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Taxes on Earnings
 12 Months Ended
Jul. 31, 2022
Income Tax Disclosure [Abstract]  
Taxes on Earnings Taxes on Earnings
The provision for income taxes on earnings from continuing operations consists of the following:
(Millions)202220212020
Income taxes:
Currently payable:
Federal$160 $151 $152 
State22 34 26 
Non-U.S. 15 6 3 
197 191 181 
Deferred:
Federal29 102 (12)
State(6)33 4 
Non-U.S. (2)2 1 
21 137 (7)
$218 $328 $174 

(Millions)202220212020
Earnings from continuing operations before income taxes:
United States$948 $1,308 $737 
Non-U.S. 27 28 29 
$975 $1,336 $766 
The following is a reconciliation of the effective income tax rate on continuing operations to the U.S. federal statutory income tax rate:
 202220212020
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income taxes (net of federal tax benefit)2.2 2.8 3.4 
Tax effect of international items0.7 0.2 (0.3)
State income tax law changes
(1.0)0.3 0.1 
Divestiture impact on deferred taxes— (0.9)— 
Legal entity reorganization— 1.4 — 
Capital loss on the sale of the Plum baby food and snacks business
— (1.3)— 
Capital loss valuation allowance on the sale of the Plum baby food and snacks business— 1.3 — 
Benefit on sale of the European chips business— — (1.3)
Other(0.5)(0.2)(0.2)
Effective income tax rate22.4 %24.6 %22.7 %
In the second quarter of 2021, we recorded a $19 million deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance.
Deferred tax liabilities and assets are comprised of the following:
(Millions)20222021
Depreciation$354 $352 
Amortization870 869 
Operating lease ROU assets54 53 
Pension35 45 
Other9 9 
Deferred tax liabilities1,322 1,328 
Benefits and compensation119 127 
Pension benefits28 38 
Tax loss carryforwards13 24 
Capital loss carryforwards115 117 
Operating lease liabilities54 53 
Other52 61 
Gross deferred tax assets381 420 
Deferred tax asset valuation allowance(131)(142)
Deferred tax assets, net of valuation allowance250 278 
Net deferred tax liability$1,072 $1,050 
At July 31, 2022, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately $259 million. Of these carryforwards, $4 million may be carried forward indefinitely, and $255 million expire between 2023 and 2037, with the majority expiring after 2028. At July 31, 2022, deferred tax asset valuation allowances have been established to offset $78 million of these tax loss carryforwards. Additionally, as of July 31, 2022, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $477 million, all of which were offset by valuation allowances.
The net change in the deferred tax asset valuation allowance in 2022 was a decrease of $11 million. The decrease was primarily due to liquidation of an inactive subsidiary. The net change in the deferred tax asset valuation allowance in 2021 was an increase of $20 million. The increase was primarily due to the sale of the the Plum baby food and snacks business. The net change in the deferred tax asset valuation allowance in 2020 was a decrease of $305 million. The decrease was primarily due to the sale of the Arnott's and other international operations. 
As of July 31, 2022, and August 1, 2021, other deferred tax assets included $13 million of state tax credit carryforwards related to various states that expire between 2023 and 2025. As of July 31, 2022, and August 1, 2021, deferred tax asset valuation allowances have been established to offset the $13 million of state credit carryforwards.
As of July 31, 2022, we had approximately $11 million of undistributed earnings of foreign subsidiaries which are deemed to be permanently reinvested and for which we have not recognized a deferred tax liability. We estimate that the tax liability that might be incurred if permanently reinvested earnings were remitted to the U.S. would not be material. Foreign subsidiary earnings in 2021 and thereafter are not considered permanently reinvested and we have therefore recognized a deferred tax liability and expense.
A reconciliation of the activity related to unrecognized tax benefits follows:
(Millions)202220212020
Balance at beginning of year$22 $23 $24 
Increases related to prior-year tax positions4 — — 
Decreases related to prior-year tax positions(10)(1)(1)
Increases related to current-year tax positions1 3 2 
Settlements(2)— (1)
Lapse of statute(1)(3)(1)
Balance at end of year$14 $22 $23 
The decrease of unrecognized tax benefits was primarily due to audit settlements. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $12 million as of July 31, 2022, and $18 million as of August 1, 2021 and August 2, 2020. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes.
Our accounting policy for interest and penalties attributable to income taxes is to reflect any expense or benefit as a component of our income tax provision. The total amount of interest and penalties recognized in the Consolidated Statements of Earnings was not material in 2022, 2021, and 2020. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was $4 million as of July 31, 2022, and as of August 1, 2021.
We file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities, including the U.S. and Canada. With limited exceptions, we have been audited for income tax purposes in the U.S. through 2020 and in Canada through 2016. In addition, several state income tax examinations are in progress for the years 2016 to 2021.