses to an amount that is more likely than not to be realized. As of January 28, 2018, we are no longer active in the foreign jurisdictions in which the valuation allowance relates; therefore, the valuation allowance of $3 million was released this year when the related deferred tax asset was written off. We intend to reinvest substantially all of the unremitted earnings of our non-U.S. subsidiaries in excess of working capital and strategic requirements and postpone their remittance indefinitely. Accordingly, no provision for withholding taxes was recorded on these unremitted earnings in the accompanying consolidated statements of earnings. It is impracticable for us to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. We have reevaluated our investment position with respect to certain cash balances and we do not intend to indefinitely reinvest cash in excess of working capital and strategic requirements. Accordingly, we have recorded a provisional deferred tax expense for these unremitted earnings in the accompanying consolidated statements of earnings. Our income tax returns are routinely examined by domestic and foreign tax authorities. For fiscal years 2005 through 2009, a transfer pricing issue remains open pending negotiations between the U.S. and Mexican tax authorities. Our U.S. federal tax returns for fiscal years 2010 through 2012 are currently under examination by the IRS. During fiscal 2016, the IRS issued a proposed adjustment relating to transfer pricing between our entities in the U.S. and China for fiscal years 2010 through 2012. We intend to defend our position using all available remedies including bi-lateral relief. There are also ongoing U.S. state and local and other foreign audits covering fiscal years 2005 through 2015. We do not expect the results from any ongoing income tax audit to have a material impact on our consolidated financial condition, results of operations, or cash flows. Over the next twelve months, it is reasonably possible that the resolution of federal and state tax examinations could reduce our unrecognized tax benefits by $187 million. Final settlement of these audit issues may result in payments that are more or less than this amount, but we do not anticipate the resolution of these matters will result in a material change to our consolidated financial condition or results of operations. Reconciliations of the beginning and ending amount of our gross unrecognized tax benefits follow.
in millions | Fiscal |  | Fiscal |  | Fiscal
2017 |  | 2016 |  | 2015
Unrecognized tax benefits balance at beginning of fiscal year | $ | 659 |  |  | $ | 689 |  |  | $ | 765 |
Additions based on tax positions related to the current year | 74 |  |  | 147 |  |  | 169 |
Additions for tax positions of prior years | 15 |  |  | 14 |  |  | 126 |
Reductions for tax positions of prior years | (93 | ) |  | (161 | ) |  | (350 | )
Reductions due to settlements | (1 | ) |  | (16 | ) |  | (14 | )
Reductions due to lapse of statute of limitations | (17 | ) |  | (14 | ) |  | (7 | )
Unrecognized tax benefits balance at end of fiscal year | $ | 637 |  |  | $ | 659 |  |  | $ | 689 |
Unrecognized tax benefits that if recognized would affect our annual effective income tax rate on net earnings were $483 million at January 28, 2018; $382 million at January 29, 2017; and $382 million at January 31, 2016. Net adjustments to accruals for interest and penalties associated with uncertain tax positions resulted in expenses of $24 million in fiscal 2017, $20 million in fiscal 2016, and $5 million in fiscal 2015. Interest and penalties are included in interest expense and SG&A, respectively. Our total accrued interest and penalties follow.
in millions | January 28, 2018 |  | January 29, 2017
Total accrued interest and penalties | $ | 134 |  |  | $ | 109 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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