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Taxes on Earnings (Loss)
6 Months Ended
Aug. 01, 2020
Income Tax Disclosure [Abstract]  
Taxes on Earnings (Loss) Taxes on Earnings (Loss)
On March 27, 2020, the CARES Act was signed into law. The CARES Act made several significant changes to business tax provisions including modifications for net operating losses, employee retention credits, and deferral of employer payroll tax payments. The modifications for net operating losses eliminate the taxable income limitation for certain net operating losses and allow the carry back of net operating losses arising in 2018, 2019, and 2020 to the five prior tax years.

The Company's effective tax rates for the three month periods ended August 1, 2020 and August 3, 2019, were approximately 61% and 25%, respectively. The increase in the effective tax rate of 36% for the three month period ended August 1, 2020 compared to the three month period ended August 3, 2019 was primarily due to fluctuations in pre-tax earnings, partially offset by a revaluation of deferred taxes related to the CARES Act. The Company's effective tax rates for the six month periods ended August 1, 2020 and August 3, 2019, were approximately 31% and 24%, respectively. The increase in the effective tax rate of 7% for the six month period ended August 1, 2020 compared to the six month period ended August 3, 2019 was primarily due to a pre-tax loss in the current period. The effective tax rate is impacted by changes in tax law and accounting guidance, location of new stores, level of earnings, tax effects associated with share-based compensation, and the resolution of tax positions.

As of August 1, 2020, February 1, 2020, and August 3, 2019, the reserves for unrecognized tax benefits were $71.6 million, $67.1 million, and $88.4 million, inclusive of $8.5 million, $7.2 million, and $14.9 million of related interest and penalties, respectively. In November 2019, the Company resolved uncertain tax positions with a tax authority. As a result, the Company recognized a decrease in reserves for tax positions in prior periods of $16.2 million, inclusive of $6.6 million of related reserves for interest and penalties. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $56.8 million would impact the Company’s effective tax rate. It is reasonably possible that certain state tax matters may be concluded or statutes of limitations may lapse during the next 12 months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to $9.8 million. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These amounts are net of federal and state income taxes.
The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2016 through 2019. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2015 through 2019. Certain state tax returns are currently under audit by various tax authorities. The Company does not expect the results of these audits to have a material impact on the condensed consolidated financial statements.