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INCOME TAXES | 12 Months Ended
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Jul. 29, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 14—INCOME TAXES Income Tax (Benefit) Expense For fiscal 2023, (loss) income before income taxes consists of $(1) million from U.S. continuing operations and $8 million from foreign continuing operations. 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. The total (benefit) provision for income taxes included in the Consolidated Statements of Operations consisted of the following:
(in millions) | 2023 |  | 2022 |  | 2021
Continuing operations | $ | (23) |  |  | $ | 56 |  |  | $ | 34 |
Discontinued operations | — |  |  | — |  |  | (1) |
Total | $ | (23) |  |  | $ | 56 |  |  | $ | 33 |
The income tax (benefit) expense in continuing operations was allocated as follows:
(in millions) | 2023 |  | 2022 |  | 2021
Income tax (benefit) expense | $ | (23) |  |  | $ | 56 |  |  | $ | 34 |
Other comprehensive (loss) income | (2) |  |  | 11 |  |  | 65 |
Total | $ | (25) |  |  | $ | 67 |  |  | $ | 99 |
Total federal, state and foreign income tax (benefit) expense in continuing operations consists of the following:
(in millions) | Current |  | Deferred |  | Total
Fiscal 2023 |  |  |  |  |
U.S. Federal | $ | 23 |  |  | $ | (36) |  |  | $ | (13) |
State and Local | (11) |  |  | (1) |  |  | (12) |
Foreign | 1 |  |  | 1 |  |  | 2 |
| $ | 13 |  |  | $ | (36) |  |  | $ | (23) |
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 |
Total income tax (benefit) expense 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) | 2023 |  | 2022 |  | 2021
Computed “expected” tax expense | $ | 1 |  |  | $ | 66 |  |  | $ | 39 |
State and local income tax, net of Federal income tax benefit | (1) |  |  | 18 |  |  | 10 |
Non-deductible expenses | 3 |  |  | 13 |  |  | 7 |
Tax effect of share-based compensation | (9) |  |  | (31) |  |  | (3) |
General business credits | (8) |  |  | (3) |  |  | (6) |
Unrecognized tax benefits | (16) |  |  | (6) |  |  | (4) |
Enhanced inventory donations | (1) |  |  | (2) |  |  | (3) |
Changes in valuation allowance(1) | 4 |  |  | 1 |  |  | 1 |
Other, net(1) | 4 |  |  | — |  |  | (7) |
Total income tax (benefit) expense | $ | (23) |  |  | $ | 56 |  |  | $ | 34 |
(1)Immaterial prior period amounts that were included in the other, net category have been reclassified to conform with current period presentation. Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
(in millions) | 2023 |  | 2022 |  | 2021
Unrecognized tax benefits at beginning of period | $ | 19 |  |  | $ | 27 |  |  | $ | 32 |
Unrecognized tax benefits added during the period | 5 |  |  | — |  |  | 6 |
Decreases in unrecognized tax benefits due to statute expiration | (5) |  |  | (7) |  |  | (8) |
Decreases in unrecognized tax benefits due to settlements | (8) |  |  | (1) |  |  | (3) |
Unrecognized tax benefits at end of period | $ | 11 |  |  | $ | 19 |  |  | $ | 27 |
In addition, the Company has $1 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 2023, 2022 and 2021, total accrued interest and penalties was $1 million, $6 million and $6 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 29, 2023, the Company is no longer subject to federal income tax examinations for fiscal years before 2016 and in most states is no longer subject to state income tax examinations for fiscal years before 2011 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, the Company does not anticipate that the amount of unrecognized tax benefits will change significantly 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 29, 2023 and July 30, 2022 are presented below:
(in millions) | July 29, 2023 |  | July 30, 2022
Deferred tax assets: |  |  |
Compensation and benefits related | $ | 29 |  |  | $ | 50 |
Accounts receivable, principally due to allowances for uncollectible accounts | 4 |  |  | 4 |
Accrued expenses | 52 |  |  | 37 |
Net operating loss carryforwards | 10 |  |  | 14 |
Other tax carryforwards (interest, charitable contributions) | 32 |  |  | 15 |
Foreign tax credits | 1 |  |  | 1 |
Intangible assets | 50 |  |  | 50 |
Lease liabilities | 333 |  |  | 319 |
Other deferred tax assets | 6 |  |  | — |
Total gross deferred tax assets | 517 |  |  | 490 |
Less valuation allowance | (7) |  |  | (5) |
Net deferred tax assets | $ | 510 |  |  | $ | 485 |
Deferred tax liabilities: |  |  |
Plant and equipment, principally due to differences in depreciation | $ | 141 |  |  | $ | 159 |
Inventories | 15 |  |  | 29 |
Lease right of use assets | 317 |  |  | 304 |
Interest rate swap agreements | 5 |  |  | 1 |
Total deferred tax liabilities | 478 |  |  | 493 |
Net deferred tax assets (liabilities) | $ | 32 |  |  | $ | (8) |
Tax Credits and Valuation Allowances At July 29, 2023, the Company had gross deferred tax assets of approximately $517 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 29, 2023, 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, charitable contribution carryovers and state net operating losses. Accordingly, the Company has established valuation allowances against that portion of its charitable contribution carryovers, 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 29, 2023, 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 29, 2023, 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 29, 2023 and correspondingly no valuation allowance has been established. At July 29, 2023, the Company had disallowed charitable contribution carryforwards of approximately $45 million that are available for carryforward over five years. As of July 29, 2023, the Company anticipates sufficient future taxable income to utilize $30 million of these charitable contribution carryovers within the applicable five-year carryforward periods. The Company has established a valuation allowance against the $15 million of charitable contribution carryovers that, in the Company’s judgement, are not likely to be realized within the applicable recovery period. 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 The Company’s effective income tax rate for continuing operations was a benefit rate of 328.6% on pre-tax income for fiscal 2023 as compared to an expense rate of 18.1% and 18.6% on pre-tax income for fiscal 2022 and 2021, respectively. 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. For fiscal 2023, the effective tax rate was impacted by solar credits, including the tax credit impact of a fiscal 2023 investment in an equity method partnership and solar credits associated with a solar array installation at the Company’s Howell Township, New Jersey facility. The effective tax rate was also impacted by the recognition of previously unrecognized tax benefits and excess tax deductions attributable to share-based compensation. The combined impact of these fiscal 2023 tax benefits exceeded pre-tax income, generating an overall tax benefit rate for fiscal 2023.

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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 -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
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