Dollar Tree 2015 Annual Report Download - page 74

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Significant components of the Company's net deferred tax assets (liabilities) follow:
(in millions) January 30, 2016 January 31, 2015
Deferred tax assets:
Deferred rent $ 47.3 $ 41.0
Accrued expenses 73.2 37.6
Net operating losses and credit carryforwards 53.1 31.0
Accrued compensation expense 77.8 33.8
Other 0.3 5.1
Total deferred tax assets 251.7 148.5
Valuation allowance (48.4)(13.8)
Deferred tax assets, net 203.3 134.7
Deferred tax liabilities:
Property and equipment (369.3)(48.7)
Other intangibles (1,415.9)(18.7)
Prepaid expenses (3.3)(3.0)
Inventory (1.4)(5.4)
Total deferred tax liabilities (1,789.9)(75.8)
Net deferred tax asset (liability) $ (1,586.6) $ 58.9
Deferred tax liabilities have been provided for the tax effects of the differences between the book and tax bases in the
assets acquired from Family Dollar. The increase in the deferred tax liability was primarily generated from the recording of the
tax effects related to the Family Dollar trade name, favorable lease rights, inventory and property plant and equipment.
At January 30, 2016 the Company had certain state tax credit carryforwards, net operating loss carryforwards and capital
loss carryforwards totaling approximately $53.1 million. These carryforwards will expire, if not utilized, beginning in 2016
through 2035.
A valuation allowance of $48.4 million, net of federal tax benefits, has been provided principally for certain state credit
carryforwards and net operating loss carryforwards. Since January 31, 2015 the valuation allowance has been increased by
$6.8 million as a result of the Acquisition, $19.4 million as a result of recording a valuation allowance on foreign net operating
loss carryforwards, $7.6 million as a result of reserving for a federal capital loss carryforward and $0.8 million as a result of
increasing the state credit valuation reserve. In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred taxes will not be realized. Based upon the availability
of carrybacks of future deductible amounts to the past two years’ taxable income and the Company's projections for future
taxable income over the periods in which the deferred tax assets are deductible, the Company believes it is more likely than not
the remaining existing deductible temporary differences will reverse during periods in which carrybacks are available or in
which the Company generates net taxable income.
The Company is participating in the Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”) for the
2015 fiscal year and will participate in the program for fiscal year 2016. This program accelerates the examination of key
transactions with the goal of resolving any issues before the tax return is filed. The Dollar Tree segment's federal tax returns
have been examined and all issues have been settled through the fiscal 2014 tax year. The federal statute of limitations is still
open for Family Dollar's tax returns for the fiscal year ended August 25, 2012 and forward. Several states completed their
examinations during fiscal 2015. In general, fiscal years 2012 and forward are within the statute of limitations for state tax
purposes. The statute of limitations is still open prior to 2012 for some states.
The balance for unrecognized tax benefits at January 30, 2016 was $71.4 million. The total amount of unrecognized tax
benefits at January 30, 2016 that, if recognized, would affect the effective tax rate was $19.3 million (net of the federal tax
benefit).