Income Taxes

12 Months Ended

Oct. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income (Loss) Before Income Taxes by Domestic and Foreign Subsidiaries

Income (Loss) Before Income Taxes	2022		2021		2020
Domestic subsidiaries (including U.S. exports)	$	5,955	$	5,241	$	4,706
Foreign subsidiaries(1)	(670)		(2,680)		(6,449)
Total income (loss) from continuing operations	5,285		2,561		(1,743)
Loss from discontinued operations	(62)		(38)		(42)
	$	5,223	$	2,523	$	(1,785)

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

Provision for Income Taxes: Current and Deferred

Income Tax Expense (Benefit)
Current	2022		2021		2020
Federal	$	436	$	594	$	95
State	282		129		148
Foreign(1)	846		554		731
	1,564		1,277		974
Deferred
Federal	407		(526)		279
State	26		(220)		(29)
Foreign	(265)		(506)		(525)
	168		(1,252)		(275)
Income tax expense from continuing operations	1,732		25		699
Income tax expense from discontinued operations	(14)		(9)		(10)
	$	1,718	$	16	$	689

(1)Includes foreign withholding taxes.

Deferred Tax Assets and Liabilities

Components of Deferred Tax (Assets) and Liabilities	October 1, 2022		October 2, 2021
Deferred tax assets
Net operating losses and tax credit carryforwards(1)	$	(3,527)	$	(3,944)
Accrued liabilities	(1,570)		(2,544)
Lease liabilities	(748)		(764)
Licensing revenues	(124)		(80)
Other	(819)		(725)
Total deferred tax assets	(6,788)		(8,057)
Deferred tax liabilities
Depreciable, amortizable and other property	8,575		7,916
Investment in U.S. entities	1,798		2,653
Right-of-use assets	676		697
Investment in foreign entities	543		392
Other	64		164
Total deferred tax liabilities	11,656		11,822
Net deferred tax liability before valuation allowance	4,868		3,765
Valuation allowance	2,859		2,795
Net deferred tax liability	$	7,727	$	6,560

(1)Balances as of October 1, 2022 and October 2, 2021 include approximately $1.5 billion and $1.6 billion, respectively, of International Theme Park net operating losses and approximately $1.0 billion at both October 1, 2022 and October 2, 2021 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 $0.2 billion may expire between fiscal 2023 and fiscal 2028. Foreign tax credits in the U.S. have a ten-year carryforward period. Foreign tax credits of $1.0 billion may expire beginning fiscal 2026.

The following table details the change in valuation allowance for fiscal 2022, 2021 and 2020 (in billions):

	Balance at Beginning of Period		Charges to Tax Expense		Other Changes		Balance at End of Period
Year ended October 1, 2022	$	2.8	$	0.4	$	(0.3)	$	2.9
Year ended October 2, 2021	2.4		0.4		—		2.8
Year ended October 3, 2020	1.9		0.6		(0.1)		2.4

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

	2022		2021		2020(1)
Federal income tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	3.1		1.9		4.3
Tax rate differential on foreign income	4.3		12.0		(16.5)
Foreign derived intangible income	(3.4)		(6.4)		—
Excess tax benefits from equity awards	—		(5.3)		3.7
Legislative changes	1.7		(12.2)		4.4
Income tax audits and reserves	2.7		(4.8)		(6.1)
Goodwill impairment	—		—		(41.1)
Valuation allowance	4.5		2.6		(14.6)
Other	(1.1)		(7.8)		4.8
	32.8	%	1.0	%	(40.1	%)

(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 fiscal 2022 was higher than the U.S. statutory rate primarily due to higher effective tax rates on foreign earnings. The effective income tax rate in fiscal 2021 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 higher effective tax rates on foreign earnings. The effective income tax rate in fiscal 2020 included an unfavorable impact of the goodwill impairment, which was not tax deductible, and the impact of higher effective tax rates on foreign earnings than the U.S. statutory rate. Higher effective tax rates on foreign earnings in fiscal 2022, 2021 and 2020 reflected the impact of foreign losses and, to a lesser extent, foreign tax credits 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:

	2022		2021		2020
Balance at the beginning of the year	$	2,641	$	2,740	$	2,952
Increases for current year tax positions	48		51		26
Increases for prior year tax positions	103		556		168
Decreases in prior year tax positions	(108)		(174)		(99)
Settlements with taxing authorities	(235)		(532)		(307)
Balance at the end of the year	$	2,449	$	2,641	$	2,740

The fiscal year-end 2022, 2021 and 2020 balances include $1.9 billion, $2.0 billion and $2.1 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 1, 2022, October 2, 2021 and October 3, 2020, the Company had $1.0 billion, $1.0 billion and $1.1 billion, respectively, in accrued interest and penalties related to unrecognized tax benefits. During fiscal 2022, 2021 and 2020, the Company recorded additional interest and penalties of $157 million, $191 million and $211 million, respectively, and recorded reductions in accrued interest and penalties of $119 million, $256 million and $101 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 generally no longer subject to U.S. federal examination for years prior to 2018. 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 open tax matters, which would reduce our unrecognized tax benefits by $0.1 billion.

Other

In fiscal 2022, 2021 and 2020, the Company recognized income tax benefits of $2 million, $135 million and $64 million, respectively for the excess of equity-based compensation deductions over amounts recorded based on the grant date fair value.