XML 72 R22.htm IDEA: XBRL DOCUMENT v3.22.2
Income Taxes
 12 Months Ended
Apr. 29, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax provision (benefit) is based on income before income taxes reported for financial statement purposes. The components of income before income taxes, based on tax jurisdiction, are as follows:
 Fiscal Year
(in millions)202220212020
U.S.$436 $(358)$466 
International5,081 4,253 3,589 
Income before income taxes$5,517 $3,895 $4,055 
The income tax provision (benefit) consists of the following:
 Fiscal Year
(in millions)202220212020
Current tax expense:   
U.S.$467 $287 $151 
International599 439 375 
Total current tax expense1,066 726 526 
Deferred tax (benefit) expense:
U.S.(402)(625)(138)
International(209)165 (1,139)
Net deferred tax benefit(611)(461)(1,277)
Income tax provision (benefit)
$456 $265 $(751)
Tax assets (liabilities), shown before jurisdictional netting of deferred tax assets (liabilities), are comprised of the following:
(in millions)April 29, 2022
April 30, 2021(1)
Deferred tax assets:  
Intangible assets$2,334 $1,536 
Net operating loss, capital loss, and credit carryforwards5,982 6,114 
Capitalization of research and development597 408 
Other accrued liabilities483 442 
Accrued compensation332 411 
Pension and post-retirement benefits66 234 
Stock-based compensation146 132 
Inventory146 164 
Lease obligations 92 106 
Federal and state benefit on uncertain tax positions60 55 
Interest limitation386 352 
Other374 336 
Gross deferred tax assets10,998 10,290 
Valuation allowance(6,583)(5,822)
Total deferred tax assets4,4154,468
Deferred tax liabilities:  
Intangible assets(1,488)(1,856)
Realized loss on derivative financial instruments(66)(75)
Right of use leases(89)(102)
Unrealized gain on available-for-sale securities and derivative financial instruments— (16)
Accumulated depreciation(121)(151)
Outside basis difference of subsidiaries(129)(101)
Other(70)(81)
Total deferred tax liabilities(1,963)(2,382)
Prepaid income taxes474 458 
Income tax receivables 358 353 
Tax assets, net$3,284 $2,897 
Reported as (after valuation allowance and jurisdictional netting):  
Other current assets$765 $756 
Tax assets3,403 3,169 
Deferred tax liabilities(884)(1,028)
Tax assets, net$3,284 $2,897 
(1)Certain prior year amounts have been reclassified to conform to current year presentation
No deferred taxes have been provided on the approximately $79.3 billion and $74.2 billion of undistributed earnings of the Company’s subsidiaries at April 29, 2022 and April 30, 2021, respectively, since these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries. Due to the number of legal entities and jurisdictions involved, the complexity of the legal entity structure of the Company, and the complexity of the tax laws in the relevant jurisdictions, the Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon distribution of these undistributed earnings.
At April 29, 2022, the Company had approximately $25.4 billion of net operating loss carryforwards in certain non-U.S. jurisdictions, of which $20.0 billion have no expiration, and the remaining $5.4 billion will expire during fiscal years 2023 through 2042. Included in these net operating loss carryforwards are $18.6 billion of net operating losses related to a subsidiary of the Company, substantially all of which
were recorded in fiscal year 2008 as a result of the receipt of a favorable tax ruling from certain non-U.S. taxing authorities. The Company has recorded a full valuation allowance against these net operating losses, as management does not believe that it is more likely than not that these net operating losses will be utilized. Certain of the remaining non-U.S. net operating loss carryforwards of $6.8 billion have a valuation allowance recorded against the carryforwards, as management does not believe that it is more likely than not that these net operating losses will be utilized.
At April 29, 2022, the Company had $222 million of U.S. federal net operating loss carryforwards, of which $47 million have no expiration. The remaining loss carryforwards will expire during fiscal years 2023 through 2036. For U.S. state purposes, the Company had $1.4 billion of net operating loss carryforwards at April 29, 2022, $72 million of which have no expiration. The remaining U.S. state loss carryforwards will expire during fiscal years 2023 through 2042.
At April 29, 2022, the Company also had $254 million of tax credits available to reduce future income taxes payable, of which $120 million have no expiration. The remaining credits will expire during fiscal years 2023 through 2042.
The Company has established valuation allowances of $6.6 billion and $5.8 billion at April 29, 2022 and April 30, 2021, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets which are primarily comprised of tax loss and credit carryforwards in various jurisdictions. The increase in the valuation allowance during fiscal year 2022 is primarily related to the step up in tax basis for Swiss Cantonal purposes, the generation of certain net operating losses and the effects of currency fluctuations. These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not required.
The Company’s effective income tax rate varied from the U.S. federal statutory tax rate as follows:
 Fiscal Year
 202220212020
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
Increase (decrease) in tax rate resulting from:   
U.S. state taxes, net of federal tax benefit0.2 (1.1)0.5 
Research and development credit(1.3)(2.3)(2.1)
Puerto Rico excise tax(1.1)(2.0)(1.5)
International(11.2)(12.6)(10.0)
Stock based compensation(0.8)(0.8)(1.5)
Interest on uncertain tax positions0.5 0.9 1.3 
Base erosion anti-abuse tax0.9 0.5 2.6 
Foreign derived intangible income benefit(1.0)(1.9)(1.2)
Certain tax adjustments(0.9)(1.0)(30.8)
Legal entity restructuring— 1.8 — 
U.S. tax on foreign earnings2.2 3.4 2.8 
Other, net(0.2)0.9 0.4 
Effective tax rate8.3 %6.8 %(18.5)%
During fiscal year 2022, the net benefit from certain tax adjustments of $50 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:
•A benefit of $82 million associated with a step up in tax basis for Swiss Cantonal purposes.
•A benefit of $82 million related to a change in tax rates on intangible assets.
•A cost of $47 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.
•A cost of $41 million associated with a change in the Company’s permanent reinvestment assertion on certain historical earnings.
•A net cost of $26 million primarily associated with an intercompany sale of assets.
During fiscal year 2021, the net benefit from certain tax adjustments of $41 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:
•A net benefit of $106 million associated with the resolution of an audit at the IRS Appellate level for fiscal years 2012, 2013, and 2014. The issues resolved relate to the utilization of certain net operating losses and the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico for businesses that are not the subject of the U.S. Tax Court Case for fiscal years 2005 and 2006.
•A net cost of $73 million related to a tax basis adjustment of previously established deferred tax assets from intercompany intellectual property transactions. The cumulative amount of deferred tax benefit previously recognized from intercompany intellectual property transactions and recorded as Certain Tax Adjustments is $1.5 billion. The corresponding deferred tax assets will be amortized over a period of approximately 20 years.
•A cost of $50 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.
•A net cost of $25 million associated with an internal restructuring and intercompany sale of assets.
•A benefit of $83 million related to the capitalization of certain research and development costs for U.S. income tax purposes and the establishment of a deferred tax asset at the U.S. federal statutory tax rate.
During fiscal year 2020, the net benefit from certain tax adjustments of $1.2 billion, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:
•A net benefit of $63 million related to the finalization of certain state tax impacts from U.S. Tax Reform, and the issuance of certain final U.S. Treasury Regulations associated with U.S. Tax Reform. The primary impact of these regulations resulted in the Company re-establishing its permanently reinvested assertion on certain foreign earnings and reversing the previously accrued tax liability. This benefit was partially offset by additional tax associated with a previously executed internal reorganization of certain foreign subsidiaries.
•A benefit of $252 million related to tax legislative changes in Switzerland, which abolished certain preferential tax regimes the Company benefited from and replaced them with a new set of internationally accepted measures. The legislation provided for higher effective tax rates but allowed for a transitional period whereby an amortizable asset was created for Swiss federal income tax purposes that will be amortized and deducted over a 10-year period.
•A benefit of $658 million related to the release of a valuation allowance previously recorded against certain net operating losses. Luxembourg enacted tax legislation during the year requiring the Company to reassess the realizability of certain net operating losses. The Company evaluated both the positive and negative evidence and released valuation allowance equal to the expected benefit from the utilization of certain net operating losses in connection with a planned intercompany sale of intellectual property.
•A benefit of $269 million associated with the intercompany sale of intellectual property and the establishment of a deferred tax asset.
Currently, the Company’s operations in Puerto Rico, Singapore, Dominican Republic, Costa Rica, and China have various tax holidays and tax incentive grants. The tax reductions as compared to the local statutory rate favorably impacted earnings by $248 million, $301 million, and $231 million in fiscal years 2022, 2021, and 2020, respectively, and diluted earnings per share by $0.18, $0.22, and $0.17, in fiscal years 2022, 2021, and 2020, respectively. The tax holidays are conditional upon the Company meeting certain thresholds required under statutory law. The tax incentive grants, unless extended, will expire between fiscal years 2023 and 2034. The Company’s historical practice has been to renew, extend, or obtain new tax incentive grants upon expiration of existing tax incentive grants. If the Company is not able to renew, extend, or obtain new tax incentive grants, the expiration of existing tax incentive grants could have a material impact on the Company’s financial results in future periods. The tax incentive grants which expired during fiscal year 2022 did not have a material impact on the Company's consolidated financial statements.
The Company had $1.7 billion, $1.7 billion, and $1.9 billion of gross unrecognized tax benefits at April 29, 2022, April 30, 2021, and April 24, 2020, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2022, 2021, and 2020 is as follows:
 Fiscal Year
(in millions)202220212020
Gross unrecognized tax benefits at beginning of fiscal year$1,668 $1,862 $1,836 
Gross increases:   
Prior year tax positions1 88 12 
Current year tax positions40 62 55 
Gross decreases:   
Prior year tax positions(29)(106)(9)
Settlements(8)(216)(5)
Statute of limitation lapses(11)(21)(27)
Gross unrecognized tax benefits at end of fiscal year1,661 1,668 1,862 
Cash advance paid to taxing authorities(859)(859)(859)
Gross unrecognized tax benefits at end of fiscal year, net of cash advance$802 $809 $1,003 
If all of the Company’s unrecognized tax benefits at April 29, 2022, April 30, 2021, and April 24, 2020 were recognized, $1.6 billion, $1.6 billion, and $1.8 billion would impact the Company’s effective tax rate, respectively. Although the Company believes that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company’s effective tax rate in future periods. The Company has recorded gross unrecognized tax benefits, net of cash advance, of $787 million as a noncurrent liability. The Company estimates that within the next 12 months it is reasonably possible that its uncertain tax positions excluding interest, could decrease by as much as $15 million, net as a result of statute of limitation lapses.
The Company recognizes interest and penalties related to income tax matters in income tax provision (benefit) in the consolidated statements of income and records the liability in the current or noncurrent accrued income taxes in the consolidated balance sheets, as appropriate. The Company had $117 million, $99 million, and $225 million of accrued gross interest and penalties at April 29, 2022, April 30, 2021, and April 24, 2020, respectively. During fiscal years 2022, 2021, and 2020, the Company recognized gross interest expense of $17 million, income of $44 million, and expense of $53 million, respectively, in income tax provision (benefit) in the consolidated statements of income.
The Company reserves for uncertain tax positions related to unresolved matters with the IRS and other taxing authorities. These reserves are subject to a high degree of estimation and management judgment. Resolution of these significant unresolved matters, or positions taken by the IRS or other tax authorities during future tax audits, could have a material impact on the Company’s financial results in future periods. The Company continues to believe that its reserves for uncertain tax positions are appropriate and that it has meritorious defenses for its tax filings and will vigorously defend them during the audit process, appellate process, and through litigation in courts, as necessary.
The major tax jurisdictions where the Company conducts business which remain subject to examination are as follows:
JurisdictionEarliest Year Open
United States - federal and state2005
Australia2018
Brazil2017
Canada2013
China2015
Costa Rica2018
Dominican Republic2019
France2019
Germany2014
India2002
Ireland2012
Israel2010
Italy2005
Japan2018
Korea2017
Luxembourg2017
Mexico2017
Puerto Rico2011
Singapore2016
Switzerland2010
United Kingdom2017
See Note 18 for additional information regarding the status of current tax audits and proceedings.