Ulta Beauty, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income taxes

Income taxes

12 Months Ended

Feb. 03, 2024

Income Taxes

Income taxes

11. Income taxes

The provision for income taxes consists of the following:


	Fiscal year ended
	February 3,		January 28,		January 29,
(In thousands)	2024		2023		2022
Current:
Federal	$	308,656	$	315,763	$	280,300
State		65,415		69,719		55,358
Total current		374,071		385,482		335,658
Deferred:
Federal		27,391		11,800		(22,936)
State		3,184		3,854		(2,730)
Total deferred		30,575		15,654		(25,666)
Provision for income taxes	$	404,646	$	401,136	$	309,992

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:


	Fiscal year ended
	February 3,	January 28,	January 29,
	2024	2023	2022
Federal statutory rate	21.0%	21.0%	21.0%
State effective rate, net of federal tax benefit	3.2%	3.6%	3.3%
Executive compensation limitation	0.3%	0.3%	0.5%
Excess deduction of stock compensation	(0.4%)	(0.2%)	(0.5%)
Other	(0.2%)	(0.3%)	(0.4%)
Effective tax rate	23.9%	24.4%	23.9%

On August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law, which, among other things, introduced a 15% corporate alternative minimum tax on book income of certain large corporations and created a 1% excise tax on net share repurchases. The corporate alternative minimum tax will be effective in fiscal 2024 and is not expected to have a material impact on the consolidated financial statements. The excise tax applies to share repurchases made after December 31, 2022.

Significant components of deferred tax assets and liabilities are as follows:


	February 3,		January 28,
(In thousands)	2024		2023
Deferred tax assets:
Operating lease liability	$	490,907	$	487,824
Reserves not currently deductible		58,796		52,133
Accrued liabilities		40,501		39,989
Employee benefits		32,885		27,395
Inventory valuation		1,962		—
Property and equipment		1,729		16,600
Credit carryforwards		359		338
NOL carryforwards		231		265
Total deferred tax assets		627,370		624,544
Deferred tax liabilities:
Operating lease asset		607,251		591,007
Prepaid expenses		83,775		69,248
Receivables not currently includable		20,502		15,644
Other		1,763		2,308
Inventory valuation		—		1,538
Intangibles		—		145
Total deferred tax liabilities		713,291		679,890
Net deferred tax liability	$	(85,921)	$	(55,346)

At February 3, 2024, the Company had $454 of credit carryforwards for state income tax purposes that expire between 2024 and 2027. The Company had $41 of state net operating loss (NOL) carryforwards that expire by 2038 and $117 of state NOL carryforwards that do not expire. The Company also had $505 of federal NOL carryforwards that do not expire.

The Company accounts for uncertainty in income taxes in accordance with Accounting Standards Codification 740-10. The reserve for uncertain tax positions was $4,060 and $4,158 at February 3, 2024 and January 28, 2023, respectively, which represents the best estimate of the potential liability. A reconciliation of unrecognized tax benefits, excluding interest and penalties, is as follows:


	February 3,		January 28,
(In thousands)	2024		2023
Beginning balance	$	4,158	$	3,389
Increase due to a prior year tax position		1,437		1,473
Decrease due to a prior year tax position		(590)		(704)
Decrease due to a prior year audit adjustment		(945)		—
Ending balance	$	4,060	$	4,158

The Company acknowledges that the amount of unrecognized tax benefits may change in the next twelve months. However, it does not expect the change to have a significant impact on its consolidated financial statements. Income tax-related interest and penalties were insignificant for fiscal 2023 and 2022.

The Company files tax returns in the U.S. federal and state jurisdictions. The Company is no longer subject to U.S. federal examinations by the Internal Revenue Service for years before 2020 and is no longer subject to examinations by

state authorities before 2019.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details