Income Taxes

6 Months Ended

Oct. 27, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Israeli Central-Lod District Court issued its decision in Medtronic Ventor Technologies Ltd (Ventor) v. Kfar Saba Assessing Office on June 1, 2023. The court determined that there was a deemed taxable transfer of intellectual property. As a result, the Company recorded a $187 million income tax charge during the six months ended October 27, 2023. Subsequent to October 27, 2023, the Company filed an appeal with the Supreme Court of Israel.

Our effective tax rate for the three and six months ended October 27, 2023 was 30.6% and 32.0%, respectively, as compared to 68.7% and 44.0% for the three and six months ended October 28, 2022, respectively. The decrease in our effective tax rate for the three months ended October 27, 2023 primarily relates to the $764 million income tax charge recorded during the three months ended October 28, 2022 related to the U.S. Tax Court decision, which was partially offset by an increase in Puerto Rico withholding tax rates and the establishment of a valuation allowance on certain net operating losses recorded during the three months ended October 27, 2023. In addition to the items discussed in the current quarter, the decrease in the effective tax rate for the six months ended October 27, 2023 was also attributable to the Ventor court decision noted above.

At October 27, 2023 and April 28, 2023, the Company's gross unrecognized tax benefits were $2.8 billion and $2.7 billion, respectively. During the three months ended October 27, 2023, the Company made a $193 million payment to the Internal Revenue Service. After considering advance payments and deposits, the Company had no accrued gross interest and penalties at October 27, 2023. If all of the Company’s unrecognized tax benefits were recognized, approximately $2.6 billion would impact the Company’s effective tax rate. At both October 27, 2023 and April 28, 2023, the amount of the Company's gross unrecognized tax benefits, net of cash advance, recorded as a noncurrent liability within accrued income taxes on the consolidated balance sheets was $1.8 billion. The Company recognizes interest and penalties related to income tax matters within income tax provision in the consolidated statements of income and records the liability within either current or noncurrent accrued income taxes on the consolidated balance sheets.

Refer to Note 16 to the consolidated financial statements for additional information regarding the status of current tax audits and proceedings.