Taxes on Earnings

12 Months Ended

Jan. 29, 2022

Income Tax Disclosure [Abstract]

Taxes on Earnings

Taxes on Earnings

The provision for income taxes consisted of the following:

($000)	2021		2020		2019
Current
Federal	$	442,152	$	44,164	$	414,823
State	78,024		4,563		56,528
	520,176		48,727		471,351
Deferred
Federal	21,103		(27,487)		28,244
State	(5,328)		(325)		3,765
	15,775		(27,812)		32,009
Total	$	535,951	$	20,915	$	503,360

The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory federal income tax rate. The differences are reconciled below:

	2021		2020		2019
Federal income taxes at the statutory rate	21.0	%	21.0	%	21.0	%
State income taxes (net of federal benefit)	3.2	%	4.1	%	3.2	%
Hiring tax credits	(0.5)	%	(5.4)	%	(0.4)	%
Tax audit settlements	—	%	—	%	(0.5)	%
Total	23.7	%	19.7	%	23.3	%
Certain items in the prior years have been reclassified to conform to current year’s presentation.

In fiscal 2019, the Company resolved uncertain tax positions with a state tax authority. As a result, the Company recognized a tax benefit of approximately $10.0 million in the Consolidated Statement of Earnings.

The components of deferred taxes at January 29, 2022 and January 30, 2021 are as follows:

($000)	2021		2020
Deferred Tax Assets
Accrued liabilities	$	34,211	$	30,415
Deferred compensation	38,685		34,545
Stock-based compensation	45,840		39,302
State taxes and credits	18,501		10,926
Employee benefits	28,430		37,779
Operating lease liabilities	801,186		829,946
Other	9,632		6,239
Gross Deferred Tax Assets	976,485		989,152
Less: Valuation allowance	(1,931)		(4,089)
Deferred Tax Assets	974,554		985,063
Deferred Tax Liabilities
Depreciation	(293,065)		(285,161)
Merchandise inventory	(27,699)		(25,434)
Supplies	(12,280)		(11,589)
Operating lease assets	(764,557)		(775,183)
Other	(14,595)		(9,563)
Deferred Tax Liabilities	(1,112,196)		(1,106,930)
Net Deferred Tax Liabilities	$	(137,642)	$	(121,867)

At the end of fiscal 2021 and 2020, the Company’s state tax credit carryforwards for income tax purposes were approximately $12.0 million and $13.7 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2022. The Company has provided a valuation allowance of $1.9 million as of the end of fiscal 2021 for deferred tax assets related to state tax credits that are not expected to be realized.

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2021, 2020, and 2019 are as follows:

($000)	2021		2020		2019
Unrecognized tax benefits - beginning of year	$	60,240	$	59,887	$	65,787
Gross increases:
Tax positions in current period	10,381		12,310		13,864
Tax positions in prior period	1,494		2,860		2,672
Gross decreases:
Tax positions in prior periods	(1,795)		(2,624)		(9,559)
Lapse of statutes of limitations	(9,757)		(9,861)		(8,653)
Settlements	(16)		(2,332)		(4,224)
Unrecognized tax benefits - end of year	$	60,547	$	60,240	$	59,887

At the end of fiscal 2021, 2020, and 2019, the reserves for unrecognized tax benefits were $68.1 million, $67.9 million, and $67.1 million inclusive of $7.6 million, $7.7 million, and $7.2 million of related reserves for interest and penalties, respectively. In fiscal 2019, the Company resolved uncertain tax positions with a state 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, $54.6 million would impact the Company’s effective tax rate. 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 tax assets and liabilities. These amounts are net of federal and state income taxes.

It is reasonably possible that certain federal and state tax matters may be concluded or statutes of limitations may lapse during the next twelve months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to $10.1 million.

The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2018 through 2021. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2017 through 2021. 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 consolidated financial statements.