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Income Taxes
 12 Months Ended
Feb. 03, 2024
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 for Income Taxes for 2023, 2022 and 2021:
202320222021
 (in millions)
Current:
U.S. Federal$19 $67 $129 
U.S. State10 22 44 
Non-U.S.18 18 23 
Total47 107 196 
Deferred:
U.S. Federal(14)(20)6 
U.S. State(2)(4)(4)
Non-U.S.— (4)(1)
Total(16)(28)1 
Provision for Income Taxes$31 $79 $197 
The non-U.S. component of pre-tax income, arising principally from overseas operations, was income of $112 million, $92 million and $92 million for 2023, 2022 and 2021, respectively.
The following table provides the reconciliation between the statutory federal income tax rate and the effective tax rate for 2023, 2022 and 2021:
202320222021
Federal Income Tax Rate21.0 %21.0 %21.0 %
State Income Taxes, Net of Federal Income Tax Effect3.1 %3.9 %4.3 %
Foreign Rate Differential(9.1 %)(3.4 %)(1.8 %)
Impact of Non-U.S. Operations1.4 %1.8 %0.9 %
Share-based Compensation 1.1 %(4.6 %)(1.2 %)
Uncertain Tax Positions0.7 %0.2 %(0.2 %)
Change in Valuation Allowance(0.9 %)(0.1 %)— %
U.S. Permanent Items1.7 %0.3 %0.1 %
Adore Me Contingent Compensation3.3 %— %— %
Restructuring of Foreign Investments— %— %0.2 %
Other Items, Net(0.9 %)(0.1 %)— %
Effective Tax Rate21.4 %19.0 %23.3 %
Deferred Taxes
The following table provides the effect of temporary differences that cause deferred income taxes as of February 3, 2024 and January 28, 2023. 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.
 February 3, 2024January 28, 2023
AssetsLiabilitiesTotalAssetsLiabilitiesTotal
(in millions)
Loss Carryforwards$130 $— $130 $133 $— $133 
Leases359 (319)40 354 (309)45 
Deferred Revenue51 — 51 43 — 43 
Accrued Expenses35 — 35 39 — 39 
Share-based Compensation12 — 12 12 — 12 
Trade Name and Other Intangibles— (97)(97)— (100)(100)
Property and Equipment— (57)(57)— (58)(58)
Other26 (11)15 15 (11)4 
Valuation Allowance(146)— (146)(153)— (153)
Total Deferred Income Taxes$467 $(484)$(17)$443 $(478)$(35)
As of February 3, 2024, the Company had loss carryforwards of $130 million, of which $34 million has an indefinite carryforward. The remainder of the non-U.S. carryforwards, if unused, will expire at various dates from 2024 through 2040. 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 $74 million for 2023, $161 million for 2022 and $56 million for 2021.
Uncertain Tax Positions
The following table summarizes the activity related to the Company’s unrecognized tax benefits for U.S. federal, state and non-U.S. tax jurisdictions for 2023, 2022 and 2021, without interest and penalties:
202320222021
(in millions)
Gross Unrecognized Tax Benefits, as of the Beginning of the Fiscal Year$31 $10 $126 
Decreases to Unrecognized Tax Benefits Transferred to Former Parent— — (126)
Increases to Unrecognized Tax Benefits as a Result of Current Year Activity9 10 10 
Increases to Unrecognized Tax Benefits for Prior Years, Including Acquisitions13 11 — 
Decreases to Unrecognized Tax Benefits for Prior Years(15)— — 
Gross Unrecognized Tax Benefits, as of the End of the Fiscal Year$38 $31 $10 
Of the total gross unrecognized tax benefits, approximately $35 million, $20 million and $9 million at February 3, 2024, January 28, 2023, and January 29, 2022, 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 $27 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 $2 million in 2023, $1 million in 2022, and did not recognize expense in 2021. The Company has accrued approximately $3 million for the payment of interest and penalties as of February 3, 2024, and $1 million as of January 28, 2023. Accrued interest and penalties are included within Other Long-term Liabilities on the Consolidated Balance Sheets.
The Company files income tax returns with the U.S. and various state, local, and non-U.S. jurisdictions. The Company participates in the Compliance Assurance Process (“CAP”) of the Internal Revenue Service. As part of CAP, tax years are examined on a contemporaneous basis. The Company is no longer subject to U.S. federal examination for years prior to fiscal year 2020. The Company is currently under examination, or may be subject to examination, by various state, local, and non-U.S. tax jurisdictions for fiscal year 2015 through 2022. The Company is no longer subject to 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 2015. 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 is 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 $22 million, including measurement period adjustments, 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 is 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.