Macy's 2013 Annual Report Download - page 70

Table of Contents

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:







Balance, beginning of year $170
$179
$ 205
Additions based on tax positions related to the current year 37
18
23
Additions for tax positions of prior years —
18
—
Reductions for tax positions of prior years (1)
(19)
(21)
Settlements (1)
(9)
(15)
Statute expirations (16)
(17)
(13)
Balance, end of year $189
$170
$179
Amounts recognized in the Consolidated Balance Sheets at
February 1, 2014, February 2, 2013 and January 28, 2012
Current income taxes $31
$20
$ 18
Long-term deferred income taxes 11
23
27
Other liabilities 147
127
134
$189
$170
$179
As of February 1, 2014 and February 2, 2013, the amount of unrecognized tax benefits, net of deferred tax assets, that, if recognized would affect the
effective income tax rate, was $123 million and $111 million, respectively.
The Company classifies unrecognized tax benefits not expected to be settled within one year as other liabilities on the Consolidated Balance Sheets.
The Company classifies federal, state and local interest and penalties not expected to be settled within one year as other liabilities on the Consolidated
Balance Sheets and follows a policy of recognizing all interest and penalties related to unrecognized tax benefits in income tax expense. Federal, state and local
interest and penalties, which amounted to an expense of $9 million for 2013, a credit of $10 million for 2012, and a credit of $2 million for 2011, are
reflected in income tax expense.
The Company had $63 million and $55 million accrued for the payment of federal, state and local interest and penalties at February 1, 2014 and
February 2, 2013, respectively. The accrued federal, state and local interest and penalties primarily relates to state tax issues and the amount of penalties paid
in prior periods, and the amount of penalties accrued at February 1, 2014 and February 2, 2013 are insignificant. At February 1, 2014, $51 million of
federal, state and local interest and penalties is included in other liabilities and $12 million is included in current income taxes on the Consolidated Balance
Sheets.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company
is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2010. With respect to state and local jurisdictions, with limited
exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years before 2004. Although the outcome of tax audits is always
uncertain, the Company believes that adequate amounts of tax, interest and penalties have been accrued for any adjustments that are expected to result from the
years still subject to examination.
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