Macy's 2014 Annual Report Download - page 71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-24
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
January 31,
2015 February 1, 2014 February 2, 2013
(millions)
Balance, beginning of year ...................................................................... $ 189 $ 170 $ 179
Additions based on tax positions related to the current year ................... 33 37 18
Additions for tax positions of prior years ................................................ — — 18
Reductions for tax positions of prior years.............................................. (15)(1)(19)
Settlements............................................................................................... (23)(1)(9)
Statute expirations.................................................................................... (12)(16)(17)
Balance, end of year................................................................................. $ 172 $ 189 $ 170
Amounts recognized in the Consolidated Balance Sheets at
January 31, 2015, February 1, 2014 and February 2, 2013
Current income taxes........................................................................ $ 11 $ 31 $ 20
Long-term deferred income taxes..................................................... 6 11 23
Other liabilities ................................................................................. 155 147 127
$ 172 $ 189 $ 170
As of January 31, 2015 and February 1, 2014, the amount of unrecognized tax benefits, net of deferred tax assets,
that, if recognized would affect the effective income tax rate, was $112 million and $123 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 a credit
of $3 million for 2014, an expense of $9 million for 2013, and a credit of $10 million for 2012, are reflected in income tax
expense.
The Company had $52 million and $63 million accrued for the payment of federal, state and local interest and
penalties at January 31, 2015 and February 1, 2014, 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
January 31, 2015 and February 1, 2014 are insignificant. At January 31, 2015, $49 million of federal, state and local
interest and penalties is included in other liabilities and $3 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 2011. 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 2005. 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.