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Income Taxes
 12 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2023, 2022 and 2021, consisted of the following (in millions):
202320222021
Federal:
Current$9,445 $7,890 $8,257 
Deferred(3,644)(2,265)(7,176)
Total5,801 5,625 1,081 
State:
Current1,570 1,519 1,620 
Deferred(49)84 (338)
Total1,521 1,603 1,282 
Foreign:
Current8,750 8,996 9,424 
Deferred669 3,076 2,740 
Total9,419 12,072 12,164 
Provision for income taxes$16,741 $19,300 $14,527 
The foreign provision for income taxes is based on foreign pretax earnings of $72.9 billion, $71.3 billion and $68.7 billion in 2023, 2022 and 2021, respectively.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2023, 2022 and 2021) to income before provision for income taxes for 2023, 2022 and 2021, is as follows (dollars in millions):
202320222021
Computed expected tax$23,885 $25,012 $22,933 
State taxes, net of federal effect1,124 1,518 1,151 
Earnings of foreign subsidiaries(5,744)(4,366)(4,715)
Research and development credit, net(1,212)(1,153)(1,033)
Excess tax benefits from equity awards(1,120)(1,871)(2,137)
Foreign-derived intangible income deduction— (296)(1,372)
Other(192)456 (300)
Provision for income taxes$16,741 $19,300 $14,527 
Effective tax rate14.7 %16.2 %13.3 %
Deferred Tax Assets and Liabilities
As of September 30, 2023 and September 24, 2022, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
20232022
Deferred tax assets:
Tax credit carryforwards$8,302 $6,962 
Accrued liabilities and other reserves6,365 6,515 
Capitalized research and development6,294 1,267 
Deferred revenue4,571 5,742 
Unrealized losses2,447 2,913 
Lease liabilities2,421 2,400 
Other2,343 3,407 
Total deferred tax assets32,743 29,206 
Less: Valuation allowance(8,374)(7,530)
Total deferred tax assets, net24,369 21,676 
Deferred tax liabilities:
Right-of-use assets2,179 2,163 
Depreciation1,998 1,582 
Minimum tax on foreign earnings1,940 1,983 
Unrealized gains511 942 
Other490 469 
Total deferred tax liabilities7,118 7,139 
Net deferred tax assets$17,251 $14,537 
As of September 30, 2023, the Company had $5.2 billion in foreign tax credit carryforwards in Ireland and $3.0 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 30, 2023, the total amount of gross unrecognized tax benefits was $19.5 billion, of which $9.5 billion, if recognized, would impact the Company’s effective tax rate. 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 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 2023, 2022 and 2021, is as follows (in millions):
202320222021
Beginning balances$16,758 $15,477 $16,475 
Increases related to tax positions taken during a prior year2,044 2,284 816 
Decreases related to tax positions taken during a prior year(1,463)(1,982)(1,402)
Increases related to tax positions taken during the current year2,628 1,936 1,607 
Decreases related to settlements with taxing authorities(19)(28)(1,838)
Decreases related to expiration of the statute of limitations(494)(929)(181)
Ending balances$19,454 $16,758 $15,477 
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 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 $4.5 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 “ECJ”) and a hearing was held on May 23, 2023. A decision from the ECJ is expected in calendar year 2024. The Company believes it would be eligible to claim a U.S. foreign tax credit for a portion of any incremental Irish corporate income taxes potentially due related to the State Aid Decision.
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 30, 2023, 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 4, “Financial Instruments” for more information.