Macy's 2008 Annual Report Download - page 78

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other in the foregoing Accounts Payable and Accrued Liabilities table, at January 31, 2009, included $25
million for the settlement of a wage and hour class action in California, which was paid in February 2009.
13. Taxes
Income tax expense is as follows:
2008 2007 2006
Current Deferred Total Current Deferred Total Current Deferred Total
(millions)
Federal .................. $ 6 $(123) $(117) $370 $(10) $360 $429 $(23) $406
State and local ............ 8 (26) (18) 53 (2) 51 65 (13) 52
$14 $(149) $(135) $423 $(12) $411 $494 $(36) $458
The income tax expense reported differs from the expected tax computed by applying the federal income tax
statutory rate of 35% for 2008, 2007 and 2006 to income (loss) from continuing operations before income taxes.
The reasons for this difference and their tax effects are as follows:
2008 2007 2006
(millions)
Expected tax ........................................................... $(1,728) $462 $506
State and local income taxes, net of federal income tax benefit .................... (12) 36 35
Settlement of federal tax examinations ....................................... – (78) (80)
Non-deductibility of goodwill impairment charges ............................. 1,611 – –
Other ................................................................. (6) (9) (3)
$ (135) $411 $458
During the fourth quarter of 2007, the Company settled an Internal Revenue Service (“IRS”) examination
for fiscal years 2003, 2004 and 2005. As a result of the settlement, the Company recognized previously
unrecognized tax benefits and related accrued interest totaling $78 million, primarily attributable to losses related
to the disposition of a former subsidiary.
On May 24, 2006, the Company received a refund of $155 million from the IRS as a result of settling an
IRS examination for fiscal years 2000, 2001 and 2002. The refund was also primarily attributable to losses
related to the disposition of a former subsidiary. As a result of the settlement, the Company recognized a tax
benefit of approximately $80 million and approximately $17 million of interest income in 2006, including the
reversal of $6 million of accrued interest.
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