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Income Taxes
 12 Months Ended
Feb. 29, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income Tax Provision
 Years Ended February 29 or 28
(In thousands)202420232022
Current:   
Federal$140,480 $128,994 $264,194 
State26,711 29,598 61,855 
Total167,191 158,592 326,049 
Deferred:   
Federal(6,542)(1,118)10,560 
State1,742 (5,432)4,440 
Total(4,800)(6,550)15,000 
Income tax provision$162,391 $152,042 $341,049 
 
Effective Income Tax Rate Reconciliation
 Years Ended February 29 or 28
 202420232022
Federal statutory income tax rate21.0 %21.0 %21.0 %
State and local income taxes, net of federal benefit3.9 3.4 3.7 
Share-based compensation0.2 — (1.8)
Nondeductible and other items1.7 1.5 0.7 
Credits(1.5)(2.0)(0.7)
Effective income tax rate25.3 %23.9 %22.9 %

Temporary Differences Resulting in Deferred Tax Assets and Liabilities
 As of February 29 or 28
(In thousands)20242023
Deferred tax assets:  
Accrued expenses and other$93,690 $102,611 
Allowance for loan losses117,618 123,636 
Prepaid expenses2,902 3,484 
Net operating loss carryforwards and other tax attributes29,670 35,184 
Operating lease liabilities139,124 146,006 
Share-based compensation43,689 37,165 
Capital loss carry forward701 847 
Total deferred tax assets427,394 448,933 
Less:  valuation allowance(701)(1,305)
Total deferred tax assets after valuation allowance426,693 447,628 
Deferred tax liabilities:  
Intangibles43,060 47,072 
Property and equipment101,796 113,015 
Operating lease assets130,181 137,617 
Inventory18,933 14,512 
Derivatives33,933 54,672 
Total deferred tax liabilities327,903 366,888 
Net deferred tax asset$98,790 $80,740 

As of the fiscal year ended February 29, 2024, CarMax’s net operating loss carryforwards and other tax attributes include a deferred tax asset of $0.9 million related to U.S. federal net operating loss carryforwards that have no expiration; a deferred tax asset of $12.6 million related to U.S. federal tax credit carryforwards, which expire between 2024 and 2041; a deferred tax asset of $3.0 million, related to state net operating loss carryforwards, which generally expire between 2024 and 2038; and a deferred tax asset of $12.5 million related to state tax credit carryforwards that have no expiration.
Except for amounts for which a valuation allowance has been provided, we believe it is more likely than not that the results of future operations and the reversals of existing deferred taxable temporary differences will generate sufficient taxable income to realize the deferred tax assets.  The valuation allowance as of February 29, 2024 relates to capital loss carryforwards that are not more likely than not to be utilized prior to their expiration.
Reconciliation of Unrecognized Tax Benefits
 Years Ended February 29 or 28
(In thousands)202420232022
Balance at beginning of year$27,092 $24,765 $28,997 
Increases for tax positions of prior years397 114 432 
Decreases for tax positions of prior years(172)(19)(5,056)
Increases based on tax positions related to the current year3,627 3,813 2,657 
Settlements(386)(79)(391)
Lapse of statute(1,741)(1,502)(1,874)
Balance at end of year$28,817 $27,092 $24,765 

As of February 29, 2024, we had $28.8 million of gross unrecognized tax benefits, $12.1 million of which, if recognized, would affect our effective tax rate.  Within the next 12 months it is reasonably possible that statutes will expire, and the previously unrecognized tax benefit related to the prepayment of services provided by related entities will be recognized. Recognition of this benefit will decrease the gross unrecognized tax benefit by approximately $14.0 million and would not materially impact our effective tax rate. Additionally, it is reasonably possible that other unrecognized tax benefits will increase or decrease during the next 12 months. As of February 28, 2023, we had $27.1 million of gross unrecognized tax benefits, $10.6 million of which, if recognized, would affect our effective tax rate.  As of February 28, 2022, we had $24.8 million of gross unrecognized tax benefits, $8.5 million of which, if recognized, would affect our effective tax rate.
Our continuing practice is to recognize interest and penalties related to income tax matters in SG&A expenses.  Our accrual for interest and penalties was $5.3 million, $4.0 million and $3.4 million as of February 29, 2024, February 28, 2023 and February 28, 2022, respectively.
The Inflation Reduction Act of 2022 included a 15% corporate alternative minimum tax (“CAMT”) on adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1 billion over a three-year period. The CAMT is effective for tax periods beginning with fiscal 2024; however, we do not expect to have a CAMT liability.
CarMax is subject to U.S. federal income tax as well as income tax of multiple states and local jurisdictions.  With a few insignificant exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to fiscal 2020.