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Income Taxes | 12 Months Ended
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Feb. 03, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Tax Reform 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. Also in December 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. As disclosed in our 2017 Form 10-K, we were able to reasonably estimate certain effects and, therefore, recorded a total provisional charge of $127 million. The provisional charge included (i) a charge for the deemed repatriation of historical earnings of foreign subsidiaries, (ii) a provisional benefit for the remeasurement of deferred tax assets and liabilities, and (iii) an estimated benefit due to a lower U.S. statutory tax rate. As of February 3, 2019, we have completed our accounting for all of the enactment-date income tax effects of the Tax Act. During fiscal 2018, we adjusted the provisional charge by a net benefit of $85 million, for a final tax charge of $42 million. These adjustments were made upon our further analysis of certain aspects of the Tax Act, refinement of our calculations, and the issuance of guidance by the U.S. Department of the Treasury. The components of the provisional charge recognized in fiscal 2017 and the adjustments made during fiscal 2018 follow.
in millions | Deemed Repatriation |  | Deferred Tax Remeasure-ment |  | Statutory Tax Rate Impact |  | Total
Provisional tax charge (benefit) - recognized in fiscal 2017 | $ | 400 |  |  | $ | (147 | ) |  | $ | (126 | ) |  | $ | 127 |
Tax charge (benefit) adjustment - finalized in fiscal 2018 | (62 | ) |  | (22 | ) |  | (1 | ) |  | (85 | )
Total tax charge (benefit) | $ | 338 |  |  | $ | (169 | ) |  | $ | (127 | ) |  | $ | 42 |
We have elected to pay our transition tax over the eight-year period provided in the Tax Act. As of February 3, 2019, the remaining balance of our transition tax obligation was $14 million, after required application of overpayments. The Tax Act also created a new requirement that certain income (referred to as global intangible low-taxed income or “GILTI”) earned by controlled foreign corporations, or CFCs, must be included currently in the gross income of the CFCs’ U.S. shareholder. Due to the complexity of the new GILTI tax rules, we recorded no GILTI related deferred taxes as of January 28, 2018. After further considerations in fiscal 2018, we have elected to account for GILTI in the period the tax is incurred. 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 the provision for income taxes in the period in which the guidance is issued or finalized. Provision for Income Taxes Our earnings before the provision for income taxes follow.
in millions | Fiscal |  | Fiscal |  | Fiscal
2018 |  | 2017 |  | 2016
U.S. | $ | 13,456 |  |  | $ | 12,682 |  |  | $ | 11,568 |
Foreign | 1,100 |  |  | 1,016 |  |  | 923 |
Total | $ | 14,556 |  |  | $ | 13,698 |  |  | $ | 12,491 |
Our provision for income taxes follows.
in millions | Fiscal |  | Fiscal |  | Fiscal
2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 2,495 |  |  | $ | 4,128 |  |  | $ | 3,870 |
State | 544 |  |  | 499 |  |  | 462 |
Foreign | 372 |  |  | 331 |  |  | 315 |
Total current | 3,411 |  |  | 4,958 |  |  | 4,647 |
Deferred: |  |  |  |  |
Federal | 67 |  |  | (67 | ) |  | (102 | )
State | 1 |  |  | 89 |  |  | 13 |
Foreign | (44 | ) |  | 88 |  |  | (24 | )
Total deferred | 24 |  |  | 110 |  |  | (113 | )
Provision for income taxes | $ | 3,435 |  |  | $ | 5,068 |  |  | $ | 4,534 |
Our combined federal, state, and foreign effective tax rates follow.
| Fiscal |  | Fiscal |  | Fiscal
| 2018 |  | 2017 |  | 2016
Combined federal, state, and foreign effective tax rates | 23.6 | % |  | 37.0 | % |  | 36.3 | %
The reconciliation of our provision for income taxes at the federal statutory rates of 21% for fiscal 2018, approximately 34% for fiscal 2017, and 35% for fiscal 2016 to the actual tax expense follows.
in millions | Fiscal |  | Fiscal |  | Fiscal
2018 |  | 2017 |  | 2016
Income taxes at federal statutory rate | $ | 3,057 |  |  | $ | 4,648 |  |  | $ | 4,372 |
State income taxes, net of federal income tax benefit | 443 |  |  | 369 |  |  | 309 |
Tax on mandatory deemed repatriation | (62 | ) |  | 400 |  |  | — |
Other, net | (3 | ) |  | (349 | ) |  | (147 | )
Total | $ | 3,435 |  |  | $ | 5,068 |  |  | $ | 4,534 |
Deferred Taxes The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities follow.
in millions | February 3, 2019 |  | January 28, 2018
Assets: |  |  |
Deferred compensation | $ | 183 |  |  | $ | 185 |
Accrued self-insurance liabilities | 298 |  |  | 295 |
State income taxes | 96 |  |  | 109 |
Non-deductible reserves | 231 |  |  | 220 |
Net operating losses | 17 |  |  | 19 |
Other | 116 |  |  | 124 |
Total deferred tax assets | 941 |  |  | 952 |
Valuation allowance | — |  |  | — |
Total deferred tax assets after valuation allowance | 941 |  |  | 952 |
Liabilities: |  |  |
Merchandise inventories | (9 | ) |  | (9 | )
Property and equipment | (893 | ) |  | (770 | )
Goodwill and other intangibles | (179 | ) |  | (243 | )
Other | (230 | ) |  | (251 | )
Total deferred tax liabilities | (1,311 | ) |  | (1,273 | )
Net deferred tax liabilities | $ | (370 | ) |  | $ | (321 | )
Our noncurrent deferred tax assets and noncurrent deferred tax liabilities, netted by tax jurisdiction, follow.
in millions | February 3, 2019 |  | January 28, 2018
Other assets | $ | 121 |  |  | $ | 119 |
Deferred income taxes | (491 | ) |  | (440 | )
Net deferred tax liabilities | $ | (370 | ) |  | $ | (321 | )
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 February 3, 2019, we had federal, state, and foreign net operating loss carryforwards available to reduce future taxable income, expiring at various dates beginning in 2019 to 2038. We have concluded that it is more likely than not that the tax benefits related to the federal, state, and foreign net operating losses will be realized. Reinvestment of Unremitted Earnings Substantially all of our current year foreign cash flows in excess of working capital and cash needed for strategic investments are not intended to be indefinitely reinvested offshore. Therefore, the tax effects of repatriation (including applicable state and local taxes and foreign withholding taxes) of such cash flows have been provided for in the accompanying consolidated statements of earnings. We intend to reinvest substantially all of the approximately $3 billion of non-cash unremitted earnings of our non-U.S. subsidiaries indefinitely. Accordingly, no provision for state and local taxes or foreign 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 due to the complexities associated with the hypothetical calculation. Tax Return Examination Status Our income tax returns are routinely examined by U.S. federal, state and local, and foreign tax authorities. With few exceptions, as of February 3, 2019, the Company is no longer subject to U.S. federal examinations by tax authorities for years before fiscal 2010. During fiscal 2018, the Company settled a transfer pricing issue between the U.S. and Mexican tax authorities. The resolution of this issue reduced our unrecognized tax benefits by $89 million. The net impact of the settlement resulted in an immaterial tax charge in fiscal 2018. Our U.S. federal tax returns for fiscal years 2010 through 2014 are currently under examination by the IRS. With respect to these years, the IRS has issued a proposed adjustment relating to transfer pricing between our entities in the U.S. and China. We intend to defend our position using all available remedies including bi-lateral relief. There are also ongoing U.S. state and local audits and other foreign audits covering fiscal years 2005 through 2017. 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 $65 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. Unrecognized Tax Benefits Reconciliations of the beginning and ending amount of our gross unrecognized tax benefits follow.
in millions | Fiscal |  | Fiscal |  | Fiscal
2018 |  | 2017 |  | 2016
Unrecognized tax benefits balance at beginning of fiscal year | $ | 637 |  |  | $ | 659 |  |  | $ | 689 |
Additions based on tax positions related to the current year | 91 |  |  | 74 |  |  | 147 |
Additions for tax positions of prior years | 100 |  |  | 15 |  |  | 14 |
Reductions for tax positions of prior years | (245 | ) |  | (93 | ) |  | (161 | )
Reductions due to settlements | (66 | ) |  | (1 | ) |  | (16 | )
Reductions due to lapse of statute of limitations | (23 | ) |  | (17 | ) |  | (14 | )
Unrecognized tax benefits balance at end of fiscal year | $ | 494 |  |  | $ | 637 |  |  | $ | 659 |
Unrecognized tax benefits that if recognized would affect our annual effective income tax rate on net earnings were $398 million at February 3, 2019; $483 million at January 28, 2018; and $382 million at January 29, 2017. Interest and Penalties Net adjustments to accruals for interest and penalties associated with uncertain tax positions resulted in a benefit of $33 million in fiscal 2018, and expenses of $24 million in fiscal 2017 and $20 million in fiscal 2016. Interest and penalties are included in interest expense and SG&A, respectively. Our total accrued interest and penalties follow.
in millions | February 3, 2019 |  | January 28, 2018
Total accrued interest and penalties | $ | 101 |  |  | $ | 134 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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