Macy's 2015 Annual Report Download - page 76

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-27
As of January 30, 2016 and January 31, 2015, the amount of unrecognized tax benefits, net of deferred tax assets,
that, if recognized would affect the effective income tax rate, was $115 million and $112 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 $1 million for 2015, a credit of $3 million for 2014, and an expense of $9 million for 2013, are reflected in
income tax expense.
The Company had $53 million and $52 million accrued for the payment of federal, state and local interest and
penalties at January 30, 2016 and January 31, 2015, 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 30, 2016 and January 31, 2015 are insignificant. At January 30, 2016, $48 million of federal, state and local
interest and penalties is included in other liabilities and $5 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 2012. 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 2006. 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.