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) benefit from income taxes varied from that computed at the U.S. federal statutory income tax rate for fiscal 2022, 2021 and 2020 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. In addition, for fiscal 2021, our benefit from income taxes varied from the tax computed at the U.S. federal statutory income tax rate primarily due to a total net deferred tax benefit of $2.3 billion as a result of a partial realignment of our legal entity structure that resulted in the intra-group transfer of certain intellectual property rights.

In November 2021, the U.S. House of Representatives passed the “Build Back Better Act” budget reconciliation bill (the Bill). To date, the Bill has failed to advance in the Senate. If the Bill as currently drafted (or a modified version containing similar revenue provisions) were enacted, it would substantially increase U.S. taxes on corporations, including, among other changes, raising the level of U.S. tax on profits earned outside the U.S. and further restricting the deductibility of interest expense. Such changes, if enacted, likely would have a material adverse impact on our future tax liabilities and consolidated financial results.

	Year Ended May 31,
(in millions)	2022			2021		2020
Domestic	$	(629	)	$	4,375	$	3,890
Foreign		8,278			8,624		8,173
Income before income taxes	$	7,649		$	12,999	$	12,063

	Year Ended May 31,
(Dollars in millions)	2022			2021			2020
Current provision:
Federal	$	(709	)	$	(516	)	$	(1,616	)
State		(186	)		(233	)		(19	)
Foreign		(1,183	)		(929	)		(1,144	)
Total current provision	$	(2,078	)	$	(1,678	)	$	(2,779	)
Deferred benefit:
Federal	$	1,661		$	(8,631	)	$	983
State		139			77			(50	)
Foreign		(654	)		10,979			(82	)
Total deferred benefit	$	1,146		$	2,425		$	851
Total (provision for) benefit from income taxes	$	(932	)	$	747		$	(1,928	)
Effective income tax expense (benefit) rate	12.2%			(5.7%)			16.0%

The (provision for) benefit from 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)	2022			2021			2020
U.S. federal statutory tax rate	21.0%			21.0%			21.0%
Tax provision at statutory rate	$	(1,606	)	$	(2,730	)	$	(2,533	)
Foreign earnings at other than United States rates		536			580			496
Net impact of intra-entity IP transfer		—			2,266			—
State tax expense, net of federal benefit		(132	)		(206	)		(172	)
Settlements and releases from judicial decisions and statute expirations, net		263			582			137
Tax contingency interest accrual, net		(44	)		(55	)		(163	)
Domestic tax contingency, net		(441	)		(282	)		(58	)
Federal research and development credit		222			169			151
Stock-based compensation		263			300			166
Other, net		7			123			48
Total (provision for) benefit from income taxes	$	(932	)	$	747		$	(1,928	)

	May 31,
(in millions)	2022			2021
Deferred tax assets:
Accruals and allowances	$	493		$	452
Employee compensation and benefits		818			755
Differences in timing of revenue recognition		623			547
Lease liabilities		688			524
Basis of property, plant and equipment and intangible assets		11,362			12,161
Tax credit and net operating loss carryforwards		4,409			3,934
Other		141			—
Total deferred tax assets		18,534			18,373
Valuation allowance		(1,742	)		(1,526	)
Total deferred tax assets, net		16,792			16,847
Deferred tax liabilities:
Unrealized gain on stock		(78	)		(78	)
Acquired intangible assets		(126	)		(266	)
GILTI deferred		(8,937	)		(9,883	)
ROU assets		(668	)		(488	)
Withholding taxes on foreign earnings		(232	)		(195	)
Other		—			(165	)
Total deferred tax liabilities		(10,041	)		(11,075	)
Net deferred tax assets	$	6,751		$	5,772
Recorded as:
Non-current deferred tax assets	$	12,782		$	13,636
Non-current deferred tax liabilities		(6,031	)		(7,864	)
Net deferred tax assets	$	6,751		$	5,772

We provide for United States income taxes on the undistributed earnings and the other outside basis temporary differences of foreign subsidiaries unless they are considered indefinitely reinvested outside the United States. At May 31, 2022, 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 $7.9 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, 2022, 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 $1.5 billion.

Our net deferred tax assets were $6.8 billion and $5.8 billion as of May 31, 2022 and 2021, 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 $1.7 billion and $1.5 billion as of May 31, 2022 and 2021, respectively. A majority of the valuation allowances as of May 31, 2022 and 2021 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, 2022, we had federal net operating loss carryforwards of approximately $446 million, which are subject to limitation on their utilization. Approximately $372 million of these federal net operating losses expire in various years between fiscal 2023 and fiscal 2038. Approximately $74 million of these federal net operating losses are not currently subject to expiration dates. We had state net operating loss carryforwards of approximately $1.8 billion at May 31, 2022, which expire between fiscal 2023 and fiscal 2042 and are subject to limitations on their utilization. We had total foreign net operating loss carryforwards of approximately $1.9 billion at May 31, 2022, which are subject to limitations on their utilization. Approximately $1.8 billion of these foreign net operating losses are not currently subject to expiration dates. The remainder of the foreign net operating losses, approximately $53 million, expire between fiscal 2023 and fiscal 2041. At May 31, 2022, we had federal capital loss carryforwards of approximately $193 million, which expire in fiscal 2026. We had state capital loss carryforwards of approximately $366 million, which expire between fiscal 2026 and fiscal 2036. We had tax credit carryforwards of approximately $1.3 billion at May 31, 2022, which are subject to limitations on their utilization. Approximately $854 million of these tax credit carryforwards are not currently subject to expiration dates. The remainder of the tax credit carryforwards, approximately $407 million, expire in various years between fiscal 2023 and fiscal 2042.

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)	2022			2021			2020
Gross unrecognized tax benefits as of June 1	$	6,912		$	6,972		$	6,348
Increases related to tax positions from prior fiscal years		66			225			624
Decreases related to tax positions from prior fiscal years		(24	)		(836	)		(298	)
Increases related to tax positions taken during current fiscal year		919			531			628
Settlements with tax authorities		(117	)		(51	)		(177	)
Lapses of statutes of limitation		(333	)		(66	)		(116	)
Cumulative translation adjustments and other, net		(139	)		137			(37	)
Total gross unrecognized tax benefits as of May 31	$	7,284		$	6,912		$	6,972

As of May 31, 2022, 2021 and 2020, $4.3 billion, $4.4 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) benefit from income taxes line of our consolidated statements of operations of $93 million, $166 million and $202 million during fiscal 2022, 2021 and 2020, respectively. Interest and penalties accrued were $1.6 billion as of May 31, 2022 and 2021.

Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2020. 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, foreign tax credits, research and development credits, state economic nexus, and qualification as a state manufacturer. 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, 2022, 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 $994 million ($825 million net of offsetting tax benefits). Our U.S. federal income tax returns have been examined for all years prior to fiscal 2011 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 2007, 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 2021. 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. We believe it was reasonably possible that, as of May 31, 2022, 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 $287 million ($109 million net of offsetting tax benefits). We also believe it was reasonably possible that, as of May 31, 2022, the gross unrecognized tax benefits could increase in the next 12 months by as much as $869 million ($227 million net of offsetting US 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, India, Indonesia, Israel, Italy, Mexico, New Zealand, 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.