Nordstrom 2002 Annual Report Download - page 33

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notes to consolidated
financial statements
NORDSTROM INC. AND SUBSIDIARIES 31
Note 8: Income Taxes
Income tax expense consists of the following:
Year ended January 31, 2003 2002 2001
Current income taxes:
Federal $76,901 $58,122 $79,778
State and local 10,633 6,142 11,591
Total current
income taxes 87,534 64,264 91,369
Deferred income taxes:
Current (4,225) (7,217) (11,215)
Non-current 8,732 22,753 (15,054)
Total deferred
income taxes 4,507 15,536 (26,269)
Total before cumulative effect
of accounting change 92,041 79,800 65,100
Deferred income taxes on
cumulative effect of
accounting change (8,541) ——
Total tax expense $83,500 $79,800 $65,100
A reconciliation of the statutory Federal income tax rate to the
effective tax rate on earnings before the cumulative effect of
accounting change is as follows:
Year ended January 31, 2003 2002 2001
Statutory rate 35.00% 35.00% 35.00%
State and local
income taxes, net of
Federal income taxes 3.78 3.93 3.93
Change in valuation allowance 8.45 ——
Other, net (0.18) .09 .05
Effective tax rate 47.05% 39.02% 38.98%
Deferred income taxes reflect the net tax effect of temporary
differences between amounts recorded for financial reporting
purposes and amounts used for tax purposes. The major
components of deferred tax assets and liabilities are as follows:
January 31, 2003 2002
Accrued expenses $35,480 $33,896
Compensation and
benefits accruals 52,969 48,584
Merchandise inventories 25,831 24,643
Capital loss carryforwards 7,406 13,399
Loss on minority interest purchase 16,532 —
Other 28,835 21,123
Total deferred tax assets 167,053 141,645
Land, buildings and
equipment basis and
depreciation differences (50,401) (49,978)
Employee benefits (9,657) (9,771)
Other (3,891) (3,195)
Total deferred tax liabilities (63,949)(62,944)
Valuation allowance (16,532)—
Net deferred tax assets $86,572 $78,701
In January 2003 we sold our Denver Credit facility, generating a
capital gain for tax purposes of $15,367 which was used to offset
a portion of our existing capital loss carryforwards. Capital loss
carryforwards of $18,990 remain available to offset capital gain
income in the next three years. No valuation allowance has been
provided because we believe it is probable that the full benefit
of these carryforwards will be realized.
Our purchase of the outstanding shares of Nordstrom.com, Inc.
series C preferred stock resulted in an expense of $40,389 which
we believe will not be deductible for tax purposes. As a result,
we have established a valuation allowance of $16,532 to offset
the deferred tax asset related to this purchase.