XML 27 R12.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
 12 Months Ended
Sep. 25, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2021, 2020 and 2019, consisted of the following (in millions):
202120202019
Federal:
Current
$8,257 $6,306 $6,384 
Deferred
(7,176)(3,619)(2,939)
Total
1,081 2,687 3,445 
State:
Current
1,620 455 475 
Deferred
(338)21 (67)
Total
1,282 476 408 
Foreign:
Current
9,424 3,134 3,962 
Deferred
2,740 3,383 2,666 
Total
12,164 6,517 6,628 
Provision for income taxes
$14,527 $9,680 $10,481 
The foreign provision for income taxes is based on foreign pretax earnings of $68.7 billion, $38.1 billion and $44.3 billion in 2021, 2020 and 2019, respectively.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (21% in 2021, 2020 and 2019) to income before provision for income taxes for 2021, 2020 and 2019, is as follows (dollars in millions):
202120202019
Computed expected tax
$22,933 $14,089 $13,805 
State taxes, net of federal effect
1,151 423 423 
Impacts of the U.S. Tax Cuts and Jobs Act of 2017— (582)— 
Earnings of foreign subsidiaries(4,715)(2,534)(2,625)
Foreign-derived intangible income deduction(1,372)(169)(149)
Research and development credit, net
(1,033)(728)(548)
Excess tax benefits from equity awards
(2,137)(930)(639)
Other
(300)111 214 
Provision for income taxes
$14,527 $9,680 $10,481 
Effective tax rate
13.3 %14.4 %15.9 %
Deferred Tax Assets and Liabilities
As of September 25, 2021 and September 26, 2020, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
20212020
Deferred tax assets:
Amortization and depreciation
$5,575 $8,317 
Accrued liabilities and other reserves
5,895 4,934 
Lease liabilities2,406 2,038 
Deferred revenue5,399 1,638 
Tax credit carryforwards4,262 797 
Other1,639 1,612 
Total deferred tax assets25,176 19,336 
Less: Valuation allowance(4,903)(1,041)
Total deferred tax assets, net
20,273 18,295 
Deferred tax liabilities:
Minimum tax on foreign earnings
4,318 7,045 
Right-of-use assets2,167 1,862 
Unrealized gains203 526 
Other
512 705 
Total deferred tax liabilities
7,200 10,138 
Net deferred tax assets$13,073 $8,157 
Deferred tax assets and liabilities reflect the effects of tax credits and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company has elected to record certain deferred tax assets and liabilities in connection with the minimum tax on certain foreign earnings created by the U.S. Tax Cuts and Jobs Act of 2017 (the “Act”).
As of September 25, 2021, the Company had $2.6 billion in foreign tax credit carryforwards in Ireland and $1.6 billion in California research and development credit carryforwards, both of which can be carried forward indefinitely. A valuation allowance has been recorded for the tax credit carryforwards and a portion of other temporary differences.
Uncertain Tax Positions
As of September 25, 2021, the total amount of gross unrecognized tax benefits was $15.5 billion, of which $6.6 billion, if recognized, would impact the Company’s effective tax rate. As of September 26, 2020, the total amount of gross unrecognized tax benefits was $16.5 billion, of which $8.8 billion, if recognized, would have impacted the Company’s effective tax rate.
The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2021, 2020 and 2019, is as follows (in millions):
202120202019
Beginning balances
$16,475 $15,619 $9,694 
Increases related to tax positions taken during a prior year
816 454 5,845 
Decreases related to tax positions taken during a prior year
(1,402)(791)(686)
Increases related to tax positions taken during the current year
1,607 1,347 1,697 
Decreases related to settlements with taxing authorities
(1,838)(85)(852)
Decreases related to expiration of the statute of limitations
(181)(69)(79)
Ending balances
$15,477 $16,475 $15,619 
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. Tax years after 2015 for the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination. Although the timing of resolution and/or closure of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by as much as $1.2 billion.
Interest and Penalties
The Company includes interest and penalties related to income tax matters within the provision for income taxes. As of September 25, 2021 and September 26, 2020, the total amount of gross interest and penalties accrued was $1.5 billion and $1.4 billion, respectively. The Company recognized interest and penalty expense of $219 million, $85 million and $73 million in 2021, 2020 and 2019, respectively.
European Commission State Aid Decision
On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward. The recovery amount was calculated to be €13.1 billion, plus interest of €1.2 billion. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice. The Company believes that any incremental Irish corporate income taxes potentially due related to the State Aid Decision would be creditable against U.S. taxes, subject to any foreign tax credit limitations in the Act.
On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries. As of September 25, 2021, the adjusted recovery amount was €12.7 billion, excluding interest. The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings. Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 3, “Financial Instruments” for more information.