INCOME TAXES

The components of Earnings from Continuing Operations before Provision for Income Taxes for fiscal 2011, 2010 and 2009 were as follows (amounts in millions):



	Fiscal Year Ended
	January 29, 2012		January 30, 2011		January 31, 2010
United States	$	5,508	$	4,854	$	3,586
Foreign	560		419		396
Total	$	6,068	$	5,273	$	3,982

The Provision for Income Taxes consisted of the following (amounts in millions):



	Fiscal Year Ended
	January 29, 2012		January 30, 2011		January 31, 2010
Current:
Federal	$	1,566	$	1,478	$	1,157
State	234		181		184
Foreign	150		151		195
	1,950		1,810		1,536
Deferred:
Federal	199		79		(121		)
State	35		21		(24		)
Foreign	1		25		(29		)
	235		125		(174		)
Total	$	2,185	$	1,935	$	1,362

The Company’s combined federal, state and foreign effective tax rates for fiscal 2011, 2010 and 2009 were approximately 36.0%, 36.7% and 34.2%, respectively.

The reconciliation of the Provision for Income Taxes at the federal statutory rate of 35% to the actual tax expense for the applicable fiscal years was as follows (amounts in millions):



	Fiscal Year Ended
	January 29, 2012			January 30, 2011			January 31, 2010
Income taxes at federal statutory rate	$	2,125		$	1,846		$	1,394
State income taxes, net of federal income tax benefit	175			131			104
Other, net	(115		)	(42		)	(136		)
Total	$	2,185		$	1,935		$	1,362

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of January 29, 2012 and January 30, 2011 were as follows (amounts in millions):



	January 29, 2012			January 30, 2011
Current:
Deferred Tax Assets:
Property and equipment	$	—		$	64
Accrued self-insurance liabilities	123			115
Other accrued liabilities	202			196
Deferred compensation	324			393
Current Deferred Tax Assets	649			768
Deferred Tax Liabilities:
Accelerated inventory deduction	(93		)	(106		)
Other	(105		)	(114		)
Current Deferred Tax Liabilities	(198		)	(220		)
Current Deferred Tax Assets, net	451			548
Noncurrent:
Deferred Tax Assets:
Accrued self-insurance liabilities	353			345
State income taxes	56			69
Capital loss carryover	101			141
Net operating losses	65			66
Foreign tax credit carryforward	—			30
Impairment of investment	120			120
Other	295			212
Valuation allowance	(19		)	(66		)
Noncurrent Deferred Tax Assets	971			917
Deferred Tax Liabilities:
Property and equipment	(1,192		)	(1,073		)
Goodwill and other intangibles	(94		)	(95		)
Noncurrent Deferred Tax Liabilities	(1,286		)	(1,168		)
Noncurrent Deferred Tax Liabilities, net	(315		)	(251		)
Net Deferred Tax Assets	$	136		$	297

Current deferred tax assets and current deferred tax liabilities are netted by tax jurisdiction and noncurrent deferred tax assets and noncurrent deferred tax liabilities are netted by tax jurisdiction, and are included in the accompanying Consolidated Balance Sheets as follows (amounts in millions):



	January 29, 2012			January 30, 2011
Other Current Assets	$	454		$	553
Other Assets	25			21
Other Accrued Expenses	(3		)	(5		)
Deferred Income Taxes	(340		)	(272		)
Net Deferred Tax Assets	$	136		$	297

The Company believes that the realization of the deferred tax assets is more likely than not, based upon the expectation that it will generate the necessary taxable income in future periods, and except for certain net operating losses discussed below, no valuation reserves have been provided.

At January 29, 2012, the Company had state and foreign net operating loss carryforwards available to reduce future taxable income, expiring at various dates from 2011 to 2028. Management has concluded that it is more likely than not that the tax benefits related to the state net operating losses will be realized. However, it is unlikely that the Company will be able to utilize certain foreign net operating losses. Therefore, a valuation allowance has been provided to reduce the deferred tax asset related to foreign net operating losses to an amount that is more likely than not to be realized. Total valuation allowances related to net operating losses at January 29, 2012 and January 30, 2011 were $19 million and $21 million, respectively.

As of January 30, 2011, the Company had a valuation allowance of $45 million related to capital loss carryforwards. During the fiscal year ended January 29, 2012, the Company was able to utilize a portion of its capital loss carryforward. This utilization combined with other available tax planning strategies enabled the Company to release the $45 million valuation allowance associated with the capital loss carryforward.

The Company had no foreign tax credit carryforwards as of January 29, 2012 and $30 million as of January 30, 2011. During the fiscal year ended January 29, 2012, the Company generated sufficient foreign source income to fully utilize the foreign tax credit carryforward from the prior year.

The Company has not provided for deferred income taxes on approximately $2.4 billion of undistributed earnings of international subsidiaries because of its intention to indefinitely reinvest these earnings outside the U.S. The determination of the amount of the unrecognized deferred income tax liability related to the undistributed earnings is not practicable; however, unrecognized foreign income tax credits would be available to reduce a portion of this liability.

The Company’s income tax returns are routinely examined by domestic and foreign tax authorities. The Company’s U.S. federal and Canadian tax returns for fiscal years 2005 through 2009 are currently under audit by the Internal Revenue Service. The Company's Canadian operations are currently under audit by the Canada Revenue Agency for fiscal years 2005 to 2007. There are also ongoing U.S. state and local and other foreign audits covering tax years 2003 to 2010. At this time, the Company does not expect the results from any income tax audit to have a material impact on the Company’s financial statements.

The Company believes that certain adjustments under examination by the IRS and in certain states will be agreed upon within the next twelve months. The Company has classified approximately $97 million of the reserve for unrecognized tax benefits as a short-term liability in the accompanying Consolidated Balance Sheets. Final settlement of these audit issues may result in payments that are more or less than these amounts, but the Company does not anticipate the resolution of these matters will result in a material change to its consolidated financial position or results of operations.

Reconciliations of the beginning and ending amount of gross unrecognized tax benefits for fiscal 2011, 2010 and 2009 were as follows (amounts in millions):



	January 29, 2012			January 30, 2011			January 31, 2010
Unrecognized tax benefits balance at beginning of fiscal year	$	662		$	659		$	695
Additions based on tax positions related to the current year	37			174			55
Additions for tax positions of prior years	56			84			33
Reductions for tax positions of prior years	(123		)	(181		)	(28		)
Reductions due to settlements	(4		)	(65		)	(94		)
Reductions due to lapse of statute of limitations	(7		)	(9		)	(2		)
Unrecognized tax benefits balance at end of fiscal year	$	621		$	662		$	659

The amount of unrecognized tax benefits that if recognized would affect the annual effective income tax rate on Earnings from Continuing Operations was $246 million, $298 million and $386 million as of January 29, 2012, January 30, 2011 and January 31, 2010, respectively.

Net adjustments to accruals for interest and penalties associated with uncertain tax positions provided income of $2 million and $32 million in fiscal 2011 and 2010, respectively, and expense of $41 million in fiscal 2009. Total accrued interest and penalties as of January 29, 2012 and January 30, 2011 were $80 million and $84 million, respectively. Interest and penalties are included in Interest Expense and SG&A, respectively, in the accompanying Consolidated Statements of Earnings.