Income Taxes

9 Months Ended

Jun. 24, 2022

Income Taxes

Income Taxes

12. Income Taxes

We recorded income tax expense of $116 million and $124 million for the quarters ended June 24, 2022 and June 25, 2021, respectively. The income tax expense for the quarter ended June 24, 2022 included a $21 million income tax benefit related to the tax impacts of an intercompany transaction. Our estimated annual effective tax rate for fiscal 2022 includes a total income tax benefit of approximately $75 million related to this transaction, with a portion recognized in the nine months ended June 24, 2022 and the remainder to be recognized in the fourth quarter of fiscal 2022.

We recorded income tax expense of $362 million and $290 million for the nine months ended June 24, 2022 and June 25, 2021, respectively. The income tax expense for the nine months ended June 24, 2022 included a $57 million income tax benefit related to the tax impacts of the intercompany transaction discussed above and $27 million of income tax expense related to the write-down of certain deferred tax assets to the lower corporate tax rate enacted in the canton of Schaffhausen. In addition, the income tax expense for the nine months ended June 24, 2022 included $12 million of income tax expense related to an income tax audit of an acquired entity. As we are entitled to indemnification of pre-acquisition period tax obligations under the terms of the purchase agreement, we recorded an associated indemnification receivable and other income of $11 million during the nine months ended June 24, 2022. The income tax expense for the nine months ended June 25, 2021 included a $29 million income tax benefit related to an Internal Revenue Service approved change in the tax method of depreciating or amortizing certain assets.

During the nine months ended June 24, 2022, we completed additional intercompany transactions that resulted in a non-U.S. subsidiary recording an increase in deferred tax assets for tax loss and credit carryforwards of approximately $4.0 billion. We do not expect this subsidiary to generate sufficient future taxable income to realize these deferred tax assets; therefore, we recognized a corresponding increase to the valuation allowance. Accordingly, there was no impact to the Condensed Consolidated Statement of Operations for the nine months ended June 24, 2022 or Condensed Consolidated Balance Sheet as of June 24, 2022.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of June 24, 2022, approximately $100 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of June 24, 2022.