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Income Taxes | 12 Months Ended
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Feb. 03, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following is a reconciliation of the federal statutory income tax rate to income tax expense in fiscal 2018, 2017 and 2016 ($ in millions):
| 2018 |  | 2017 |  | 2016
Federal income tax at the statutory rate | $ | 613 |  |  | $ | 635 |  |  | $ | 458 |
State income taxes, net of federal benefit | 44 |  |  | 38 |  |  | 38 |
(Benefit) expense from foreign operations | (85 | ) |  | (46 | ) |  | 5 |
Other | (37 | ) |  | (18 | ) |  | 2 |
Tax Reform | 283 |  |  | — |  |  | — |
Income tax expense | $ | 818 |  |  | $ | 609 |  |  | $ | 503 |
Effective income tax rate | 45.0 | % |  | 33.5 | % |  | 38.4 | %
Tax Reform On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act ("tax reform" or “Tax Act”), which significantly changed U.S. tax law. Among other things, the Tax Act lowered the U.S. statutory tax rate from 35% to 21% effective January 1, 2018, broadened the base to which U.S. income tax applies, imposed a one-time deemed repatriation tax on net unremitted earnings of foreign subsidiaries not previously subject to U.S. income tax and effectively created a new minimum tax on certain future foreign earnings. In response to the Tax Act, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) that provides guidance on accounting for the impact of the Tax Act. SAB 118 allows companies to record provisional amounts to the extent that they are reasonably estimable and adjust them over time as more information becomes available, not to extend beyond the measurement period of one year from the enactment of the Tax Act. As a result of the Tax Act, we applied a blended U.S. statutory federal income tax rate of 33.7% for fiscal 2018. In addition, we recorded provisional tax expense in fiscal 2018 of $283 million. The $283 million included a $209 million charge associated with the deemed repatriation tax and a $74 million charge related to the revaluation of deferred tax assets and liabilities to reflect the new tax rate. We previously considered substantially all of the earnings in our non-U.S. subsidiaries to be indefinitely reinvested outside the U.S. and, accordingly, recorded no deferred income taxes on such earnings. At this time, and until we fully analyze the applicable provisions of the Tax Act, our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. Apart from the deemed repatriation tax, any incremental deferred income taxes on the unremitted foreign earnings are not expected to be material. We continue to analyze the impacts of the Tax Act for provisions that become effective in future years. One such provision is the Global Intangible Low Tax Income (“GILTI”), effectively, a new minimum tax on certain foreign earnings. Under U.S. GAAP, we can make an accounting policy election and either treat taxes on GILTI as a current period expense when incurred or factor such amounts into the measurement of deferred taxes. Due to the complexity of these new rules, we have not completed the analysis of this provision; therefore, we have not made any adjustments in our fiscal 2018 financial statements nor have we made a policy decision regarding the recording of GILTI. The actual impact of the Tax Act may differ materially from our provisional amounts due to further refinement of our calculations as allowed by SAB 118, changes in interpretations and assumptions we have made or actions we may take as a result of the Tax Act. The provisional amounts will be finalized within the one-year measurement period, as we gather and analyze the additional documentation necessary for the calculations. Earnings from continuing operations before income tax expense by jurisdiction was as follows in fiscal 2018, 2017 and 2016 ($ in millions):
| 2018 |  | 2017 |  | 2016
United States | $ | 1,480 |  |  | $ | 1,507 |  |  | $ | 1,310 |
Outside the United States | 337 |  |  | 309 |  |  | — |
Earnings from continuing operations before income tax expense | $ | 1,817 |  |  | $ | 1,816 |  |  | $ | 1,310 |
Income tax expense was comprised of the following in fiscal 2018, 2017 and 2016 ($ in millions):
| 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 547 |  |  | $ | 317 |  |  | $ | 347 |
State | 59 |  |  | 37 |  |  | 48 |
Foreign | 50 |  |  | 54 |  |  | 60 |
| 656 |  |  | 408 |  |  | 455 |
Deferred: |  |  |  |  |
Federal | 141 |  |  | 163 |  |  | 65 |
State | 11 |  |  | 21 |  |  | 10 |
Foreign | 10 |  |  | 17 |  |  | (27 | )
| 162 |  |  | 201 |  |  | 48 |
Income tax expense | $ | 818 |  |  | $ | 609 |  |  | $ | 503 |
Deferred taxes are the result of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities were comprised of the following ($ in millions):
| February 3, 2018 |  | January 28, 2017
Accrued property expenses | $ | 52 |  |  | $ | 91 |
Other accrued expenses | 43 |  |  | 76 |
Deferred revenue | 69 |  |  | 104 |
Compensation and benefits | 32 |  |  | 43 |
Stock-based compensation | 32 |  |  | 64 |
Goodwill and intangibles | 102 |  |  | 210 |
Loss and credit carryforwards | 120 |  |  | 123 |
Other | 38 |  |  | 59 |
Total deferred tax assets | 488 |  |  | 770 |
Valuation allowance | (99 | ) |  | (94 | )
Total deferred tax assets after valuation allowance | 389 |  |  | 676 |
Property and equipment | (163 | ) |  | (240 | )
Inventory | (47 | ) |  | (97 | )
Other | (20 | ) |  | (22 | )
Total deferred tax liabilities | (230 | ) |  | (359 | )
Net deferred tax assets | $ | 159 |  |  | $ | 317 |
Net deferred tax assets are included on our Consolidated Balance Sheets as Other assets as of February 3, 2018, and January 28, 2017. At February 3, 2018, we had total net operating loss carryforwards from international operations of $81 million, of which $76 million will expire in various years through 2036 and the remaining amounts have no expiration. Additionally, we had acquired U.S. federal net operating loss carryforwards of $9 million, which expire between 2023 and 2030; U.S. federal foreign tax credit carryforwards of $1 million, which expire between 2023 and 2026; U.S. federal capital loss carryforwards of $2 million, which expire in 2023; state credit carryforwards of $11 million, which expire between 2020 and 2028; state capital loss carryforwards of $6 million, which expire in 2019; international credit carryforwards of $2 million, which have no expiration; and international capital loss carryforwards of $8 million, which have no expiration. At February 3, 2018, a valuation allowance of $99 million had been established, of which $1 million is against U.S. federal foreign tax credit carryforwards; $16 million is against international, U.S. federal and state capital loss carryforwards; $7 million is against state credit carryforwards and other state deferred tax assets; and $75 million is against certain international net operating loss carryforwards and other international deferred tax assets. The $5 million increase from January 28, 2017, is primarily due to the current year loss activity and the exchange rate impact on the valuation allowance against certain international net operating loss carryforwards. The following table provides a reconciliation of changes in unrecognized tax benefits for fiscal 2018, 2017 and 2016 ($ in millions):
| 2018 |  | 2017 |  | 2016
Balance at beginning of period | $ | 374 |  |  | $ | 469 |  |  | $ | 410 |
Gross increases related to prior period tax positions | 19 |  |  | 11 |  |  | 30 |
Gross decreases related to prior period tax positions | (126 | ) |  | (144 | ) |  | (13 | )
Gross increases related to current period tax positions | 29 |  |  | 55 |  |  | 59 |
Settlements with taxing authorities | (12 | ) |  | (12 | ) |  | (9 | )
Lapse of statute of limitations | (5 | ) |  | (5 | ) |  | (8 | )
Balance at end of period | $ | 279 |  |  | $ | 374 |  |  | $ | 469 |
Unrecognized tax benefits of $263 million, $346 million and $337 million at February 3, 2018, January 28, 2017, and January 30, 2016, respectively, would favorably impact our effective income tax rate if recognized. We recognize interest and penalties (not included in the "unrecognized tax benefits" above), as well as interest received from favorable tax settlements, as components of income tax expense. Interest income of $10 million, interest income of $9 million and interest expense of $10 million was recognized in fiscal 2018, 2017 and 2016, respectively. At February 3, 2018, January 28, 2017, and January 30, 2016, we had accrued interest of $42 million, $61 million and $89 million, respectively, along with accrued penalties of $0 million, $1 million and $1 million at February 3, 2018, January 28, 2017, and January 30, 2016, respectively. We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before fiscal 2011. Because existing tax positions will continue to generate increased liabilities for us for unrecognized tax benefits over the next 12 months, and since we are routinely under audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months. An estimate of the amount or range of such change cannot be made at this time. However, we do not expect the change, if any, to have a material effect on our consolidated financial condition, results of operations or cash flows within the next 12 months.

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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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