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TAXES BASED ON INCOME | 12 Months Ended
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Feb. 02, 2019
INCOME TAXES |
TAXES BASED ON INCOME | 5.TAXES BASED ON INCOME The provision for taxes based on income consists of:
|  | 2018 |  | 2017 |  | 2016 |
Federal |  |  |  |  |  |  |  |  |  |
Current |  | $ | 775 |  | $ | 309 |  | $ | 721 |
Deferred |  |  | (3) |  |  | (747) |  |  | 158 |
Subtotal federal |  |  | 772 |  |  | (438) |  |  | 879 |
State and local |  |  |  |  |  |  |  |  |  |
Current |  |  | 108 |  |  | 15 |  |  | 51 |
Deferred |  |  | 20 |  |  | 18 |  |  | 27 |
Subtotal state and local |  |  | 128 |  |  | 33 |  |  | 78 |
Total |  | $ | 900 |  | $ | (405) |  | $ | 957 |
A reconciliation of the statutory federal rate and the effective rate follows:
|  | 2018 |  | 2017 |  | 2016 |
Statutory rate |  | 21.0 | % | 33.7 | % | 35.0 | %
State income taxes, net of federal tax benefit |  | 2.6 |  | 1.7 |  | 1.6 |
Credits |  | (1.3) |  | (2.5) |  | (1.1) |
Resolution of issues |  | 0.5 |  | — |  | (0.5) |
Domestic manufacturing deduction |  | — |  | (1.1) |  | (0.7) |
Excess tax benefits from share-based payments |  | (0.3) |  | (0.4) |  | (1.6) |
Effect of Tax Cuts and Jobs Act |  | — |  | (60.8) |  | — |
Impairment of goodwill |  | — |  | 2.3 |  | — |
Other changes, net |  | 0.1 |  | (0.2) |  | 0.1 |
|  | 22.6 | % | (27.3) | % | 32.8 | %
The 2018 tax rate differed from the federal statutory rate primarily due to the effect of state income taxes and an IRS audit that resulted in a reduction of prior year tax deductions at pre-Tax Act rates and an increase in future tax deductions at post-Tax Act rates. These 2018 items were partially offset by the utilization of tax credits and deductions, the remeasurement of uncertain tax positions and adjustments to provisional amounts that increased prior year deductions at pre-Tax Act rates and decreased future deductions at post-Tax Act rates. In accordance with SAB 118, the Company has completed accounting for the Tax Act resulting in no measurement period adjustments. The 2017 tax rate differed from the federal statutory rate primarily as a result of remeasuring deferred taxes due to the Tax Act, the Domestic Manufacturing Deduction and other changes, partially offset by non-deducible goodwill impairment charges and the effect of state income taxes. The 2016 tax rate differed from the federal statutory rate primarily as a result of the recognition of excess tax benefits related to share-based payments after the adoption of Accounting Standards Update (“ASU”) 2016-09, the utilization of tax credits, the Domestic Manufacturing Deduction and other changes, partially offset by the effect of state income taxes. The tax effects of significant temporary differences that comprise tax balances were as follows:
|  | 2018 |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |
Compensation related costs |  | $ | 350 |  | $ | 348 |
Lease accounting |  |  | 81 |  |  | 78 |
Closed store reserves |  |  | 41 |  |  | 45 |
Net operating loss and credit carryforwards |  |  | 110 |  |  | 146 |
Other |  |  | 55 |  |  | 54 |
Subtotal |  |  | 637 |  |  | 671 |
Valuation allowance |  |  | (54) |  |  | (62) |
Total deferred tax assets |  |  | 583 |  |  | 609 |
Deferred tax liabilities: |  |  |  |  |  |  |
Depreciation and amortization |  |  | (1,850) |  |  | (1,892) |
Insurance related costs |  |  | (38) |  |  | (32) |
Inventory related costs |  |  | (257) |  |  | (253) |
Total deferred tax liabilities |  |  | (2,145) |  |  | (2,177) |
Deferred taxes |  | $ | (1,562) |  | $ | (1,568) |
At February 2, 2019, the Company had net operating loss carryforwards for state income tax purposes of $1,208. These net operating loss carryforwards expire from 2019 through 2038. The utilization of certain of the Company’s state net operating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state net operating losses. At February 2, 2019, the Company had state credit carryforwards of $47, most of which expire from 2019 through 2027. The utilization of certain of the Company’s credits may be limited in a given year. Further, based on the analysis described below, the Company has recorded a valuation allowance against some of the deferred tax assets resulting from its state credits. At February 2, 2019, the Company had federal net operating loss carryforwards of $2. These net operating loss carryforwards expire from 2036 through 2037. The utilization of certain of the Company’s federal net operating loss carryforwards may be limited in a given year. Further, based on the analysis described below, the Company has not recorded a valuation allowance against the deferred tax assets resulting from its federal net operating losses. The Company regularly reviews all deferred tax assets on a tax filer and jurisdictional basis to estimate whether these assets are more likely than not to be realized based on all available evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The expected timing of the reversals of existing temporary differences is based on current tax law and the Company’s tax methods of accounting. Unless deferred tax assets are more likely than not to be realized, a valuation allowance is established to reduce the carrying value of the deferred tax asset until such time that realization becomes more likely than not. Increases and decreases in these valuation allowances are included in "Income tax expense" in the Consolidated Statements of Operations. As of February 2, 2019, February 3, 2018 and January 28, 2017, the total valuation allowance was $54, $62 and $50, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits, including positions impacting only the timing of tax benefits, is as follows:
|  | 2018 |  | 2017 |  | 2016 |
Beginning balance |  | $ | 180 |  | $ | 177 |  | $ | 204 |
Additions based on tax positions related to the current year |  |  | 7 |  |  | 11 |  |  | 10 |
Reductions based on tax positions related to the current year |  |  | (1) |  |  | (1) |  |  | (1) |
Additions for tax positions of prior years |  |  | 23 |  |  | 6 |  |  | 3 |
Reductions for tax positions of prior years |  |  | (22) |  |  | (8) |  |  | (30) |
Settlements |  |  | (10) |  |  | — |  |  | (2) |
Lapse of statute |  |  | (3) |  |  | (5) |  |  | (7) |
Ending balance |  | $ | 174 |  | $ | 180 |  | $ | 177 |
The Company does not anticipate that changes in the amount of unrecognized tax benefits over the next twelve months will have a significant impact on its results of operations or financial position. As of February 2, 2019, February 3, 2018 and January 28, 2017, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $72, $88 and $73 respectively. To the extent interest and penalties would be assessed by taxing authorities on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense. During the years ended February 2, 2019, February 3, 2018 and January 28, 2017, the Company recognized approximately $2, $8 and $(1), respectively, in interest and penalties (recoveries). The Company had accrued approximately $30, $28 and $20 for the payment of interest and penalties as of February 2, 2019, February 3, 2018 and January 28, 2017, respectively. As of February 2, 2019, the Internal Revenue Service had concluded its examination of our 2012 and 2013 federal tax returns.

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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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