Income Taxes

9 Months Ended

Oct. 29, 2022

Income Taxes

Income Taxes

NOTE 12—INCOME TAXES

We recorded income tax expense of $36 million and $54 million in the three months ended October 29, 2022 and October 30, 2021, respectively. We recorded an income tax benefit of $71 million and income tax expense of $99 million in the nine months ended October 29, 2022 and October 30, 2021, respectively. The effective tax rate was 26.8% and 22.8% in the three months ended October 29, 2022 and October 30, 2021, respectively. The effective tax rate was (20.2)% and 15.5% in the nine months ended October 29, 2022 and October 30, 2021, respectively. The increase in our effective tax rate for the three months ended October 29, 2022 as compared to the three months ended October 30, 2021 is primarily attributable to significantly lower net excess tax benefits from stock-based compensation in the three months ended October 29, 2022. The decrease in our effective tax rate for the nine months ended October 29, 2022 as compared to the nine months ended October 30, 2021 is primarily attributable to significantly higher net excess tax benefits from stock-based compensation in the nine months ended October 29, 2022.

As of October 29, 2022, we had $8.2 million of unrecognized tax benefits, of which $7.6 million would reduce income tax expense and the effective tax rate, if recognized. The remaining unrecognized tax benefits would offset other deferred tax assets, if recognized. As of October 29, 2022, we had $5.5 million of exposures related to unrecognized tax benefits that are expected to decrease in the next 12 months.

Inflation Reduction Act

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income” and a one percent excise tax on net repurchases of stock after December 31, 2022. We are continuing to evaluate the Inflation Reduction Act and its requirements, including the application to our business.