Our effective tax rates for each of the periods presented are the result of the mix of income and losses earned in various tax jurisdictions that apply a broad range of income tax rates. Our provision for income taxes varied from the tax computed at the U.S. federal statutory income tax rate for fiscal 2024, 2023 and 2022 primarily due to earnings in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the tax effect of Global Intangible Low-Taxed Income.


	Year Ended May 31,
(in millions)	2024		2023		2022
Domestic	$	3,023	$	1,492	$	(629	)
Foreign		8,718		7,634		8,278
Income before income taxes	$	11,741	$	9,126	$	7,649


	Year Ended May 31,
(Dollars in millions)	2024			2023			2022
Current provision:
Federal	$	999		$	625		$	709
State		420			398			186
Foreign		1,994			1,767			1,183
Total current provision	$	3,413		$	2,790		$	2,078
Deferred benefit:
Federal	$	(2,020	)	$	(2,193	)	$	(1,661	)
State		(280	)		(398	)		(139	)
Foreign		161			424			654
Total deferred benefit	$	(2,139	)	$	(2,167	)	$	(1,146	)
Total provision for income taxes	$	1,274		$	623		$	932
Effective income tax rate	10.9%			6.8%			12.2%

The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before income taxes as follows:


	Year Ended May 31,
(Dollars in millions)	2024			2023			2022
U.S. federal statutory tax rate	21.0%			21.0%			21.0%
Tax provision at statutory rate	$	2,466		$	1,917		$	1,606
Foreign earnings at other than U.S. rates		(262	)		(357	)		(536	)
State tax expense, net of federal benefit		81			41			132
Settlements and releases from judicial decisions and statute expirations, net		(124	)		(552	)		(263	)
Tax contingency interest accrual, net		157			101			44
Domestic tax contingency, net		131			28			441
Federal research and development credit		(372	)		(280	)		(222	)
Stock-based compensation		(624	)		(322	)		(263	)
Realization of a one-time tax attribute		(235	)		—			—
Other, net		56			47			(7	)
Total provision for income taxes	$	1,274		$	623		$	932


	May 31,
(in millions)	2024			2023
Deferred tax assets:
Accruals and allowances	$	708		$	928
Employee compensation and benefits		929			811
Differences in timing of revenue recognition		781			662
Lease liabilities		1,553			1,036
Basis of property, plant and equipment and intangible assets		9,315			9,989
Capitalized research and development		2,574			1,421
Tax credit and net operating loss carryforwards		5,695			4,941
Other		15			189
Total deferred tax assets		21,570			19,977
Valuation allowance		(1,898	)		(1,940	)
Total deferred tax assets, net		19,672			18,037
Deferred tax liabilities:
Unrealized gain on stock		(79	)		(79	)
Acquired intangible assets		(1,425	)		(2,124	)
GILTI deferred		(7,759	)		(8,124	)
ROU assets		(1,503	)		(1,000	)
Withholding taxes on foreign earnings		(325	)		(256	)
Total deferred tax liabilities		(11,091	)		(11,583	)
Net deferred tax assets	$	8,581		$	6,454
Recorded as:
Non-current deferred tax assets	$	12,273		$	12,226
Non-current deferred tax liabilities		(3,692	)		(5,772	)
Net deferred tax assets	$	8,581		$	6,454

We provide for U.S. income taxes on the undistributed earnings and the other outside basis temporary differences of foreign subsidiaries unless they are considered indefinitely reinvested outside the U.S. At May 31, 2024, the amount of temporary differences related to undistributed earnings and other outside basis temporary differences of investments in foreign subsidiaries upon which U.S. income taxes have not been provided was approximately $11.0 billion. If the undistributed earnings and other outside basis differences were recognized in a taxable transaction, they would generate foreign tax credits that would reduce the federal tax liability associated with the foreign dividend or the otherwise taxable transaction. At May 31, 2024, assuming a full utilization of the foreign tax credits, the potential net deferred tax liability associated with these other outside basis temporary differences would be approximately $2.0 billion.

Our net deferred tax assets were $8.6 billion and $6.5 billion as of May 31, 2024 and 2023, respectively. We believe that it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credit carryforwards. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

The valuation allowance was $1.9 billion as of May 31, 2024 and 2023. A majority of the valuation allowances as of May 31, 2024 and 2023 related to tax assets established in purchase accounting and other tax credits. Any subsequent reduction of that portion of the valuation allowance and the recognition of the associated tax benefits associated with our acquisitions will be recorded to our provision for income taxes subsequent to our final determination of the valuation allowance or the conclusion of the measurement period (as defined above), whichever comes first.

At May 31, 2024, we had federal net operating loss carryforwards of approximately $322 million, which are subject to limitation on their utilization. Approximately $255 million of these federal net operating losses expire in various years between fiscal 2025 and fiscal 2038. Approximately $67 million of these federal net operating losses are not currently subject to expiration dates. We had state net operating loss carryforwards of approximately $2.1 billion at May 31, 2024, which are subject to limitations on their utilization. Approximately $2.0 billion of these state net operating losses expire in various years between fiscal 2025 and fiscal 2044. Approximately $49 million of these state net operating losses are not currently subject to expiration dates. We had total foreign net operating loss carryforwards of approximately $1.9 billion at May 31, 2024, which are subject to limitations on their utilization. Approximately $1.9 billion of these foreign net operating losses are not currently subject to expiration dates. The remainder of the foreign net operating losses, approximately $68 million, expire between fiscal 2025 and fiscal 2044. At May 31, 2024, we had federal capital loss carryforwards of approximately $145 million, which expire between fiscal 2026 and fiscal 2027. We had state capital loss carryforwards of approximately $318 million, which expire between fiscal 2026 and fiscal 2037. We had foreign capital loss carryforwards of approximately $187 million, which are not currently subject to expiration dates. We had tax credit carryforwards of approximately $1.4 billion at May 31, 2024, which are subject to limitations on their utilization. Approximately $956 million of these tax credit carryforwards are not currently subject to expiration dates. The remainder of the tax credit carryforwards, approximately $478 million, expire in various years between fiscal 2025 and fiscal 2044.

Current income taxes payable are included in other current liabilities in our consolidated balance sheets and totaled $2.1 billion and $1.9 billion as of May 31, 2024 and 2023, respectively.

We classify our unrecognized tax benefits as either current or non-current income taxes payable in the accompanying consolidated balance sheets. The aggregate changes in the balance of our gross unrecognized tax benefits, including acquisitions, were as follows:


	Year Ended May 31,
(in millions)	2024			2023			2022
Gross unrecognized tax benefits as of June 1	$	7,715		$	7,284		$	6,912
Increases related to tax positions from prior fiscal years		492			709			66
Decreases related to tax positions from prior fiscal years		(128	)		(45	)		(24	)
Increases related to tax positions taken during current fiscal year		889			669			919
Settlements with tax authorities		(46	)		(212	)		(117	)
Lapses of statutes of limitation		(129	)		(631	)		(333	)
Cumulative translation adjustments and other, net		(8	)		(59	)		(139	)
Total gross unrecognized tax benefits as of May 31	$	8,785		$	7,715		$	7,284

As of May 31, 2024, 2023 and 2022, $4.2 billion, $3.9 billion and $4.3 billion, respectively, of unrecognized tax benefits would affect our effective tax rate if recognized. We recognized interest and penalties related to uncertain tax positions in our provision for income taxes line of our consolidated statements of operations of $199 million, $111 million and $93 million during fiscal 2024, 2023 and 2022, respectively. Interest and penalties accrued as of May 31, 2024 and 2023 were $1.8 billion and $1.7 billion, respectively.

Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2022. Many issues are at an advanced stage in the examination process, the most significant of which include issues related to transfer pricing, domestic production activity, one-time transition tax, foreign tax credits, research and development credits and state economic nexus. With respect to all of these domestic audit issues considered in the aggregate, we believe that it was reasonably possible that, as of May 31, 2024, our gross unrecognized tax benefits could decrease (whether by payment, release, or a combination of both) in the next 12 months by as much as $568 million ($454 million net of offsetting tax benefits). Our U.S. federal income tax returns have been examined for all years prior to fiscal 2013 and, with some exceptions, we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2010, and we are no longer subject to audit for those periods.

Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining or have examined returns of Oracle and various acquired entities for years through fiscal 2023. Many of the relevant tax years are at an advanced

stage in examination or subsequent controversy resolution processes, the most significant of which include issues related to transfer pricing and withholding tax. The manner in which those issues are resolved and the timing thereof could potentially result in a range of decreases or increases in our unrecognized tax benefits over the next 12 months. With respect to all of these international audit issues considered in the aggregate, we believe it was reasonably possible that, as of May 31, 2024, the gross unrecognized tax benefits could decrease (whether by payment, release, or a combination of both) in the next 12 months by as much as $847 million ($302 million net of offsetting tax benefits). We also believe it was reasonably possible that, as of May 31, 2024, the gross unrecognized tax benefits could increase in the next 12 months by as much as $619 million ($107 million net of offsetting U.S. tax benefits). With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 2001.

We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, Canada, Egypt, Germany, India, Indonesia, Israel, Italy, Pakistan, Saudi Arabia, South Korea and Spain, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.

We believe that we have adequately provided under GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof.