Income Taxes

12 Months Ended

Feb. 03, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

In 2021, the Organization for Economic Co-operation and Development announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. Considering we do not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, these rules are not expected to materially increase our global tax costs. There remains uncertainty as to the final Pillar Two model rules. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”), was signed into law. Among other things, the IRA imposes a 15% corporate alternative minimum tax (the “Corporate AMT”) for tax years beginning after December 31, 2022 and levies a 1% excise tax on net stock repurchases after December 31, 2022. The excise tax on the net stock repurchase, Corporate AMT, or other provisions of the IRA did not have a material impact on our results of operations or financial position in fiscal 2024 or fiscal 2023.

For financial reporting purposes, components of income before income taxes are as follows:

	Fiscal Year Ended
In millions	February 3, 2024		January 28, 2023		January 29, 2022
	(53 weeks)
United States	$	5,077	$	4,029	$	3,934
Foreign	890		607		464
Income before income taxes	$	5,967	$	4,636	$	4,398

The provision for income taxes includes the following:

	Fiscal Year Ended
In millions	February 3, 2024		January 28, 2023		January 29, 2022
	(53 weeks)
Current:
Federal	$	982	$	656	$	766
State	344		233		271
Foreign	175		185		122
Deferred:
Federal	6		52		(32)
State	(34)		0		(26)
Foreign	20		12		14
Provision for income taxes	$	1,493	$	1,138	$	1,115

TJX had net deferred tax assets (liabilities) as follows:

	Fiscal Year Ended
In millions	February 3, 2024		January 28, 2023
Deferred tax assets:
Net operating loss carryforward	$	137	$	156
Pension, stock compensation, postretirement and employee benefits	388		326
Operating lease liabilities	2,589		2,500
Accruals and reserves	274		245
Other	17		14
Total gross deferred tax assets	$	3,405	$	3,241
Valuation allowance	(63)		(86)
Total deferred tax asset	$	3,342	$	3,155
Deferred tax liabilities:
Property, plant and equipment	$	701	$	628
Capitalized inventory	68		61
Operating lease right of use assets	2,492		2,404
Tradename/intangibles	23		21
Undistributed foreign earnings	29		5
Other	5		5
Total deferred tax liabilities	$	3,318	$	3,124
Net deferred tax asset	$	24	$	31
Non-current asset	$	172	$	158
Non-current liability	(148)		(127)
Total	$	24	$	31

TJX has provided for all applicable state and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries in Canada, Puerto Rico, Italy, India, Hong Kong and Vietnam through February 3, 2024. The Company has not provided for federal, state, or foreign withholding taxes on the approximately $1.4 billion of undistributed earnings related to all other foreign subsidiaries as such earnings are considered to be indefinitely reinvested in the business. The net amount of unrecognized state and foreign withholding tax liabilities related to the undistributed earnings is not material.

As of February 3, 2024 and January 28, 2023, for state income tax purposes, TJX had net operating loss carryforwards of $318 million and $328 million respectively. Of that amount, $51 million can be carried forward indefinitely and $267 million will expire, if unused, in the years 2025 through 2044. TJX has analyzed the realization of the state net operating loss carryforwards on an individual state basis. For those states where the Company has determined that it is more likely than not that the state net operating loss carryforwards will not be realized, a valuation allowance of $1 million has been provided for the deferred tax asset as of February 3, 2024 and $16 million as of January 28, 2023.

The Company had available for foreign income tax purposes (related to Australia, Austria, Germany, the Netherlands and the U.K.) net operating loss carryforwards of $439 million as of February 3, 2024 and $508 million as of January 28, 2023. The full amount of the loss carryforwards do not expire. For the deferred tax assets associated with the net operating loss carryforwards for which management has determined it is more likely than not that the deferred tax assets will not be realized, TJX had valuation allowances recorded of approximately $62 million as of February 3, 2024 and $71 million as of January 28, 2023.

The difference between the U.S. federal statutory income tax rate and TJX’s worldwide effective income tax rate is reconciled below:

	Fiscal Year Ended
	February 3, 2024		January 28, 2023		January 29, 2022
	(53 weeks)
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Effective state income tax rate	4.2		4.3		4.6
Impact of foreign operations	0.9		1.1		0.9
Excess share-based compensation	(0.8)		(1.0)		(1.2)
Tax credits	(0.2)		(0.3)		(0.3)
Nondeductible/nontaxable items	0.1		(0.1)		0.2
All other	(0.2)		(0.5)		0.2
Worldwide effective income tax rate	25.0	%	24.5	%	25.4	%

TJX’s effective income tax rate increased for fiscal 2024 compared to fiscal 2023. The increase in the fiscal 2024 effective income tax rate is primarily due to an increase of nondeductible items and a reduction of excess tax benefits from share-based compensation.

TJX had net unrecognized tax benefits of $228 million as of February 3, 2024, $265 million as of January 28, 2023 and $288 million as of January 29, 2022.

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:

	Fiscal Year Ended
In millions	February 3, 2024		January 28, 2023		January 29, 2022
Balance, beginning of year	$	266	$	280	$	269
Additions for uncertain tax positions taken in current year	6		8		10
Additions for uncertain tax positions taken in prior years	—		7		3
Reductions for uncertain tax positions taken in prior years	—		(2)		—
Reductions resulting from lapse of statute of limitations	(19)		(18)		(2)
Settlements with tax authorities	(27)		(9)		—
Balance, end of year	$	226	$	266	$	280

Included in the gross amount of unrecognized tax benefits are items that will impact future effective tax rates upon recognition. These items amounted to $221 million as of February 3, 2024, $251 million as of January 28, 2023 and $260 million as of January 29, 2022.

TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In the U.S. and India, fiscal years through 2010 are no longer subject to examination. In all other jurisdictions, fiscal years through 2011 are no longer subject to examination.

TJX’s accounting policy is to classify interest and penalties related to income tax matters as part of income tax expense. The amount of interest and penalties expensed was $10 million for the fiscal years ended February 3, 2024, and $7 million for both of the fiscal years ended January 28, 2023 and January 29, 2022. The accrued amounts for interest and penalties are $32 million as of February 3, 2024, $37 million as of January 28, 2023 and $43 million as of January 29, 2022.

Based on the final resolution of tax examinations, judicial or administrative proceedings, changes in facts or law, expirations of statutes of limitations in specific jurisdictions or other resolutions of, or changes in, tax positions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those represented on the consolidated financial statements as of February 3, 2024. During the next twelve months, it is reasonably possible that tax audit resolutions may reduce unrecognized tax benefits by up to $43 million, which would reduce the provision for taxes on earnings.