INCOME TAXES	3 Months Ended
May 04, 2014
INCOME TAXES
INCOME TAXES	NOTE 6 — INCOME TAXES For the three months ended May 4, 2014, the Company’s combined federal, state and foreign tax provision for continuing operations was $1 million, mainly driven by the impact of discrete items recorded during the period. The Company’s effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where it operates, restructuring and other one-time charges, as well as discrete events, such as settlements of future audits. The Company is subject to audits and examinations of its tax returns by tax authorities in various jurisdictions, including the Internal Revenue Service (the “IRS”). Management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of provisions for income taxes. With regard to the increase in the valuation allowance and the impact the valuation allowance had on income tax expense, the valuation allowance was immaterially impacted by the increasing of the deferred tax liability for U.S. goodwill amortization for tax purposes. The deferred tax liability related to the Company’s U.S. tax deductible goodwill is considered a liability related to an asset with an indefinite life. Therefore, the deferred tax liability does not amortize and is not available as a source of taxable income to support the realization of deferred tax assets created by other deductible temporary timing differences. The Company does not believe it is “more likely than not” it will realize its U.S. deferred tax assets equal to the deferred liability created by tax deductible goodwill and therefore, the Company was required to record an additional tax expense to increase its deferred tax asset valuation allowance. There was no material impact of tax amortization on tax expense for indefinite lived intangibles for the three months ended May 4, 2014 due to income results. As of February 2, 2014, the Company’s unrecognized tax benefits in accordance with the income taxes principles of GAAP (ASC 740, Income Taxes) were $192 million. As of May 4, 2014, the Company’s unrecognized tax benefits decreased $1 million to $191 million as a result of state audit settlements. During the three months ended May 4, 2014, the Company recorded $1 million of net interest related to unrecognized tax benefits. The Company’s ending net accrual for interest and penalties related to unrecognized tax benefits as of February 2, 2014 was $27 million and increased to $28 million as of May 4, 2014. During fiscal year 2010, the Company determined that it did not meet the “more likely than not” standard that substantially all of its net U.S. deferred tax assets would be realized and therefore, the Company established a valuation allowance for its net U.S. deferred tax assets. With regard to the U.S., the Company continues to believe that a full valuation allowance is needed against the majority of its net deferred tax assets. As of May 4, 2014, the Company’s U.S. valuation allowance was $1,002 million. See Note 10, Commitments and Contingencies, for discussion of the IRS audit of the Company’s U.S. federal income tax returns.

NOTE 6 — INCOME TAXES

For the three months ended May 4, 2014, the Company’s combined federal, state and foreign tax provision for continuing operations was $1 million, mainly driven by the impact of discrete items recorded during the period. The Company’s effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where it operates, restructuring and other one-time charges, as well as discrete events, such as settlements of future audits. The Company is subject to audits and examinations of its tax returns by tax authorities in various jurisdictions, including the Internal Revenue Service (the “IRS”). Management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of provisions for income taxes.

With regard to the increase in the valuation allowance and the impact the valuation allowance had on income tax expense, the valuation allowance was immaterially impacted by the increasing of the deferred tax liability for U.S. goodwill amortization for tax purposes. The deferred tax liability related to the Company’s U.S. tax deductible goodwill is considered a liability related to an asset with an indefinite life. Therefore, the deferred tax liability does not amortize and is not available as a source of taxable income to support the realization of deferred tax assets created by other deductible temporary timing differences. The Company does not believe it is “more likely than not” it will realize its U.S. deferred tax assets equal to the deferred liability created by tax deductible goodwill and therefore, the Company was required to record an additional tax expense to increase its deferred tax asset valuation allowance. There was no material impact of tax amortization on tax expense for indefinite lived intangibles for the three months ended May 4, 2014 due to income results.

As of February 2, 2014, the Company’s unrecognized tax benefits in accordance with the income taxes principles of GAAP (ASC 740, Income Taxes) were $192 million. As of May 4, 2014, the Company’s unrecognized tax benefits decreased $1 million to $191 million as a result of state audit settlements. During the three months ended May 4, 2014, the Company recorded $1 million of net interest related to unrecognized tax benefits.

The Company’s ending net accrual for interest and penalties related to unrecognized tax benefits as of February 2, 2014 was $27 million and increased to $28 million as of May 4, 2014.

During fiscal year 2010, the Company determined that it did not meet the “more likely than not” standard that substantially all of its net U.S. deferred tax assets would be realized and therefore, the Company established a valuation allowance for its net U.S. deferred tax assets. With regard to the U.S., the Company continues to believe that a full valuation allowance is needed against the majority of its net deferred tax assets. As of May 4, 2014, the Company’s U.S. valuation allowance was $1,002 million.

See Note 10, Commitments and Contingencies, for discussion of the IRS audit of the Company’s U.S. federal income tax returns.