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INCOME TAXES | 12 Months Ended
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Jul. 30, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 14—INCOME TAXES Income Tax Expense (Benefit) Income before income taxes for fiscal 2022 consists of $302 million from U.S. continuing operations and $8 million from foreign continuing operations. Income before income taxes for fiscal 2021 consists of $175 million from U.S. continuing operations and $8 million from foreign continuing operations. Loss before income taxes for fiscal 2020 consists of ($338) million from U.S. continuing operations and ($4) million from foreign continuing operations. The total provision (benefit) for income taxes included in the Consolidated Statements of Operations consisted of the following:
(in millions) | 2022 |  | 2021 |  | 2020
Continuing operations | $ | 56 |  |  | $ | 34 |  |  | $ | (91) |
Discontinued operations | — |  |  | (1) |  |  | (5) |
Total | $ | 56 |  |  | $ | 33 |  |  | $ | (96) |
The income tax expense (benefit) in continuing operations was allocated as follows:
(in millions) | 2022 |  | 2021 |  | 2020
Income tax expense (benefit) | $ | 56 |  |  | $ | 34 |  |  | $ | (91) |
Other comprehensive income | 11 |  |  | 65 |  |  | (45) |
Total | $ | 67 |  |  | $ | 99 |  |  | $ | (136) |
Total federal, state, and foreign income tax (benefit) expense in continuing operations consists of the following:
(in millions) | Current |  | Deferred |  | Total
Fiscal 2022 |  |  |  |  |
U.S. Federal | $ | (7) |  |  | $ | 45 |  |  | $ | 38 |
State and Local | 6 |  |  | 9 |  |  | 15 |
Foreign | 2 |  |  | 1 |  |  | 3 |
| $ | 1 |  |  | $ | 55 |  |  | $ | 56 |
Fiscal 2021 |  |  |  |  |
U.S. Federal | $ | 30 |  |  | $ | (8) |  |  | $ | 22 |
State and Local | 7 |  |  | 2 |  |  | 9 |
Foreign | 2 |  |  | 1 |  |  | 3 |
| $ | 39 |  |  | $ | (5) |  |  | $ | 34 |
Fiscal 2020 |  |  |  |  |
U.S. Federal | $ | (23) |  |  | $ | (45) |  |  | $ | (68) |
State and Local | 1 |  |  | (24) |  |  | (23) |
Foreign | 2 |  |  | (2) |  |  | — |
| $ | (20) |  |  | $ | (71) |  |  | $ | (91) |
Total income tax expense (benefit) in continuing operations was different than the amounts computed by applying the statutory federal income tax rate to income before income taxes because of the following:
(in millions) | 2022 |  | 2021 |  | 2020
Computed “expected” tax expense | $ | 66 |  |  | $ | 39 |  |  | $ | (72) |
State and local income tax, net of Federal income tax benefit | 18 |  |  | 10 |  |  | (19) |
Non-deductible expenses | 13 |  |  | 7 |  |  | 3 |
Tax effect of share-based compensation | (31) |  |  | (3) |  |  | 2 |
General business credits | (3) |  |  | (6) |  |  | (2) |
Unrecognized tax benefits | (6) |  |  | (4) |  |  | (8) |
Nondeductible goodwill impairment | — |  |  | — |  |  | 44 |
Enhanced Inventory Donations | (2) |  |  | (3) |  |  | (2) |
Impacts related to the CARES Act | — |  |  | — |  |  | (39) |
Other, net | 1 |  |  | (6) |  |  | 2 |
Total income tax expense (benefit) | $ | 56 |  |  | $ | 34 |  |  | $ | (91) |
Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
(in millions) | 2022 |  | 2021 |  | 2020
Unrecognized tax benefits at beginning of period | $ | 27 |  |  | $ | 32 |  |  | $ | 40 |
Unrecognized tax benefits added during the period | — |  |  | 6 |  |  | 6 |
Unrecognized tax benefits assumed in a business combination | — |  |  | — |  |  | — |
Decreases in unrecognized tax benefits due to statute expiration | (7) |  |  | (8) |  |  | (2) |
Decreases in unrecognized tax benefits due to settlements | (1) |  |  | (3) |  |  | (12) |
Unrecognized tax benefits at end of period | $ | 19 |  |  | $ | 27 |  |  | $ | 32 |
In addition, the Company has $8 million paid on deposit to various governmental agencies to cover the above liability. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. For fiscal 2022, 2021 and 2020, total accrued interest and penalties was $6 million, $6 million, and $7 million, respectively. The Company is currently under examination in several taxing jurisdictions and remains subject to examination until the statute of limitations expires for the respective taxing jurisdiction or an agreement is reached between the taxing jurisdiction and the Company. As of July 30, 2022, the Company is no longer subject to federal income tax examinations for fiscal years before 2015 and in most states is no longer subject to state income tax examinations for fiscal years before 2009 and 2016 for Supervalu and the Company, respectively. Due to the implementation of the CARES Act, NOLs were carried back into fiscal years 2014 and 2015, which extends the federal statute of limitations on those years up to the amount of the carryback claim. Based on the possibility of the closing of pending audits and appeals, or expiration of the statute of limitations, it is reasonably possible that the amount of unrecognized tax benefits will decrease by up to $6 million during the next 12 months. Deferred Tax Assets and Liabilities The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and deferred tax liabilities at July 30, 2022 and July 31, 2021 are presented below:
(in millions) | July 30, 2022 |  | July 31, 2021
Deferred tax assets: |  |  |
Compensation and benefits related | $ | 50 |  |  | $ | 54 |
Accounts receivable, principally due to allowances for uncollectible accounts | 4 |  |  | 6 |
Accrued expenses | 37 |  |  | 37 |
Net operating loss carryforwards | 14 |  |  | 16 |
Other tax carryforwards (interest, charitable contributions) | 15 |  |  | 8 |
Foreign tax credits | 1 |  |  | 1 |
Intangible assets | 50 |  |  | 61 |
Lease liabilities | 319 |  |  | 336 |
Interest rate swap agreements | — |  |  | 25 |
Other deferred tax assets | — |  |  | 6 |
Total gross deferred tax assets | 490 |  |  | 550 |
Less valuation allowance | (5) |  |  | (8) |
Net deferred tax assets | $ | 485 |  |  | $ | 542 |
Deferred tax liabilities: |  |  |
Plant and equipment, principally due to differences in depreciation | $ | 159 |  |  | $ | 125 |
Inventories | 29 |  |  | 39 |
Lease right of use assets | 304 |  |  | 321 |
Interest rate swap agreements | 1 |  |  | — |
Total deferred tax liabilities | 493 |  |  | 485 |
Net deferred tax (liabilities) assets | $ | (8) |  |  | $ | 57 |
Tax Credits and Valuation Allowances At July 30, 2022, the Company had gross deferred tax assets of approximately $490 million. The Company regularly reviews its deferred tax assets for recoverability to evaluate whether it is more likely than not that they will be realized. In making this evaluation, the Company considers the statutory recovery periods for the assets, along with available sources of future taxable income, including reversals of existing taxable temporary differences, tax planning strategies, history of taxable income, and projections of future income. The Company gives more significance to objectively verifiable evidence, such as the existence of deferred tax liabilities that are forecast to generate taxable income within the relevant carryover periods, and a history of earnings. A valuation allowance is provided when the Company concludes, based on all available evidence, that it is more likely than not that the deferred tax assets will not be realized during the applicable recovery period. The Company has reviewed these factors in evaluating the recoverability of its deferred tax assets. As of July 30, 2022, the Company anticipates sufficient future taxable income to realize all of its deferred tax assets within the applicable recovery periods with the exception of certain foreign tax credits and state net operating losses. Accordingly, the Company has established valuation allowances against that portion of its state net operating losses and foreign tax credits that, in the Company’ s judgment, are not likely to be realized within the applicable recovery periods. At July 30, 2022, the Company had net operating loss carryforwards of approximately $1 million for federal income tax purposes that are subject to an annual limitation of approximately $0.3 million under Internal Revenue Code Section 382. These Section 382-limited carryforwards expire at various times through fiscal year 2027. As of July 30, 2022, the Company anticipates sufficient future taxable income over the periods in which the net operating losses can be utilized. The Company also has the availability of future reversals of taxable temporary differences that are expected to generate taxable income in the future. Therefore, the ultimate realization of net operating losses for federal purposes appears more likely than not at July 30, 2022 and correspondingly no valuation allowance has been established. At July 30, 2022, the Company had disallowed charitable contribution carryforwards of approximately $34 million that are available for carryforward over five years. As of July 30, 2022, the Company anticipates sufficient future taxable income to fully utilize the charitable contribution carryovers within the applicable five-year carryforward period and correspondingly, no valuation allowance has been established. The retained earnings of the Company’s non-U.S. subsidiary were subject to deemed U.S. repatriation and taxation during fiscal 2017 pursuant to the Tax Cuts and Jobs Act, and existing foreign tax credits were utilized to offset the resulting liability. We have established a deferred tax asset for the remaining U.S. foreign tax credits of $1 million. Such credits are offset by a valuation allowance. Effective Tax Rate Our effective income tax rate for continuing operations was an expense rate of 18.1% and 18.6% on pre-tax income for fiscal 2022 and fiscal 2021, respectively, and a benefit rate of 26.6% on pre-tax losses for fiscal 2020. The fiscal 2020 effective tax rate was primarily driven by the impact of non-deductible goodwill impairment charges recorded in fiscal 2020, partially offset by the NOL carryback provisions of the CARES Act. For fiscal 2021, the effective tax rate was reduced by solar and employment tax credits, including the tax credit impact of a fiscal 2021 investment in an equity method partnership, the recognition of previously unrecognized tax benefits, excess tax deductions attributable to share-based compensation and inventory deductions, as well as the impact of favorable return-to-provision adjustments. For fiscal 2022, the effective tax rate was reduced by the impact of discrete tax benefits related to employee stock awards and the release of unrecognized tax positions, partially offset by non-deductible executive compensation.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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