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Income Taxes
 12 Months Ended
Sep. 24, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2022, 2021 and 2020, consisted of the following (in millions):
202220212020
Federal:
Current
$7,890 $8,257 $6,306 
Deferred
(2,265)(7,176)(3,619)
Total
5,625 1,081 2,687 
State:
Current
1,519 1,620 455 
Deferred
84 (338)21 
Total
1,603 1,282 476 
Foreign:
Current
8,996 9,424 3,134 
Deferred
3,076 2,740 3,383 
Total
12,072 12,164 6,517 
Provision for income taxes
$19,300 $14,527 $9,680 
The foreign provision for income taxes is based on foreign pretax earnings of $71.3 billion, $68.7 billion and $38.1 billion in 2022, 2021 and 2020, respectively.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2022, 2021 and 2020) to income before provision for income taxes for 2022, 2021 and 2020, is as follows (dollars in millions):
202220212020
Computed expected tax
$25,012 $22,933 $14,089 
State taxes, net of federal effect
1,518 1,151 423 
Impacts of the Act542 — (582)
Earnings of foreign subsidiaries(4,366)(4,715)(2,534)
Foreign-derived intangible income deduction(296)(1,372)(169)
Research and development credit, net
(1,153)(1,033)(728)
Excess tax benefits from equity awards
(1,871)(2,137)(930)
Other
(86)(300)111 
Provision for income taxes
$19,300 $14,527 $9,680 
Effective tax rate
16.2 %13.3 %14.4 %
Deferred Tax Assets and Liabilities
As of September 24, 2022 and September 25, 2021, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
20222021
Deferred tax assets:
Amortization and depreciation
$1,496 $5,575 
Accrued liabilities and other reserves
6,515 5,895 
Lease liabilities2,400 2,406 
Deferred revenue5,742 5,399 
Unrealized losses2,913 53 
Tax credit carryforwards6,962 4,262 
Other1,596 1,639 
Total deferred tax assets27,624 25,229 
Less: Valuation allowance(7,530)(4,903)
Total deferred tax assets, net
20,094 20,326 
Deferred tax liabilities:
Minimum tax on foreign earnings
1,983 4,318 
Right-of-use assets2,163 2,167 
Unrealized gains942 203 
Other
469 565 
Total deferred tax liabilities
5,557 7,253 
Net deferred tax assets$14,537 $13,073 
As of September 24, 2022, the Company had $4.4 billion in foreign tax credit carryforwards in Ireland and $2.5 billion in California R&D credit carryforwards, both of which can be carried forward indefinitely. A valuation allowance has been recorded for the credit carryforwards and a portion of other temporary differences.
Uncertain Tax Positions
As of September 24, 2022, the total amount of gross unrecognized tax benefits was $16.8 billion, of which $8.0 billion, if recognized, would impact the Company’s effective tax rate. 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 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 2022, 2021 and 2020, is as follows (in millions):
202220212020
Beginning balances
$15,477 $16,475 $15,619 
Increases related to tax positions taken during a prior year
2,284 816 454 
Decreases related to tax positions taken during a prior year
(1,982)(1,402)(791)
Increases related to tax positions taken during the current year
1,936 1,607 1,347 
Decreases related to settlements with taxing authorities
(28)(1,838)(85)
Decreases related to expiration of the statute of limitations
(929)(181)(69)
Ending balances
$16,758 $15,477 $16,475 
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 2017 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 $4.8 billion.
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 24, 2022, 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.