LOWES COMPANIES INCLOW

LOWES COMPANIES INC Income Taxes Disclosure

10-KFiled Mar 23, 20263 min read
Income Taxes
The following is a reconciliation of the federal statutory tax rate to the effective tax rate:

Years Ended
(In millions, except percentage data)January 30, 2026January 31, 2025February 2, 2024
Statutory federal income tax rate$1,837 21.0 %$1,922 21.0 %$2,137 21.0 %
State income taxes, net of federal tax benefit1
333 3.8 343 3.7 389 3.8 
Other, net(77)(0.9)(69)(0.7)(77)(0.7)
Effective tax rate$2,093 23.9 %$2,196 24.0 %$2,449 24.1 %
1    State taxes in CA, FL, PA, NY, VA, NC, TN, NJ, and SC contributed to the majority of the tax effect in this category.
The components of the income tax provision are as follows:
Years Ended
(In millions)January 30, 2026January 31, 2025February 2, 2024
Current:
Federal$1,443 $1,764 $1,955 
State386 424 489 
Total current1
1,829 2,188 2,444 
Deferred:
Federal236 — 3 
State28 8 2 
Total deferred1
264 8 5 
Total income tax provision$2,093 $2,196 $2,449 
1    Amounts applicable to foreign income taxes were insignificant for all periods presented.

The tax effects of cumulative temporary differences that gave rise to the deferred tax assets and liabilities were as follows:
(In millions)January 30, 2026January 31, 2025
Deferred tax assets:
Self-insurance$240 $233 
Share-based payment expense49 46 
Operating lease liabilities1,266 1,143 
Capital loss carryforwards691 645 
Net operating losses283 261 
Other, net559 390 
Total deferred tax assets3,088 2,718 
Valuation allowance(1,072)(1,003)
Net deferred tax assets2,016 1,715 
Deferred tax liabilities:
Operating lease right-of-use assets(1,136)(1,012)
Goodwill and Other Intangibles(1,089)(37)
Property(731)(315)
Other, net(99)(107)
Total deferred tax liabilities(3,055)(1,471)
Net deferred tax (liabilities)/assets$(1,039)$244 

As of January 30, 2026, and January 31, 2025, the Company had Canadian net operating loss carryforwards of $1.1 billion and $1.0 billion, respectively.  The net operating losses expire in 2026 through 2043.  As of January 30, 2026, and January 31, 2025, the Company had capital loss carryforwards of $2.7 billion and $2.5 billion, respectively, for Canadian tax purposes which do not expire. A valuation allowance of $1.1 billion and $1.0 billion was recorded as of January 30, 2026, and January 31, 2025, respectively.
A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
Years Ended
(In millions)January 30, 2026January 31, 2025February 2, 2024
Unrecognized tax benefits, beginning of year$37 $37 $37 
Additions for tax positions of prior years— — — 
Settlements— — — 
Unrecognized tax benefits, end of year$37 $37 $37 

The unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate were $37 million as of January 30, 2026, and January 31, 2025.

The net interest expense recognized by the Company related to uncertain tax positions was $3 million for 2025, $1 million for 2024, and $1 million for 2023. The Company had $18 million and $15 million of accrued interest related to uncertain tax positions as of January 30, 2026, and January 31, 2025, respectively.

No penalties were recognized related to uncertain tax positions for 2025, 2024, and 2023. The Company had $4 million of accrued penalties related to uncertain tax positions as of January 30, 2026, and January 31, 2025, respectively.

The Company is subject to examination by various foreign and domestic taxing authorities. There are ongoing U.S. state audits covering tax years 2017 to 2024. Audits performed by the Canada Revenue Agency for fiscal years 2021 and 2022 are on-going. The Company remains subject to income tax examinations for fiscal years 2015 through 2024. The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.

Historical Timeline

Fiscal YearFiled
2026Mar 23, 2026Showing above
2025Mar 24, 2025
2024Mar 25, 2024
2023Mar 27, 2023
2022Mar 21, 2022
2021Mar 22, 2021
2020Mar 23, 2020
2019Apr 2, 2019
2018Apr 2, 2018
2017Apr 4, 2017
2016Mar 29, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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