10-K – 2026-03-12 – R18.htm

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Income Taxes

12 Months Ended

Jan. 31, 2026

Income Tax Disclosure [Abstract]
 

Income Taxes
Income Taxes Current income tax expense represents the amounts expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.
The following table provides the components of the Company’s Income Before Income Taxes for 2025, 2024 and 2023:

2025 2024 2023
(in millions)
U.S. $ 817  $ 962  $ 937 
Non-U.S. 65  66  84 
Income Before Income Taxes $ 882  $ 1,028  $ 1,021 

The following table provides the components of the Company’s Provision for Income Taxes for 2025, 2024 and 2023:

2025 2024 2023
  (in millions)
Current:
U.S. Federal $ 127  $ 281  $ 214 
U.S. State 35  54  49 
Non-U.S. 8  8  7 
Total 170  343  270 
Deferred:
U.S. Federal 41  (121) (19)
U.S. State 2  (6) (2)
Non-U.S. 20  14  (106)
Total 63  (113) (127)
Provision for Income Taxes $ 233  $ 230  $ 143 

The following table provides the reconciliation between the statutory federal income tax rate and the effective tax rate for 2025:

2025
(in millions) %
Provision for Income Taxes at U.S. Federal Statutory Tax Rate $ 185  21.0 %
State and Local Income Taxes, Net of Federal Income Tax Effect (a) 34  3.8 %
Foreign Tax Effects 14  1.6 %
Effect of Cross-Border Tax Laws (3) (0.3 %)
Tax Credits (3) (0.3 %)
Changes in Valuation Allowances 1  0.1 %
Nontaxable or Nondeductible Items 5  0.5 %
Changes in Unrecognized Tax Benefits —  — %
Effective Tax Rate $ 233  26.4 %
 ________________
(a) State and local taxes in California, New York, Illinois, New Jersey, Tennessee, Florida, and Pennsylvania contributed to the majority of the tax effect in this category.
The following table provides the reconciliation between the statutory federal income tax rate and the effective tax rate for 2024 and 2023:

2024 2023
Federal Income Tax Rate 21.0 % 21.0 %
State Income Taxes, Net of Federal Income Tax Effect 4.4 % 4.0 %
Impact of Non-U.S. Operations 0.9 % 0.2 %
Change in Valuation Allowance (4.2 %) (11.0 %)
Share-based Compensation — % 0.1 %
Uncertain Tax Positions 0.3 % — %
Other Items, Net — % (0.4 %)
Effective Tax Rate 22.4 % 13.9 %

Deferred Taxes
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.
The following table provides the effect of temporary differences that cause deferred income taxes as of January 31, 2026 and February 1, 2025:

  January 31, 2026 February 1, 2025
Assets Liabilities Total Assets Liabilities Total
(in millions)
Loss Carryforwards $ 338  $ —  $ 338  $ 367  $ —  $ 367 
Leases 248  (236) 12  260  (247) 13 
Capitalized Research and Development —  —  —  37  —  37 
Share-based Compensation 8  —  8  8  —  8 
Property and Equipment 10  (130) (120) 7  (122) (115)
Trade Names —  (38) (38) —  (38) (38)
Other, Net 62  (12) 50  55  (11) 44 
Valuation Allowance (203) —  (203) (210) —  (210)
Total Deferred Income Taxes $ 463  $ (416) $ 47  $ 524  $ (418) $ 106 

As of January 31, 2026, the Company had loss carryforwards of $338 million, of which $237 million had an indefinite carryforward. The remainder of the U.S. and non-U.S. carryforwards, if unused, will expire at various dates from 2026 through 2040 and 2033 through 2041, re spectively. 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.
The following table provides the components of the Company's income tax payments (net of refunds received) for 2025, 2024 and 2023:

2025 2024 2023
(in millions)
U.S. Federal $ 177  $ 294  $ 181 
U.S. State 36  50  45 
Non-U.S. 10  7  5 
Income Tax Payments $ 223  $ 351  $ 231 

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 2025, 2024 and 2023, without interest and penalties:

2025 2024 2023
(in millions)
Gross Unrecognized Tax Benefits, as of the Beginning of the Fiscal Year $ 149  $ 145  $ 149 
Increases to Unrecognized Tax Benefits for Prior Years —  1  1 
Decreases to Unrecognized Tax Benefits for Prior Years —  (3) (7)
Increases to Unrecognized Tax Benefits as a Result of Current Year Activity 4  12  5 
Decreases to Unrecognized Tax Benefits Relating to Settlements with Taxing Authorities (14) —  (1)
Decreases to Unrecognized Tax Benefits as a Result of a Lapse of the Applicable Statute of Limitations (8) (6) (2)
Gross Unrecognized Tax Benefits, as of the End of the Fiscal Year $ 131  $ 149  $ 145 

Of the total gross unrecognized tax benefits, approximately $75 million, $91 million and $131 million, at January 31, 2026, February 1, 2025, and February 3, 2024, 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.
The Company recognizes interest and penalties related to unrecognized tax benefits as components of income tax expense. The Company recognized an income tax expense from interest and penalties of approximately $6 million for 2025, $11 million for 2024 and $9 million for 2023. The Company had accrued $36 million and $30 million for the payment of interest and penalties as of January 31, 2026 and February 1, 2025, respectively. Accrued interest and penalties are included within Other Long-term Liabilities on the Consolidated Balance Sheets.
The Company files U.S. federal income tax returns as well as income tax returns in various states and in non-U.S. jurisdictions. The Company is a participant in the Compliance Assurance Process, which is a program made available by the Internal Revenue Service (“IRS”) to certain qualifying large taxpayers, under which participants work collaboratively with the IRS to identify and resolve potential tax issues through open, cooperative and transparent interaction prior to the annual filing of their federal income tax returns. The IRS is currently examining the Company’s 2020 to 2025 consolidated U.S. federal income tax returns.
The Company is also subject to various state and local income tax examinations for the years 2018 to 2024. Finally, the Company is subject to multiple non-U.S. tax jurisdiction examinations for the years 2021 to 2023. 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.

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