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

Jan. 28, 2023

Income Taxes

Income taxes

12. Income taxes

The provision for income taxes consists of the following:


	Fiscal year ended
	January 28,		January 29,		January 30,
(In thousands)	2023		2022		2021
Current:
Federal	$	315,763	$	280,300	$	67,724
State		69,719		55,358		11,534
Total current		385,482		335,658		79,258
Deferred:
Federal		11,800		(22,936)		(19,631)
State		3,854		(2,730)		(4,377)
Total deferred		15,654		(25,666)		(24,008)
Provision for income taxes	$	401,136	$	309,992	$	55,250

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


	Fiscal year ended
	January 28,	January 29,	January 30,
	2023	2022	2021
Federal statutory rate	21.0%	21.0%	21.0%
State effective rate, net of federal tax benefit	3.6%	3.3%	2.9%
Executive compensation limitation	0.3%	0.5%	1.2%
Excess deduction of stock compensation	(0.2%)	(0.5%)	(0.3%)
Other	(0.3%)	(0.4%)	(0.9%)
Effective tax rate	24.4%	23.9%	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 the excise tax applies to share repurchases made after December 31, 2022. The corporate alternative minimum tax and the excise tax are not expected to have a material impact on the consolidated financial statements.

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


	January 28,		January 29,
(In thousands)	2023		2022
Deferred tax assets:
Operating lease liability	$	487,824	$	471,687
Reserves not currently deductible		52,133		47,059
Accrued liabilities		39,989		33,289
Employee benefits		27,395		24,355
Property and equipment		16,600		1,710
Credit carryforwards		338		334
NOL carryforwards		265		303
Total deferred tax assets		624,544		578,737
Deferred tax liabilities:
Operating lease asset		591,007		561,137
Prepaid expenses		69,248		45,815
Receivables not currently includable		15,644		5,398
Inventory valuation		1,538		3,490
Other		2,308		2,224
Intangibles		145		366
Total deferred tax liabilities		679,890		618,430
Net deferred tax liability	$	(55,346)	$	(39,693)

At January 28, 2023, the Company had $428 of credit carryforwards for state income tax purposes that expire between 2023 and 2026. The Company had $41 of state net operating loss (NOL) carryforwards that expire by 2038 and $118 of state NOL carryforwards that do not expire. The Company also had $665 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 $4,158 and $3,389 at January 28, 2023 and January 29, 2022, respectively,

which represents the best estimate of the potential liability. A reconciliation of unrecognized tax benefits, excluding interest and penalties, is as follows:


	January 28,		January 29,
(In thousands)	2023		2022
Beginning balance	$	3,389	$	2,783
Increase due to a prior year tax position		1,473		1,219
Decrease due to a prior year tax position		(704)		(613)
Ending balance	$	4,158	$	3,389

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 2022 and 2021.

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 2019 and is no longer subject to examinations by state authorities before 2018.

- 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
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details