TJ Maxx 2009 Annual Report Download - page 86

fiscal year ended January 31, 2009. TJX’s German subsidiary, which is treated as a branch for U.S. tax purposes, incurred
net operating losses of $11.4 million in fiscal 2010, $15.0 million in fiscal 2009 and $14.4 million in fiscal 2008 for tax
and financial reporting purposes. The losses were fully utilized in each year to reduce TJX’s current U.S. taxable income.
Any future utilization of the losses in Germany will result in a corresponding amount of taxable income for U.S. tax
purposes.
TJX established valuation allowances against certain deferred tax assets which may not be realized in future years.
The amount of the valuation allowances was $3.9 million as of January 30, 2010 and $6.2 million as of January 31,
2009.
TJX’s worldwide effective income tax rate was 37.8% for fiscal 2010, 36.9% for fiscal 2009, and 37.9% for fiscal
2008. The difference between the U.S. federal statutory income tax rate and TJX’s worldwide effective income tax rate is
reconciled below:
January 30,
2010
January 31,
2009
January 26,
2008
Fiscal Year Ended
(53 weeks)
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
Effective state income tax rate 4.3 2.8 4.1
Impact of foreign operations (0.6) (0.1) (0.6)
Impact of repatriation of foreign earnings —— (0.4)
All other (0.9) (0.8) (0.2)
Worldwide effective income tax rate 37.8% 36.9% 37.9%
The increase in TJX’s effective state income tax rate for fiscal 2010 as compared to fiscal 2009 is primarily attributed
to the settlement, in fiscal 2009, of several state tax audits and the resulting reduction to our reserves for uncertain tax
positions. In the first quarter of fiscal 2008, TJX adopted the provisions for recognizing and measuring tax positions
taken or expected to be taken in a tax return that affect amounts reported in the financial statements. As a result of the
implementation, TJX recognized a charge of approximately $27.2 million to its retained earnings balance at the
beginning of fiscal 2008. TJX had net unrecognized tax benefits of $121.0 million as of January 30, 2010,
$129.9 million as of January 31, 2009 and $140.7 million as of January 26, 2008.
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:
In thousands
January 30,
2010
January 31,
2009
January 26,
2008
Balance at beginning of year or date of implementation $202,543 $232,859 $188,671
Additions for uncertain tax positions taken in current year 59,301 59,807 30,811
Additions for uncertain tax positions taken in prior years 1,444 1,848 52,328
Reductions for uncertain tax positions taken in prior years (53,612) (80,959) (36,474)
Reductions resulting from lapse of statute of limitations (3,267) (2,002) (307)
Settlements with tax authorities (14,668) (9,010) (2,170)
Balance at end of year $191,741 $202,543 $232,859
Included in the gross amount of unrecognized tax benefits are items that will not impact future effective tax rates
upon recognition. These items amount to $57.6 million as of January 30, 2010, $49.3 million as of January 31, 2009
and $67.8 million as of January 26, 2008.
TJX is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. In
nearly all jurisdictions, the tax years through fiscal 2001 are no longer subject to examination.
TJX’s accounting policy is to classify interest and penalties related to income tax matters as part of income tax
expense. The amount of interest and penalties expensed was $7.6 million for the year ended January 30, 2010,
$15.3 million for the year ended January 31, 2009 and $16.2 million for the year ended January 26, 2008. The accrued
F-23