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Income Taxes

12 Months Ended

Jan. 28, 2023

Income Taxes

Income Taxes

NOTE 15—INCOME TAXES

The following table presents our income before income taxes, inclusive of our share of equity method investments losses:

​

​	​	​	​	​	​	​	​	​	​
​	​	YEAR ENDED
​	​	JANUARY 28,		​	JANUARY 29,		​	JANUARY 30,
​		2023			2022			2021
​	​	(in thousands)
Domestic	​	$	418,216	​	$	821,001	​	$	378,267
Foreign	​		19,068	​		1,103	​		(1,854)
Total	​	$	437,284	​	$	822,104	​	$	376,413

​

The following table presents a summary of our income tax expense (benefit):

​

​	​	​	​	​	​	​	​	​	​
​	​	YEAR ENDED
​	​	JANUARY 28,		​	JANUARY 29,		​	JANUARY 30,
​		2023			2022			2021
​	​	(in thousands)
Current	​	​	​	​	​	​	​	​	​
Federal	​	$	(6,773)	​	$	111,975	​	$	85,708
State	​		1,013	​		28,141	​		23,684
Foreign	​		7,012	​		363	​		126
Total current tax expense	​		1,252	​		140,479	​		109,518
Deferred	​			​			​
Federal	​		(78,032)	​		(3,841)	​		(2,251)
State	​		(18,639)	​		(2,885)	​		(2,536)
Foreign	​		4,061	​		(195)	​		(133)
Total deferred tax benefit	​		(92,610)	​		(6,921)	​		(4,920)
Total income tax expense (benefit)	​	$	(91,358)	​	$	133,558	​	$	104,598

​

A reconciliation of the federal statutory tax rate to our effective tax rate was as follows:

​

​	​	​	​	​	​	​	​
​		YEAR ENDED					​
​		JANUARY 28,		JANUARY 29,		JANUARY 30,	​
​		2023		2022		2021	​
Provision at federal statutory tax rate		21.0	%	21.0	%	21.0	%
State income taxes—net of federal tax impact		(2.8)		2.4		4.2	​
Stock compensation—excess benefits		(50.0)		(8.0)		(4.9)	​
Tax impact of convertible senior notes repurchase	​	9.4	​	—	​	—	​
Non-deductible stock-based compensation		0.9		0.6		6.5	​
Valuation allowance		0.5		—		0.1	​
Tax rate adjustments and other		0.1		0.2		0.3	​
Other permanent items		—		—		0.6	​
Effective tax rate		(20.9)	%	16.2	%	27.8	%

​

We have recorded deferred tax assets and liabilities based upon estimates of their realizable value, such estimates are based upon likely future tax consequences. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, we record a valuation allowance.

Significant components of our deferred tax assets and liabilities were as follows:

​

​	​	​	​	​	​	​
​		JANUARY 28,			JANUARY 29,
​		2023			2022
​	​	(in thousands)
Non-current deferred tax assets (liabilities)		​			​
Lease liabilities	​	$	339,911	​	$	317,971
Net operating loss carryforwards	​		120,586	​		2,884
Accrued expenses	​		30,108	​		19,572
Interest expense carryforwards	​	​	28,584	​	​	—
Stock-based compensation	​	​	14,974	​	​	26,205
Merchandise inventories	​		13,346	​		10,318
Deferred revenue	​		3,242	​		1,739
Deferred lease credits	​		—	​		4,854
Convertible senior notes	​		—	​		779
Other	​		4,483	​		1,152
Non-current deferred tax assets	​		555,234	​		385,474
Valuation allowance	​		(4,202)	​		(1,959)
Non-current deferred tax assets—net	​	$	551,032	​	$	383,515
Property and equipment	​	$	(212,424)	​	$	(154,821)
Lease right-of-use assets	​		(142,199)	​		(146,368)
Prepaid expense and other	​		(15,894)	​		(11,077)
Tradename, trademarks and intangibles	​		(11,452)	​		(12,603)
State benefit	​		(8,339)	​		(1,803)
Non-current deferred tax liabilities	​		(390,308)	​		(326,672)
Total non-current deferred tax assets—net	​	$	160,724	​	$	56,843

​

A reconciliation of our valuation allowance against deferred tax assets in certain state and foreign jurisdictions due to historical losses was as follows:

​	​	​	​	​	​	​	​	​	​
​		YEAR ENDED
​		JANUARY 28,			JANUARY 29,			JANUARY 30,
​		2023			2022			2021
​	​	(in thousands)
Balance at beginning of fiscal year	​	$	1,959	​	$	2,049	​	$	1,007
Net changes in deferred tax assets and liabilities	​		2,243	​		(90)	​		1,042
Balance at end of fiscal year	​	$	4,202	​	$	1,959	​	$	2,049

​

As of January 28, 2023, we had federal, state and foreign net operating loss carryovers of $478 million, $217 million and $16 million, respectively. The federal net operating losses do not expire. The state and foreign net operating losses will begin to expire in 2023. Internal Revenue Code Section 382 and similar state rules place a limitation on the amount of taxable income which can be offset by net operating loss carryforwards after a change in ownership (generally greater than 50% change in ownership). We cannot give any assurances that it will not undergo an ownership change in the future resulting in further limitations on utilization of net operating losses.

A reconciliation of the exposures related to unrecognized tax benefits was as follows:

​	​	​	​	​	​	​	​	​	​
​		YEAR ENDED
​		JANUARY 28,			JANUARY 29,			JANUARY 30,
​		2023			2022			2021
​	​	(in thousands)
Balance at beginning of fiscal year	​	$	8,604	​	$	8,456	​	$	8,514
Gross decreases—prior period tax positions	​		—	​		(143)	​		(129)
Gross increases—current period tax positions	​		—	​		933	​		690
Reductions based on the lapse of the applicable statutes of limitations	​		(453)	​		(642)	​		(619)
Balance at end of fiscal year	​	$	8,151	​	$	8,604	​	$	8,456

​

As of January 28, 2023, $7.6 million of our unrecognized tax benefits would reduce income tax expense and the effective tax rate, if recognized. The remaining unrecognized tax benefits would offset other deferred tax assets, if recognized. In October 2017, we filed an amended federal tax return claiming a $5.4 million refund, however, no income tax benefit has been recorded in any fiscal year given the technical nature and amount of the refund claim. An income tax benefit related to this refund claim could be recorded in a future period upon settlement with the respective taxing authority. As of January 28, 2023, we have $5.5 million of exposures related to unrecognized tax benefits that are expected to decrease in the next 12 months.

We are subject to taxation in the United States and various states and foreign jurisdictions. As of January 28, 2023, we are subject to examination by the tax authorities for fiscal 2018 through fiscal 2022. With few exceptions, as of January 28, 2023, we are no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years prior to fiscal 2018.

​

We have not provided U.S. income or foreign withholding taxes on the undistributed earnings of our foreign subsidiaries as of January 28, 2023 because we intend to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability is expected to be immaterial, due to the participation exemption put in place in the Tax Cuts and Jobs Act of 2017.

Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, among other provisions. We are evaluating the provisions included under the IRA and do not expect the provisions to have a material impact to our consolidated financial statements.

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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.

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