Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
12 Months Ended
Jan. 28, 2012
Income Taxes [Abstract]  
Income Taxes

19) Income Taxes

 

The components of our income tax (benefit)/expense for continuing operations were as follows:

 

 

 

 

 

($ in millions)

2011

 

2010

 

2009

 

Current

 

 

 

Federal and foreign

$                60

$                92

$                59

State and local

                  16

                  (4)

                  24

 

 00

 00

 

                  76

                  88

                  83

 

 

 

 

Deferred

 

 

 

Federal and foreign

              (130)

                  92

                  65

State and local

                 (23)

                  23

                    6

 

 

 

 

 

              (153)

              115

                  71

 

 

 

 

Total

$               (77)

$            203

$             154

 

 

 

 

 

A reconciliation of the statutory federal income tax rate to our effective rate for continuing operations is as follows:

 

 

 

 

 

(percent of pre-tax (loss)/income)

2011

 

2010

 

2009

 

Federal income tax at statutory rate

            (35.0)%

               35.0%

            35.0%

State and local income tax, less federal income tax benefit

              (1.8)

                2.1

               4.7

Tax effect of dividends on ESOP shares

              (1.9)

               (0.8)

             (1.2)

Non-deductible management transition costs

              11.3

                  -

                  -

Wage credits

              (5.2)

              (1.1)

             (1.0)

 

Other permanent differences and credits

              (1.0)

               (0.3)

               0.7

 

 

 

 

Effective tax rate for continuing operations

            (33.6)%

               34.9%

             38.2%

 

 

 

 

 

Our deferred tax assets and liabilities were as follows:

 

 

 

 

($ in millions)

2011

 

2010

 

Assets

 

 

Merchandise inventory

$              102

$                41

Accrued vacation pay

                  34

                  40

Gift cards

                  49

                  65

Stock-based compensation

                  87

                  73

State taxes

                  39

                  59

 

Workers' compensation/general liability

                  91

                  97

 

Accrued rent

                  26

                  24

 

Mirror savings plan

                  24

                  24

 

Pension and other retiree obligations

                187

                     -

 

Other

                  69

                  94

 

 

 

Total deferred tax assets

              708

              517

 

 

 

Liabilities

 

 

Depreciation and amortization

          (1,172)

           (1,083)

Pension and other retiree obligations

                  -

              (211)

Leveraged leases/tax benefit transfers

             (140)

              (170)

Unrealized gain on REITs

              (91)

                (62)

Other

              (13)

                (57)

 

 

 

Total deferred tax liabilities

$       (1,416)

$       (1,583)

 

 

 

Total net deferred tax (liabilities)

$          (708)

$       (1,066)

 

 

 

We anticipate that we will generate sufficient pre-tax income in the future to realize the full benefit of the deferred tax assets related to future deductible amounts. Accordingly, a valuation allowance was not required at year-end 2011 or 2010.

Deferred tax assets and liabilities included in our consolidated balance sheets were as follows:

 

 

 

 

($ in millions)

2011

 

2010

 

Other current assets

$          180

$          126

Other long-term liabilities

           (888)

         (1,192)

 

 

 

Net deferred tax liabilities

$         (708)

$      (1,066)

 

 

 

Income taxes on our Consolidated Balance Sheets included current income taxes receivable of $233 million at the end of 2011 and $208 million at the end of 2010, in addition to the net current deferred tax assets shown above.

 

A reconciliation of unrecognized tax benefits is as follows:

 

 

 

 

 

($ in millions)

2011

 

2010

 

2009

 

Beginning balance

$            162

$            165

$            192

Additions for tax positions related to the current year

                  -

                  -

                  -

Additions for tax positions of prior years

                10

                21

                37

Reductions for tax positions of prior years

              (14)

                 (5)

                 (1)

Settlements and effective settlements with tax authorities

              (45)

              (16)

              (59)

Expirations of statute

                 (3)

                 (3)

                 (4)

 

 

 

 

Balance at end of year

$          110

$       162

$            165

 

 

 

 

As of the end of 2011, 2010 and 2009 the uncertain tax position balance included $61 million, $60 million and $75 million, respectively, that, if recognized, would lower the effective tax rate and would be reduced upon settlement by $21 million, $21 million and $26 million, respectively, related to the federal tax deduction of state taxes. The remaining amounts reflected tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing. Due to deferred tax accounting, other than any interest or penalties incurred, the disallowance of the shorter deductibility period would not impact the effective tax rate, but would accelerate payment to the taxing authority.

Over the next 12 months, it is reasonably possible that the amount of unrecognized tax benefits could be reduced by $25 million if our tax position is sustained upon audit, the controlling statute of limitations expires or we agree to a disallowance.

Accrued interest and penalties related to unrecognized tax benefits included in income tax expense was $4 million as of January 28, 2012, $3 million as of January 29, 2011 and $2 million as of January 30, 2010.

 

We file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We are no longer subject to U.S. federal examinations by tax authorities for years before 2010. We expect resolution of issues pertaining to 2009 and 2010 to occur in 2012. The 2007 and 2008 examinations were resolved in 2011. We are audited by the taxing authorities of virtually all states and certain foreign countries and are subject to examination by these taxing jurisdictions for years generally after 2006.