ROSS STORES, INC.ROST
ROSS STORES, INC. Income Taxes Disclosure
Taxes on Earnings
The provision for income taxes consisted of the following:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | 580,253 | $ | 532,913 | $ | 338,479 | ||||||||||||||
| State | 95,369 | 85,169 | 57,552 | |||||||||||||||||
| 675,622 | 618,082 | 396,031 | ||||||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | (7,016) | (16,265) | 74,062 | |||||||||||||||||
| State | (2,182) | (4,556) | 5,355 | |||||||||||||||||
| (9,198) | (20,821) | 79,417 | ||||||||||||||||||
| Total | $ | 666,424 | $ | 597,261 | $ | 475,448 | ||||||||||||||
The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory federal income tax rate. The differences are reconciled below:
| 2024 | 2023 | 2022 | |||||||||||||||||||||
| Federal income taxes at the statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||||||||
| State income taxes (net of federal benefit) and other, net | 3.2 | % | 3.2 | % | 2.9 | % | |||||||||||||||||
| Total | 24.2 | % | 24.2 | % | 23.9 | % | |||||||||||||||||
The components of deferred taxes at February 1, 2025 and February 3, 2024 are as follows:
| ($000) | 2024 | 2023 | ||||||||||||
| Deferred Tax Assets | ||||||||||||||
| Accrued liabilities | $ | 32,819 | $ | 35,010 | ||||||||||
| Deferred compensation | 45,689 | 39,366 | ||||||||||||
| Stock-based compensation | 53,995 | 52,431 | ||||||||||||
| State taxes and credits | 20,534 | 18,494 | ||||||||||||
| Employee benefits | 29,549 | 33,764 | ||||||||||||
| Operating lease liabilities | 870,577 | 826,566 | ||||||||||||
| Other | 9,633 | 9,053 | ||||||||||||
| Gross Deferred Tax Assets | 1,062,796 | 1,014,684 | ||||||||||||
| Less: Valuation allowance | (583) | — | ||||||||||||
| Deferred Tax Assets | 1,062,213 | 1,014,684 | ||||||||||||
| Deferred Tax Liabilities | ||||||||||||||
| Depreciation and amortization | (364,320) | (369,529) | ||||||||||||
| Merchandise inventory | (26,004) | (25,410) | ||||||||||||
| Supplies | (14,873) | (14,137) | ||||||||||||
| Operating lease assets | (826,425) | (785,608) | ||||||||||||
| Other | (17,631) | (16,238) | ||||||||||||
| Deferred Tax Liabilities | (1,249,253) | (1,210,922) | ||||||||||||
| Net Deferred Tax Liabilities | $ | (187,040) | $ | (196,238) | ||||||||||
At the end of fiscal 2024 and 2023, the Company’s state tax credit carryforwards for income tax purposes were approximately $9.6 million and $10.1 million, respectively. The state tax credit carryforwards will begin to expire in fiscal 2031. The Company has provided a valuation allowance of $0.6 million as of the end of fiscal 2024 for deferred tax assets related to state tax credits that are not expected to be realized.
The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2024, 2023, and 2022 are as follows:
| ($000) | 2024 | 2023 | 2022 | |||||||||||||||||
| Unrecognized tax benefits - beginning of year | $ | 52,379 | $ | 53,544 | $ | 60,547 | ||||||||||||||
| Gross increases: | ||||||||||||||||||||
| Tax positions in current period | 13,100 | 13,206 | 10,132 | |||||||||||||||||
| Tax positions in prior period | 1,163 | 2,295 | 672 | |||||||||||||||||
| Gross decreases: | ||||||||||||||||||||
| Tax positions in prior periods | (3,405) | (4,366) | (6,808) | |||||||||||||||||
| Lapse of statutes of limitations | (8,820) | (11,148) | (9,989) | |||||||||||||||||
| Settlements | (126) | (1,152) | (1,010) | |||||||||||||||||
| Unrecognized tax benefits - end of year | $ | 54,291 | $ | 52,379 | $ | 53,544 | ||||||||||||||
At the end of fiscal 2024, 2023, and 2022, the reserves for unrecognized tax benefits were $62.2 million, $58.6 million, and $60.6 million inclusive of $7.9 million, $6.2 million, and $7.1 million of related reserves for interest and penalties, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $49.4 million would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred tax assets and liabilities. These amounts are net of federal and state income taxes.
It is reasonably possible that certain federal and state tax matters may be concluded or statutes of limitations may lapse during the next twelve months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to $7.7 million.
The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2021 through 2024. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2020 through 2024. Certain state tax returns are currently under audit by various tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.
In December 2021, the Organization for Economic Co-operation and Development released Pillar Two Model Rules (“Pillar Two”), which provide for a global minimum tax of 15% on multinational entities. Although the United States has not yet adopted Pillar Two, several countries enacted Pillar Two with an initial effective date of January 1, 2024. The impact of Pillar Two on the Company’s effective tax rate was not material for fiscal 2024. The Company will continue to monitor future Pillar Two legislation in relevant jurisdictions for any impacts to its effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 1, 2025 | Showing above |
| 2018 | Apr 3, 2018 | |
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.