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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008
(In thousands, except per share amounts)
6. Income Taxes
The provision for income taxes was as follows:
Year Ended
February 27, February 28, March 1,
2010 2009 2008
(52 Weeks) (52 Weeks) (52 Weeks)
Current tax expense (benefit):
Federal ............................ $(4,819) $ 165 $ (355)
State .............................. 3,330 6,327 1,183
(1,489) 6,492 828
Deferred tax expense (benefit):
Federal ............................ 1,849 260,592 726,167
State .............................. 26,398 62,173 75,706
28,247 322,765 801,873
Total income tax expense ................. $26,758 $329,257 $802,701
A reconciliation of the expected statutory federal tax and the total income tax benefit was as
follows:
Year Ended
February 27, February 28, March 1,
2010 2009 2008
(52 Weeks) (52 Weeks) (52 Weeks)
Expected federal statutory expense at 35% .... $(167,972) $(903,974) $ (95,725)
Nondeductible expenses .................. 2,941 9,445 6,476
State income taxes, net .................. (24,662) (54,921) (25,789)
Increase (reduction) of previously recorded
liabilities ........................... 18,359 9,737 (999)
Recoverable AMT tax due to special 5-year
NOL carryback ...................... (4,790) — —
Credits generated ...................... — — (1,699)
Goodwill Impairment .................... — 595,856 —
Valuation allowance ..................... 202,882 673,114 920,437
Total income tax expense (benefit) .......... $ 26,758 $ 329,257 $802,701
Net loss for fiscal 2010 included income tax expense of $26,758 and was primarily comprised of an
accrual for state and local taxes net of federal tax recoveries and adjustments to unrecognized tax
benefits. The Company maintains a full valuation allowance against the net deferred tax assets. ASC
740, ‘‘Income Taxes’’ requires a company to evaluate its deferred tax assets on a regular basis to
determine if a valuation allowance against the net deferred tax assets is required. According to ASC
740, a cumulative loss in recent years is significant negative evidence in considering whether deferred
tax assets are realizable. Based on the negative evidence, ASC 740 precludes relying on projections of
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