INCOME TAXES	3 Months Ended
May 03, 2015
INCOME TAXES
INCOME TAXES	NOTE 5 — INCOME TAXES For the three months ended May 3, 2015, the Company’s combined federal, state, and foreign effective tax rate for continuing operations is a 295% benefit. The benefit was mainly driven by a decrease of $189 million in the Company’s unrecognized U.S. federal and state tax benefits related to the February 19, 2015 approval and finalization of the Tentative Settlement (as defined in “Note 9, Commitment and Contingencies”) by the Joint Committee of Taxation. In addition, the Company’s rate was impacted by the utilization of deferred tax assets which had previously been subject to a valuation allowance, increasing the deferred tax liability for U.S. goodwill amortization for tax purposes, and the accrual of income taxes for foreign and certain state jurisdictions. 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. An increase in U.S. pre-tax book income resulted in the utilization of net deferred tax assets including U.S. tax net operating losses that were subject to a valuation allowance. The overall decrease in the valuation allowance was partially offset by an increase 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. During the three months ended May 3, 2015, the impact of the tax amortization of the indefinite lived intangibles on tax expense was a $6 million increase. As of February 1, 2015, the Company’s unrecognized tax benefits in accordance with the income taxes principles of GAAP (ASC 740, Income Taxes) were $187 million. During the three months ended May 3, 2015, the Company’s unrecognized tax benefits decreased by $178 million to $9 million primary driven by IRS and state audit settlements. During the three months ended May 3, 2015, the Company’s interest accrual related to unrecognized tax benefits decreased by $28 million. The Company’s ending net accrual for interest and penalties related to unrecognized tax benefits as of February 1, 2015 was $29 million and decreased to $1 million as of May 3, 2015. As a result of the approval and finalization of the Tentative Settlement, the tax years ending February 3, 2008 and February 1, 2009 are settled and closed to any further adjustments. At February 1, 2015 and May 3, 2015, the Company’s valuation allowance on its U.S. deferred tax assets was approximately $1,013 million and $943 million, respectively. Each reporting period we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Through fiscal 2013 the Company’s history of U.S. operating losses limited the weight we could apply to other subjective evidence such as the Company’s projections for future profitability. With the Company’s fiscal 2014 U.S. pretax income, long carryforward periods in its U.S. federal tax losses and similar carryforward periods in a significant portion of its state tax losses, and projected fiscal 2015 U.S. pretax income, we believe it is reasonably possible that sufficient positive evidence will exist during the next twelve months to release all or a significant portion of our valuation allowance on the Company’s U.S. deferred tax assets. See “Note 9, Commitments and Contingencies,” for discussion of the IRS audit of the Company’s U.S. federal income tax returns.

NOTE 5 — INCOME TAXES

For the three months ended May 3, 2015, the Company’s combined federal, state, and foreign effective tax rate for continuing operations is a 295% benefit. The benefit was mainly driven by a decrease of $189 million in the Company’s unrecognized U.S. federal and state tax benefits related to the February 19, 2015 approval and finalization of the Tentative Settlement (as defined in “Note 9, Commitment and Contingencies”) by the Joint Committee of Taxation. In addition, the Company’s rate was impacted by the utilization of deferred tax assets which had previously been subject to a valuation allowance, increasing the deferred tax liability for U.S. goodwill amortization for tax purposes, and the accrual of income taxes for foreign and certain state jurisdictions. 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.

An increase in U.S. pre-tax book income resulted in the utilization of net deferred tax assets including U.S. tax net operating losses that were subject to a valuation allowance. The overall decrease in the valuation allowance was partially offset by an increase 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. During the three months ended May 3, 2015, the impact of the tax amortization of the indefinite lived intangibles on tax expense was a $6 million increase.

As of February 1, 2015, the Company’s unrecognized tax benefits in accordance with the income taxes principles of GAAP (ASC 740, Income Taxes) were $187 million. During the three months ended May 3, 2015, the Company’s unrecognized tax benefits decreased by $178 million to $9 million primary driven by IRS and state audit settlements. During the three months ended May 3, 2015, the Company’s interest accrual related to unrecognized tax benefits decreased by $28 million. The Company’s ending net accrual for interest and penalties related to unrecognized tax benefits as of February 1, 2015 was $29 million and decreased to $1 million as of May 3, 2015. As a result of the approval and finalization of the Tentative Settlement, the tax years ending February 3, 2008 and February 1, 2009 are settled and closed to any further adjustments.

At February 1, 2015 and May 3, 2015, the Company’s valuation allowance on its U.S. deferred tax assets was approximately $1,013 million and $943 million, respectively. Each reporting period we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Through fiscal 2013 the Company’s history of U.S. operating losses limited the weight we could apply to other subjective evidence such as the Company’s projections for future profitability. With the Company’s fiscal 2014 U.S. pretax income, long carryforward periods in its U.S. federal tax losses and similar carryforward periods in a significant portion of its state tax losses, and projected fiscal 2015 U.S. pretax income, we believe it is reasonably possible that sufficient positive evidence will exist during the next twelve months to release all or a significant portion of our valuation allowance on the Company’s U.S. deferred tax assets.

See “Note 9, Commitments and Contingencies,” for discussion of the IRS audit of the Company’s U.S. federal income tax returns.