Macy's, Inc.M
Macy's, Inc. Income Taxes Disclosure
Taxes
Income tax expense (benefit) is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | Deferred | Total | Current | Deferred | Total | Current | Deferred | Total | |||||||||||||||||||||||||||||||||||||||||||||
| (millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal | $ | 116 | $ | 55 | $ | 171 | $ | 203 | $ | (50) | $ | 153 | $ | 189 | $ | (193) | $ | (4) | |||||||||||||||||||||||||||||||||||
| Foreign | 1 | — | 1 | — | — | — | (1) | — | (1) | ||||||||||||||||||||||||||||||||||||||||||||
| State and local | 28 | 8 | 36 | 30 | (2) | 28 | 54 | (51) | 3 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 145 | $ | 62 | $ | 207 | $ | 233 | $ | (52) | $ | 181 | $ | 242 | $ | (244) | $ | (2) | ||||||||||||||||||||||||||||||||||||
The income tax expense (benefit) reported differs from the expected tax computed by applying the federal income tax statutory rate of 21% to income before income taxes. The reasons for this difference and their tax effects are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Tax | Rate | Tax | Rate | Tax | Rate | ||||||||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||||||||||||
| Expected tax | $ | 178 | 21.0 | % | $ | 160 | 21.0 | % | $ | 9 | 21.0 | % | |||||||||||||||||||||||
| State and local income taxes, net of federal income taxes (a) | 29 | 3.4 | % | 26 | 3.4 | % | 2 | 4.7 | % | ||||||||||||||||||||||||||
| Foreign tax | — | — | % | (1) | (0.1) | % | (2) | (4.7) | % | ||||||||||||||||||||||||||
| Federal tax credits | (11) | (1.3) | % | (8) | (1.0) | % | (13) | (30.2) | % | ||||||||||||||||||||||||||
| Change in unrecognized tax benefits | (2) | (0.2) | % | (4) | (0.5) | % | (1) | (2.3) | % | ||||||||||||||||||||||||||
| Tax impact of equity awards | 12 | 1.4 | % | 5 | 0.7 | % | (1) | (2.3) | % | ||||||||||||||||||||||||||
| Other | 1 | 0.1 | % | 3 | 0.3 | % | 4 | 9.2 | % | ||||||||||||||||||||||||||
| $ | 207 | 24.4 | % | $ | 181 | 23.8 | % | $ | (2) | (4.6) | % | ||||||||||||||||||||||||
| (a) State taxes in California, New York and New Jersey made up the majority (greater than 50 percent) of the tax effect in this category. | |||||||||||||||||||||||||||||||||||
The Company participates in the Internal Revenue Service ("IRS") Compliance Assurance Program ("CAP"). As part of the CAP, tax years are audited on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return. The IRS has completed examinations of 2024 and all prior tax years.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
| January 31, 2026 | February 1, 2025 | ||||||||||
| (millions) | |||||||||||
| Deferred tax assets | |||||||||||
| Post employment and postretirement benefits | $ | — | $ | 1 | |||||||
| Accrued liabilities accounted for on a cash basis for tax purposes | 105 | 94 | |||||||||
| Lease liabilities | 844 | 888 | |||||||||
| Unrecognized state tax benefits and accrued interest | 20 | 21 | |||||||||
| State operating loss and credit carryforwards | 67 | 110 | |||||||||
| Other | 60 | 98 | |||||||||
| Valuation allowance | (43) | (85) | |||||||||
| Total deferred tax assets | 1,053 | 1,127 | |||||||||
| Deferred tax liabilities | |||||||||||
| Excess of book basis over tax basis of property and equipment | (760) | (755) | |||||||||
| Right of use assets | (576) | (605) | |||||||||
| Merchandise inventories | (366) | (348) | |||||||||
| Intangible assets | (114) | (115) | |||||||||
| Post employment and postretirement benefits | (18) | — | |||||||||
| Other | (24) | (28) | |||||||||
| Total deferred tax liabilities | (1,858) | (1,851) | |||||||||
| Net deferred tax liability | $ | (805) | $ | (724) | |||||||
The valuation allowance at January 31, 2026 and February 1, 2025 relates to net deferred tax assets for certain state net operating loss and credit carryforwards. The net change in the valuation allowance amounted to a decrease of $42 million in 2025 and a decrease of $15 million in 2024.
As of January 31, 2026, the Company had no federal net operating loss carryforwards and state net operating loss carryforwards, net of valuation allowances of $493 million, which will expire between 2026 and 2044. The Company has a full valuation allowance against state credit carryforwards which will expire between 2026 and 2029.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
| (millions) | |||||||||||||||||
| Balance, beginning of year | $ | 69 | $ | 76 | $ | 80 | |||||||||||
| Additions based on tax positions related to the current year | 15 | 11 | 10 | ||||||||||||||
| Reductions for tax positions of prior years | (6) | (4) | (2) | ||||||||||||||
| Settlements | (3) | (1) | — | ||||||||||||||
| Statute expirations | (12) | (13) | (12) | ||||||||||||||
| Balance, end of year | $ | 63 | $ | 69 | $ | 76 | |||||||||||
| Amounts recognized in the Consolidated Balance Sheets | |||||||||||||||||
| Current income taxes | $ | 4 | $ | 3 | $ | 4 | |||||||||||
| Deferred income taxes | — | — | 1 | ||||||||||||||
| Other liabilities (b) | 59 | 66 | 71 | ||||||||||||||
| $ | 63 | $ | 69 | $ | 76 | ||||||||||||
| (b) | Unrecognized tax benefits not expected to be settled within one year are included within other liabilities on the Consolidated Balance Sheets. | ||||
Additional information regarding unrecognized benefits and related interest and penalties is as follows:
| January 31, 2026 | February 1, 2025 | ||||||||||
| (millions) | |||||||||||
Amount of unrecognized tax benefits, net of deferred tax assets, that if recognized would affect the effective tax rate | $ | 50 | $ | 55 | |||||||
| Accrued federal, state and local interest and penalties | 26 | 25 | |||||||||
| Amounts recognized in the Consolidated Balance Sheets | |||||||||||
| Current income taxes | 9 | 5 | |||||||||
| Other liabilities | 17 | 20 | |||||||||
The Company classifies federal, state and local interest and penalties not expected to be settled within one year as other liabilities on the Consolidated Balance Sheets and follows a policy of recognizing all interest and penalties related to unrecognized tax benefits in income tax expense. The accrued federal, state and local interest and penalties primarily relate to state tax issues and the amount of penalties paid in prior periods, and the amounts of penalties accrued at January 31, 2026 and February 1, 2025, are insignificant. Federal, state and local interest and penalties amounted to expense of $1 million for 2025, income of $1 million for 2024 and expense of $3 million for 2023.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022. With respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years before 2016. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been accrued for any adjustments that are expected to result from the years still subject to examination.
Cash paid for income taxes, net of refunds, is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| (millions) | |||||||||||||||||
| Federal | $ | 41 | $ | 236 | $ | 185 | |||||||||||
| Foreign | — | — | — | ||||||||||||||
| State and Local | |||||||||||||||||
| California | 10 | 21 | * | ||||||||||||||
| New York State | 5 | 16 | 17 | ||||||||||||||
| New York City | 3 | * | * | ||||||||||||||
| Other | 11 | 31 | 38 | ||||||||||||||
| Total payments, net of refunds | $ | 70 | $ | 304 | $ | 240 | |||||||||||
* Jurisdiction was below 5 percent of total payments, net for the period presented. | |||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 27, 2026 | Showing above |
| 2025 | Mar 21, 2025 | |
| 2024 | Mar 22, 2024 | |
| 2023 | Mar 24, 2023 | |
| 2022 | Mar 25, 2022 | |
| 2021 | Mar 29, 2021 | |
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.