Science Applications International CorpSAIC
Science Applications International Corp Income Taxes Disclosure
Note 10—Income Taxes:
Substantially all of the Company’s income before income taxes for the fiscal year ended January 30, 2026 and the two preceding fiscal years is subject to taxation in the United States. The provision for income taxes for each of the periods presented include the following:
| Year Ended | |||||||||||||||||
| January 30, 2026 | January 31, 2025 | February 2, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (64) | $ | 56 | $ | 125 | |||||||||||
| State | 11 | 13 | 35 | ||||||||||||||
Foreign | 1 | — | — | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 82 | (4) | (19) | ||||||||||||||
| State | (1) | 1 | 2 | ||||||||||||||
| Total | $ | 29 | $ | 66 | $ | 143 | |||||||||||
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows, in accordance with prospective adoption of ASU 2023-09:
Year Ended | ||||||||
| January 30, 2026 | ||||||||
Amount | Percent | |||||||
(dollars in millions) | ||||||||
Amount computed at the statutory federal income tax rate | $ | 81 | 21.0 | % | ||||
State income taxes, net of federal income tax effect(1) | 13 | 3.4 | % | |||||
Tax credits | ||||||||
Research and development credits | (10) | (2.5) | % | |||||
Other credits | (1) | (0.4) | % | |||||
Non-taxable or non-deductible items | ||||||||
Non-deductible compensation | 7 | 1.7 | % | |||||
Other | (1) | (0.2) | % | |||||
Changes in unrecognized tax benefits | (57) | (14.8) | % | |||||
Other | (3) | (0.7) | % | |||||
Effective income tax rate | $ | 29 | 7.5 | % | ||||
(1) State taxes in Virginia and Texas contributed to the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to income before income taxes for each of the periods presented was as follows, before the adoption of ASU 2023-09:
Year Ended | |||||||||||
| January 31, 2025 | February 2, 2024 | ||||||||||
(dollars in millions) | |||||||||||
| Amount computed at the statutory federal income tax rate | $ | 90 | $ | 130 | |||||||
| State income taxes, net of federal tax benefit | 10 | 32 | |||||||||
| Research and development and other federal credits | (22) | (17) | |||||||||
| Non-deductible compensation | 3 | 10 | |||||||||
| Excess tax benefits for stock-based compensation | (4) | (4) | |||||||||
| Non-deductible goodwill | — | 13 | |||||||||
| Foreign-derived intangible income | (15) | (22) | |||||||||
| Other | 4 | 1 | |||||||||
| Total | $ | 66 | $ | 143 | |||||||
| Effective income tax rate | 15.5 | % | 23.1 | % | |||||||
The effective income tax rate for fiscal 2026 is lower than the rate for fiscal 2025 primarily due to a $47 million benefit from an IRS audit settlement, pending final administrative approvals, covering fiscal years 2016 through 2019, and adjustments in liabilities for uncertain tax positions for the remaining open tax years.
Income taxes paid (net of refunds) consisted of the following:
| Year Ended | |||||
| January 30, 2026 | |||||
| (in millions) | |||||
U.S. Federal | $ | 10 | |||
U.S. State and Local | |||||
California | 4 | ||||
Texas | 2 | ||||
| Virginia | 3 | ||||
| Other | 2 | ||||
Foreign | 1 | ||||
| Total cash paid for income taxes, net of refunds | $ | 22 | |||
Income taxes paid were $66 million and $165 million for the years ended January 31, 2025 and February 2, 2024, respectively.
Deferred income taxes are recorded for differences in the basis of assets and liabilities for financial reporting purposes and tax reporting purposes. Deferred tax assets (liabilities) were comprised of:
| January 30, 2026 | January 31, 2025 | ||||||||||
| (in millions) | |||||||||||
| Accrued vacation and bonuses | $ | 25 | $ | 27 | |||||||
| Deferred compensation | 20 | 20 | |||||||||
| Net operating loss and other carryforwards | 155 | 61 | |||||||||
| Lease liability | 55 | 48 | |||||||||
| Research and development expenditures | 21 | 197 | |||||||||
Other | 15 | 20 | |||||||||
| Valuation allowance | (7) | (7) | |||||||||
| Total deferred tax assets | 284 | 366 | |||||||||
| Deferred revenue | (31) | (40) | |||||||||
| Purchased intangible assets | (297) | (302) | |||||||||
| Right of use assets | (48) | (41) | |||||||||
Other | (12) | (7) | |||||||||
| Total deferred tax liabilities | (388) | (390) | |||||||||
| Net deferred tax (liabilities) assets | $ | (104) | $ | (24) | |||||||
As of January 30, 2026, the Company has approximately $138 million of tax effected federal loss carryforwards, $9 million of tax effected state loss carryforwards and approximately $8 million of state credit carryforwards that will begin to expire in fiscal 2027. The valuation allowance of $7 million at January 30, 2026 relates to these state credit carryforwards.
The changes in the unrecognized tax benefits were:
| Year Ended | |||||||||||||||||
| January 30, 2026 | January 31, 2025 | February 2, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Unrecognized tax benefits at beginning of the year | $ | 110 | $ | 117 | $ | 158 | |||||||||||
| Additions for tax positions related to prior years | 2 | 1 | 5 | ||||||||||||||
| Additions for tax positions related to the current year | 6 | 14 | 21 | ||||||||||||||
| Reductions for tax positions related to prior years | (46) | (8) | (59) | ||||||||||||||
Reductions for settlements with taxing authorities | (19) | — | — | ||||||||||||||
| Reductions for prior year tax positions related to statute expiration | (5) | (14) | (8) | ||||||||||||||
| Unrecognized tax benefits at end of the year, excluding accrued interest and penalties | $ | 48 | $ | 110 | $ | 117 | |||||||||||
| Unrecognized tax benefits that, if recognized, would affect the effective income tax rate | $ | 43 | $ | 104 | $ | 111 | |||||||||||
| Accrued interest and penalties | $ | 7 | $ | 17 | $ | 13 | |||||||||||
The Company includes net interest and penalties as a component of income tax expense.
The Company files income tax returns in the United States and various foreign jurisdictions which may be subject to routine compliance reviews by the IRS and other taxing authorities. While the Company believes it has recorded appropriate accruals for uncertain tax positions in accordance with applicable accounting guidance, it is possible that tax authorities may assess additional taxes beyond the amounts accrued or that the recorded accruals could
exceed the final settlement amounts reached with those authorities. The audit of the Company’s federal income tax returns for fiscal years 2016 through 2019 has been effectively settled, pending final administrative approvals from the IRS. Tax years 2023 through 2025 remain open and subject to examination by the IRS and other foreign and domestic taxing jurisdictions.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 16, 2026 | Showing above |
| 2025 | Mar 17, 2025 | |
| 2024 | Mar 20, 2024 | |
| 2023 | Apr 3, 2023 | |
| 2022 | Mar 28, 2022 | |
| 2021 | Mar 26, 2021 | |
| 2020 | Mar 27, 2020 | |
| 2019 | Mar 29, 2019 | |
| 2018 | Mar 29, 2018 | |
| 2017 | Mar 30, 2017 | |
| 2016 | Mar 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.