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Income Taxes
 12 Months Ended
Jan. 28, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Prior to the Separation, the Company's U.S. operations and certain of its non-U.S. operations were historically included in the income tax returns of the Former Parent or its subsidiaries that may not be part of the Company. For the periods prior to the Separation, the income tax expense (benefit) and all tax liabilities that are presented in these financial statements were calculated on a “carve-out” basis, which applied the accounting guidance as if we filed income tax returns for the Company on a standalone, separate return basis. The Company believes the assumptions supporting its allocation and presentation of income taxes on a separate return basis are reasonable. However, the Company's tax results, as presented in these financial statements for periods prior to the Separation, may not be reflective of the results that the Company expects to generate in the future.
Post-Separation, the Company files a consolidated U.S. federal income tax return as well as separate and combined income tax returns in numerous state, local and international jurisdictions. Income tax expense (benefit) for the period prior to the Separation is based on the combined financial statements prepared on a “carve-out” basis. Income tax expense (benefit) for the period after the Separation is based on the consolidated results of the Company on a standalone basis.
The following table provides the components of the Company’s Provision (Benefit) for Income Taxes for 2022, 2021 and 2020:
202220212020
 (in millions)
Current:
U.S. Federal$67 $129 $7 
U.S. State22 44 16 
Non-U.S.18 23 7 
Total107 196 30 
Deferred:
U.S. Federal(20)6 (68)
U.S. State(4)(4)(14)
Non-U.S.(4)(1)18 
Total(28)1 (64)
Provision (Benefit) for Income Taxes$79 $197 $(34)
The non-U.S. component of pre-tax income, arising principally from overseas operations, was income of $92 million, $92 million and $11 million for 2022, 2021 and 2020, respectively.
The following table provides the reconciliation between the statutory federal income tax rate and the effective tax rate for 2022, 2021 and 2020:
202220212020
Federal Income Tax Rate21.0 %21.0 %21.0 %
State Income Taxes, Net of Federal Income Tax Effect3.9 %4.3 %(5.8 %)
Impact of Non-U.S. Operations(1.6 %)(0.9 %)(16.6 %)
Share-based Compensation (4.6 %)(1.2 %)(4.0 %)
Uncertain Tax Positions0.2 %(0.2 %)19.3 %
Change in Valuation Allowance(0.1 %)— %(2.6 %)
Restructuring of Foreign Investments— %0.2 %23.3 %
U.S. Permanent Items0.3 %0.1 %(2.8 %)
Other Items, Net(0.1 %)— %0.1 %
Effective Tax Rate19.0 %23.3 %31.9 %
Deferred Taxes
The following table provides the effect of temporary differences that cause deferred income taxes as of January 28, 2023 and January 29, 2022. Deferred tax assets and liabilities represent the future effects on income taxes resulting from temporary differences and carryforwards at the end of the respective year.
 January 28, 2023January 29, 2022
AssetsLiabilitiesTotalAssetsLiabilitiesTotal
(in millions)
Loss Carryforwards$133 $— $133 $118 $— $118 
Leases354 (309)45 371 (322)49 
Share-based Compensation12 — 12 11 — 11 
Deferred Revenue43 — 43 42 — 42 
Property and Equipment— (58)(58)— (79)(79)
Trade Name and Other Intangibles— (100)(100)— (57)(57)
Other54 (11)43 34 (11)23 
Valuation Allowance(153)— (153)(148)— (148)
Total Deferred Income Taxes$443 $(478)$(35)$428 $(469)$(41)
As of January 28, 2023, the Company had loss carryforwards of $133 million, of which $37 million has an indefinite carryforward. The remainder of the non-U.S. carryforwards, if unused, will expire at various dates from 2023 through 2039. For certain jurisdictions where the Company has determined that it is more likely than not that the loss carryforwards will not be realized, a valuation allowance has been provided on those loss carryforwards as well as other net deferred tax assets.
Income tax payments were $161 million for 2022, $56 million for 2021 and $59 million for 2020.
Uncertain Tax Positions
The following table summarizes the activity related to the Company’s unrecognized tax benefits for U.S. federal, state & non-U.S. tax jurisdictions for 2022, 2021 and 2020, without interest and penalties:
202220212020
(in millions)
Gross Unrecognized Tax Benefits, as of the Beginning of the Fiscal Year$10 $126 $41 
Decreases to Unrecognized Tax Benefits Transferred to Former Parent— (126)— 
Increases to Unrecognized Tax Benefits as a Result of Current Year Activity10 10 105 
Increases to Unrecognized Tax Benefits for Prior Years, Including Acquisitions11 — — 
Decreases to Unrecognized Tax Benefits for Prior Years— — (16)
Decreases to Unrecognized Tax Benefits Relating to Settlements with Taxing Authorities— — — 
Decreases to Unrecognized Tax Benefits due to Lapse of Statute of Limitations— — (4)
Gross Unrecognized Tax Benefits, as of the End of the Fiscal Year$31 $10 $126 
Of the total gross unrecognized tax benefits, approximately $20 million, $9 million and $121 million, at January 28, 2023, January 29, 2022, and January 30, 2021, respectively, represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. These amounts are net of the offsetting tax effects from other tax jurisdictions.
Of the total unrecognized tax benefits, it is reasonably possible that $9 million could change in the next 12 months due to audit settlement, expiration of statute of limitations or other resolution of uncertainties. Due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of audits may result in amounts which could be different from this estimate. In such case, the Company will record additional tax expense or tax benefit in the period in which such matters are effectively settled.
The Company recognizes interest and penalties related to unrecognized tax benefits as components of income tax expense. The Company recognized interest and penalties expense of $1 million in 2022, did not recognize expense in 2021, and recognized a benefit from interest and penalties of $2 million in 2020. The Company has accrued approximately $1 million for the payment of interest and penalties as of January 28, 2023. The Company did not have an accrual for the payment of interest and penalties as of January 29, 2022. Accrued interest and penalties are included within Other Long-term Liabilities on the Consolidated Balance Sheets.
The Company files U.S. federal income tax returns as well as income tax returns in various states and in non-U.S. jurisdictions. The Company is currently under examination, or may be subject to examination, by various U.S. federal, state, local and non-U.S. tax jurisdictions for fiscal year 2016 through 2021. The Company is no longer subject to U.S. federal examination for years prior to fiscal year 2019, state and local examinations for years prior to fiscal year 2017, or examinations in any material non-U.S. jurisdictions for years prior to fiscal year 2016. In some situations, the Company determines that it does not have a filing requirement in a particular tax jurisdiction. Where no return has been filed, no statute of limitations applies. Accordingly, if a tax jurisdiction reaches a conclusion that a filing requirement does exist, additional years may be reviewed by the tax authority. The Company believes it has appropriately accounted for uncertainties related to this issue.
On December 30, 2022, the Company acquired Adore Me. Pursuant to the Merger Agreement, the Company will be responsible for all U.S. federal, state, local and non-U.S. income taxes for any taxable period, or portion of such period, ending on or before the date of acquisition. Approximately $10 million in gross unrecognized tax benefits were established through acquisition accounting attributable to this acquisition.
On August 2, 2021, the Company and the Former Parent entered into a Tax Matters Agreement. Under the agreement, the Former Parent will generally be responsible for all U.S. federal, state, local and non-U.S. income taxes of the Company for any taxable period, or portion of such period, ending on or before the Separation. Accordingly, the net liabilities associated with uncertain tax positions that were presented in the financial statements in prior periods on a carve-out basis were not transferred to the Company as part of the Separation.