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Taxes on Earnings
 12 Months Ended
Jul. 28, 2024
Income Tax Disclosure [Abstract]  
Taxes on Earnings Taxes on Earnings
The provision for income taxes on earnings consists of the following:
(Millions)202420232022
Income taxes:
Currently payable:
Federal$190 $229 $160 
State41 39 22 
Non-U.S. 6 7 15 
237 275 197 
Deferred:
Federal(37)(8)29 
State(9)2 (6)
Non-U.S. (1)1 (2)
(47)(5)21 
$190 $270 $218 
(Millions)202420232022
Earnings before income taxes:
United States$735 $1,105 $948 
Non-U.S. 22 23 27 
$757 $1,128 $975 
The following is a reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate:
 202420232022
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income taxes (net of federal tax benefit)3.2 2.9 2.2 
Tax effect of international items(0.1)— 0.7 
State income tax law changes
(0.1)0.1 (1.0)
Nondeductible executive compensation(1)
1.5 0.4 0.5 
Other(0.4)(0.5)(1.0)
Effective income tax rate25.1 %23.9 %22.4 %
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(1)The increase in 2024 is associated with the acquisition of Sovos Brands.
On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA introduces a corporate alternative minimum tax beginning in 2024, a 1% excise tax on share repurchases in excess of issuances after January 1, 2023, and several tax incentives to promote clean energy. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the Consolidated Statements of Equity. The provisions of the IRA did not have a material impact on our consolidated financial statements.
Deferred tax liabilities and assets are comprised of the following:
(Millions)20242023
Depreciation$353 $340 
Amortization1,260 881 
Operating lease ROU assets86 69 
Pension34 39 
Other10 8 
Deferred tax liabilities1,743 1,337 
Benefits and compensation113 112 
Pension benefits24 25 
Tax loss carryforwards7 10 
Capital loss carryforwards24 114 
Operating lease liabilities91 69 
Capitalized research and development34 15 
Other55 56 
Gross deferred tax assets348 401 
Deferred tax asset valuation allowance(29)(129)
Deferred tax assets, net of valuation allowance319 272 
Net deferred tax liability$1,424 $1,065 
At July 28, 2024, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately $145 million. Of these carryforwards, $13 million may be carried forward indefinitely, and $132 million expire between 2025 and 2045, with the majority expiring after 2028. At July 28, 2024, deferred tax asset valuation allowances have been established to offset $41 million of these tax loss carryforwards. Additionally, as of July 28, 2024, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $123 million, all of which were offset by valuation allowances. Of these capital loss carryforwards, $77 million expire in 2026, and $46 million may be carried forward indefinitely.
The net change in the deferred tax asset valuation allowance in 2024 was a decrease of $100 million. The decrease was primarily due to the expiration of capital loss carryforwards in 2024. The net change in the deferred tax asset valuation allowance in 2023 was a decrease of $2 million. The decrease was primarily due to state tax loss carryforwards. The net change in the deferred tax asset valuation allowance in 2022 was a decrease of $11 million. The decrease was primarily due to the liquidation of an inactive subsidiary.
As of July 30, 2023, other deferred tax assets included $12 million of state tax credit carryforwards. As of July 30, 2023, deferred tax asset valuation allowances had been established to offset the state tax credit carryforwards. As of July 28, 2024, the state tax credit carryforwards have expired.
As of July 28, 2024, 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)202420232022
Balance at beginning of year$15 $14 $22 
Increases related to prior-year tax positions2 — 4 
Decreases related to prior-year tax positions— — (10)
Increases related to current-year tax positions2 2 1 
Settlements— — (2)
Lapse of statute(2)(1)(1)
Balance at end of year$17 $15 $14 
The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $14 million as of July 28, 2024, and $12 million as of July 30, 2023, and July 31, 2022. 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 2024, 2023, and 2022. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was $6 million as of July 28, 2024, and $5 million as of July 30, 2023.
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 2021 and in Canada through 2016. In addition, several state income tax examinations are in progress for the years 2015 to 2023.