Income Taxes (Tables)

12 Months Ended

Sep. 29, 2012

Provision for Income Taxes

The provision for income taxes for 2012, 2011, and 2010, consisted of the following (in millions):

	2012			2011			2010
Federal:
Current	$	7,240		$	3,884		$	2,150
Deferred		5,018			2,998			1,676
		12,258			6,882			3,826
State:
Current		1,182			762			655
Deferred		(123	)		37			(115	)
		1,059			799			540
Foreign:
Current		1,203			769			282
Deferred		(490	)		(167	)		(121	)
		713			602			161
Provision for income taxes	$	14,030		$	8,283		$	4,527

Reconciliation of Provision for Income Taxes

A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2012, 2011 and 2010) to income before provision for income taxes for 2012, 2011, and 2010, is as follows (in millions):

	2012			2011			2010
Computed expected tax	$	19,517		$	11,973		$	6,489
State taxes, net of federal effect		677			552			351
Indefinitely invested earnings of foreign subsidiaries		(5,895	)		(3,898	)		(2,125	)
Research and development credit, net		(103	)		(167	)		(23	)
Domestic production activities deduction		(328	)		(168	)		(48	)
Other		162			(9	)		(117	)
Provision for income taxes	$	14,030		$	8,283		$	4,527
Effective tax rate		25.2%			24.2%			24.4%

Significant Components of Deferred Tax Assets and Liabilities

As of September 29, 2012 and September 24, 2011, the significant components of the Company’s deferred tax assets and liabilities were (in millions):

	2012			2011
Deferred tax assets:
Accrued liabilities and other reserves	$	2,101		$	1,610
Basis of capital assets and investments		447			390
Share-based compensation		395			355
Other		1,094			795
Total deferred tax assets		4,037			3,150
Less valuation allowance		0			0
Deferred tax assets, net of valuation allowance		4,037			3,150
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries		14,712			8,896
Other		193			272
Total deferred tax liabilities		14,905			9,168
Net deferred tax liabilities	$	(10,868	)	$	(6,018	)

Aggregate Changes in Gross Unrecognized Tax Benefits Excluding Interest and Penalties

The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2012, 2011, and 2010, is as follows (in millions):

	2012			2011			2010
Beginning Balance	$	1,375		$	943		$	971
Increases related to tax positions taken during a prior year		340			49			61
Decreases related to tax positions taken during a prior year		(107	)		(39	)		(224	)
Increases related to tax positions taken during the current year		467			425			240
Decreases related to settlements with taxing authorities		(3	)		0			(102	)
Decreases related to expiration of statute of limitations		(10	)		(3	)		(3	)
Ending Balance	$	2,062		$	1,375		$	943