Income Taxes

12 Months Ended

Oct. 02, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for Income Taxes and Deferred Tax Assets and Liabilities

Income (Loss) Before Income Taxes	2021		2020		2019
Domestic (including U.S. exports)	$	5,241	$	4,706	$	12,389
Foreign subsidiaries(1)	(2,680)		(6,449)		1,534
Total income (loss) from continuing operations	2,561		(1,743)		13,923
Income (loss) from discontinued operations	(38)		(42)		726
	$	2,523	$	(1,785)	$	14,649

(1) Includes goodwill and intangible asset impairment in fiscal 2020.

Income Tax Expense (Benefit)
Current	2021		2020		2019
Federal	$	594	$	95	$	14
State	129		148		112
Foreign(1)	554		731		824
	1,277		974		950
Deferred
Federal	(526)		279		1,829
State	(220)		(29)		259
Foreign	(506)		(525)		(12)
	(1,252)		(275)		2,076
Income tax expense from continuing operations	25		699		3,026
Income tax expense from discontinued operations	(9)		(10)		39
	$	16	$	689	$	3,065

(1)Includes foreign withholding taxes.

Components of Deferred Tax (Assets) and Liabilities	October 2, 2021		October 3, 2020
Deferred tax assets
Net operating losses and tax credit carryforwards(1)	$	(3,944)	$	(3,137)
Accrued liabilities	(2,544)		(2,952)
Lease liabilities	(764)		(825)
Licensing revenues	(202)		—
Other	(725)		(652)
Total deferred tax assets	(8,179)		(7,566)
Deferred tax liabilities
Depreciable, amortizable and other property	7,916		8,256
Investment in U.S. entities	2,775		2,514
Right-of-use assets	697		740
Licensing revenues	—		189
Investment in foreign entities	392		266
Other	164		150
Total deferred tax liabilities	11,944		12,115
Net deferred tax liability before valuation allowance	3,765		4,549
Valuation allowance	2,795		2,410
Net deferred tax liability	$	6,560	$	6,959

(1)Balances as of October 2, 2021 and October 3, 2020 include approximately $1.6 billion and $1.4 billion, respectively, of International Theme Park net operating losses and approximately $1.0 billion and $0.7 billion, respectively of foreign tax credits in the U.S. The International Theme Park net operating losses are primarily in France and, to a lesser extent, Hong Kong and China. Losses in France and Hong Kong have an indefinite carryforward period and losses in China have a five-year carryforward period. China theme park net operating losses of $0.1 billion may expire between fiscal 2022 and fiscal 2027. Foreign tax credits in the U.S. have a ten-year carryforward period. Foreign tax credits of $1.0 billion may expire beginning fiscal 2028.

The following table details the change in valuation allowance for fiscal 2021, 2020 and 2019 (in billions):

	Balance at Beginning of Period		Charges to Tax Expense(1)		Changes Due to TFCF Acquisition		Balance at End of Period
Year ended October 2, 2021	$	2.4	$	0.4	$	—	$	2.8
Year ended October 3, 2020	1.9		0.6		(0.1)		2.4
Year ended September 28, 2019	1.4		(0.1)		0.6		1.9

(1) Charges to tax expense in fiscal 2021 and fiscal 2020 are primarily due to International Theme Parks net operating losses.

Reconciliation of the effective income tax rate to the federal rate for continuing operations

	2021		2020(1)		2019
Federal income tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	1.9		4.3		1.9
Tax rate differential on foreign income	12.0		(16.5)		0.3
Foreign derived intangible income	(6.4)		—		(1.1)
Excess tax benefits from equity awards	(5.3)		3.7		(0.3)
Legislative changes	(12.2)		4.4		(0.3)
Income tax audits and reserves	(4.8)		(6.1)		(0.6)
Goodwill impairment	—		(41.1)		—
Valuation allowance	2.6		(14.6)		0.1
Other	(7.8)		4.8		0.7
	1.0	%	(40.1	%)	21.7	%

(1)In fiscal 2020, the Company had a pre-tax loss. Positive amounts reflect tax benefits, whereas negative amounts reflect tax expense.

The effective income tax rate in the current year was lower than the U.S. statutory rate due to favorable adjustments related to prior years and excess tax benefits on employee share-based awards, partially offset by an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit. The effective income tax rate in the prior year included an unfavorable impact of the goodwill impairment, which was not tax deductible, the impact of higher tax rates on foreign earnings than U.S. statutory rates and an unfavorable impact from foreign losses for which we are unable to recognize a tax benefit.

Unrecognized tax benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding the related accrual for interest, is as follows:

	2021		2020		2019
Balance at the beginning of the year	$	2,740	$	2,952	$	648
Increases due to acquisitions	—		34		2,728
Increases for current year tax positions	51		26		84
Increases for prior year tax positions	556		134		143
Decreases in prior year tax positions	(174)		(99)		(61)
Settlements with taxing authorities	(532)		(307)		(590)
Balance at the end of the year	$	2,641	$	2,740	$	2,952

The fiscal year-end 2021, 2020 and 2019 balances include $2.0 billion, $2.1 billion and $2.4 billion, respectively, that if recognized, would reduce our income tax expense and effective tax rate. These amounts are net of the offsetting benefits from other tax jurisdictions.

At October 2, 2021, October 3, 2020 and September 28, 2019, the Company had $1.0 billion, $1.1 billion and $1.0 billion, respectively, in accrued interest and penalties related to unrecognized tax benefits. During fiscal 2021, 2020 and 2019, the Company recorded additional interest and penalties of $191 million, $211 million and $802 million (of which the substantial majority is due to the acquisition of TFCF), respectively, and recorded reductions in accrued interest and penalties of $256

million, $101 million and $96 million, respectively, as a result of audit settlements and other prior-year adjustments. The Company’s policy is to report interest and penalties as a component of income tax expense.

The Company is no longer subject to U.S. federal examination for years prior to 2018 for The Walt Disney Company and for years prior to 2016 for TFCF. The Company is no longer subject to examination in any of its major state or foreign tax jurisdictions for years prior to 2008.

In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to the resolution of certain tax matters, which could include payments on those tax matters. These resolutions and payments could reduce our unrecognized tax benefits by $0.4 billion.

Intra-Entity Transfers of Assets Other Than Inventory

At the beginning of fiscal 2019, the Company adopted new FASB accounting guidance that requires recognition of the income tax consequences of an intra-entity transfer of an asset (other than inventory) when the transfer occurs instead of when the asset is ultimately sold to an outside party. In the first quarter of fiscal 2019, the Company recorded a $0.2 billion deferred tax asset with an offsetting increase to retained earnings.

Other

In fiscal 2021, 2020 and 2019, the Company recognized income tax benefits of $135 million, $64 million and $41 million, respectively for the excess of equity-based compensation deductions over amounts recorded based on the grant date fair value.