Income Taxes (Tables)

12 Months Ended

Feb. 03, 2018

Deferred income taxes consist of the following:

Components of the provision for income tax

The components of the provision for income taxes were as follows:

(Dollars in Millions)	2017			2016		2015
Current federal	$	299		$	272	$	397
Current state		26			25		34
Deferred federal		(86	)		16		(35	)
Deferred state		19			6		(12	)
Provision for income taxes	$	258		$	319	$	384

Items affecting statutory corporate tax rate

On December 22, 2017, H.R. 1, originally the Tax Cuts & Jobs Act (“the Act”), was signed into law making significant changes to the Internal Revenue Code. Changes include a corporate rate decrease from 35% to 21%, effective January 1, 2018, as well as a variety of other changes including the acceleration of expensing of certain business assets and reductions in the amount of executive pay that could qualify as a tax deduction.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act. For matters that have not been completed, provisional amounts are recorded to the extent they can be reasonably estimated.

We have calculated our best estimate of the impact of the Act in our year end income tax provision in accordance with our understanding of the Act and guidance available as of the date of this filing. For 2017, the reduction in the tax rate is prorated, resulting in a current year statutory federal tax rate of 33.7%. The provisional amount related to the current year federal tax rate reduction and the re-measurement of our deferred tax assets and liabilities is recorded as a total tax benefit of $136 million. This estimate may be impacted as we further analyze available tax accounting methods and elections, state tax conformity to the federal tax changes and guidance issued by regulatory bodies that provide interpretive guidance of the Act.

The effective tax rate differs from the amount that would be provided by applying the statutory U.S. corporate tax rate due to the following items:

	2017			2016			2015
Federal statutory rate		33.7	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		1.0			2.4			2.1
Re-measurement of deferred tax assets and liabilities		(10.9	)		—			—
Other federal tax credits		(0.7	)		(0.9	)		(0.8	)
Effective tax rate		23.1	%		36.5	%		36.3	%

Reconciliation of gross amount of unrecognized tax benefits

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:

(Dollars in Millions)	2017			2016
Balance at beginning of year	$	149		$	139
Increases due to:
Tax positions taken in prior years		—			3
Tax positions taken in current year		18			15
Decreases due to:
Tax positions taken in prior years		(13	)		—
Settlements with taxing authorities		(16	)		(6	)
Lapse of applicable statute of limitations		(3	)		(2	)
Balance at end of year	$	135		$	149