v3.23.1
Income Taxes
 12 Months Ended
Jan. 29, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company's domestic and foreign income before income tax expense and current and deferred income taxes from federal, state, and foreign sources are as follows: 
202220212020
(In thousands)
Income (loss) before income tax expense
Domestic
$(98,764)$204,350 $122,573 
Foreign
1,431,335 1,129,519 696,777 
$1,332,571 $1,333,869 $819,350 
Current income tax expense
Federal
$34,752 $25,701 $70 
State
33,369 17,608 10,439 
Foreign
400,250 322,105 185,803 
$468,371 $365,414 $196,312 
Deferred income tax expense (recovery)
Federal
$8,932 $5,858 $19,754 
State
2,363 1,045 5,923 
Foreign
(1,895)(13,770)8,448 
$9,400 $(6,867)$34,125 
Income tax expense
$477,771 $358,547 $230,437 
The Company's income tax expense for 2022, 2021, and 2020 include certain discrete tax amounts, as follows:
202220212020
(In thousands)
Impairment of goodwill and other assets$(28,171)$— $— 
Gain on disposal of assets1,661 — — 
Acquisition-related expenses— (1,417)(3,133)
Total tax adjustments$(26,510)$(1,417)$(3,133)
Please refer to Note 5. Property and Equipment, Note 8. Impairment of Goodwill and Other Assets, and Note 9. Acquisition-Related Expenses for further information.
The U.S. tax reforms enacted in December 2017 required the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% on cash and cash equivalents and 8% on the remaining earnings, net of foreign tax credits. The one-time transition tax is payable over eight years.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for tax years beginning after December 31, 2022. It also assesses a 1% excise tax on repurchases of corporate stock. While this is not expected to have a material adverse effect on the Company's results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.
As of January 29, 2023, the Company's net investment in its Canadian subsidiaries was $2.4 billion, of which $1.3 billion was determined to be indefinitely reinvested. A deferred income tax liability of $20.2 million has been recognized in relation to the portion of the Company's net investment in its Canadian subsidiaries that is not indefinitely reinvested, representing the Canadian withholding taxes and U.S. state income taxes which would be due upon repatriation. This deferred tax liability has been recorded on the basis that the Company would choose to make the repatriation transactions in the most tax efficient manner. Specifically, to the extent that the Canadian subsidiaries have sufficient paid-up-capital, any such distributions would be structured as a return of capital, and therefore not subject to Canadian withholding tax. The unrecognized deferred tax liability on the indefinitely reinvested amount is approximately $72.2 million. No deferred income tax liabilities have been recognized on any of the undistributed earnings of the Company's other foreign subsidiaries as these earnings are permanently reinvested outside of the United States. Excluding its Canadian subsidiaries, cumulative undistributed earnings of the Company's foreign subsidiaries as of January 29, 2023 were $323.0 million.
As of January 29, 2023, the Company had cash and cash equivalents of $470.6 million outside of the United States.
A summary reconciliation of the effective tax rate is as follows:
202220212020
(Percentages)
Federal income tax at statutory rate21.0 %21.0 %21.0 %
Foreign tax rate differentials6.8 5.0 4.6 
U.S. state taxes(0.4)0.8 0.8 
Non-deductible compensation expense0.7 0.7 2.1 
Excess tax benefits from stock-based compensation(0.5)(0.9)(0.8)
Impairment of goodwill and other assets and gain on disposal of assets7.8 — — 
Permanent and other0.5 0.3 0.4 
Effective tax rate35.9 %26.9 %28.1 %
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities as of January 29, 2023 and January 30, 2022 are presented below: 
January 29, 2023January 30, 2022
(In thousands)
Deferred income tax assets:
Net operating loss carryforwards$2,312 $6,686 
Inventories43,471 16,326 
Intangible assets, net778 873 
Non-current lease liabilities216,495 173,700 
Stock-based compensation16,093 10,739 
Accrued bonuses13,647 7,830 
Unredeemed gift card liability12,877 9,804 
Foreign tax credits1,909 2,003 
Other6,958 10,116 
Deferred income tax assets$314,540 238,077 
Valuation allowance(743)(2,804)
Deferred income tax assets, net of valuation allowance$313,797 $235,273 
Deferred income tax liabilities:
Property and equipment, net$(142,516)$(104,498)
Intangible assets, net(5,224)(17,669)
Right-of-use lease assets(192,221)(154,634)
Other(22,518)(5,733)
Deferred income tax liabilities(362,479)(282,534)
Net deferred income tax liabilities$(48,682)$(47,261)
Balance sheet classification:
Deferred income tax assets$6,402 $6,091 
Deferred income tax liabilities(55,084)(53,352)
Net deferred income tax liabilities$(48,682)$(47,261)
As of January 29, 2023, the Company had net operating loss carryforwards of $8.2 million. The majority of the net operating loss carryforwards expire, if unused, between fiscal 2030 and fiscal 2040.
There was a $2.1 million net decrease in the valuation allowance in 2022, compared to a $3.7 million net decrease in 2021, and a $0.8 million net increase in 2020.
The Company files income tax returns in the U.S., Canada, and various foreign, state, and provincial jurisdictions. The 2017 to 2020 tax years remain subject to examination by the U.S. federal and state tax authorities. The 2013 tax year is still open for certain state tax authorities. The 2016 to 2021 tax years remain subject to examination by Canadian tax authorities. The 2016 to 2021 tax years remain subject to examination by tax authorities in certain foreign jurisdictions. The Company does not have any significant unrecognized tax benefits arising from uncertain tax positions taken, or expected to be taken, in the Company's tax returns.