Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and per unit amounts
60
NOTE 14:  INCOME TAXES
Income tax expense consists of the following:
Fiscal year 2014 2013 2012
Current income taxes:
Federal $397 $379 $362
State and local 61 64 66
Total current income tax expense 458 443 428
Deferred income taxes:
Federal 9 9 21
State and local 2 3 1
Foreign (4) — —
Total deferred income tax expense 7 12 22
Total income tax expense $465 $455 $450
A reconciliation of the statutory federal income tax rate to the effective tax rate on earnings before income taxes is as follows:
Fiscal year 2014 2013 2012
Statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal income taxes 3.8% 3.6% 3.6%
Non-deductible acquisition-related items 0.9% —% —%
Other, net (0.5%) (0.3%) (0.6%)
Effective tax rate 39.2% 38.3% 38.0%
In 2014, we acquired Trunk Club in a tax-free merger transaction. Tax adjustments related to a reassessment of our deferred tax assets 
related to acquisitions resulted in an increase in our effective tax rate in 2014.
The major components of deferred tax assets and liabilities are as follows:
January 31, 2015 February 1, 2014
Compensation and benefits accruals $191 $182
Allowance for sales returns 62 56
Accrued expenses 51 48
Allowance for credit losses 29 32
Merchandise inventories 31 28
Gift cards 23 21
Gain on sale of interest rate swap 12 19
Nordstrom Notes 22 18
Federal benefit of state taxes 3 6
Other 4 16
Total deferred tax assets 428 426
Land, property and equipment basis and depreciation differences (116) (98)
Debt exchange premium (22) (24)
Total deferred tax liabilities (138) (122)
Net deferred tax assets $290 $304