The Company's effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where the Company's income is earned. The reconciliation of income tax computed at the U.S. federal statutory rates to income tax expense for fiscal 2021, fiscal 2020 and fiscal 2019 is as follows:


	2021			2020			2019
U.S. federal statutory tax rate	21.0		%	21.0		%	21.0		%
Income tax provision reconciliation:
Tax at statutory rate	$	279,030		$	275,439		$	312,003
Net foreign income subject to lower tax rate	(227,470)			(225,937)			(242,893)
State income taxes, net of federal benefit	(28,052)			(23,537)			(31,265)
Valuation allowance	13,263			13,655			34,069
Federal research and development tax credits	(37,902)			(31,055)			(50,769)
Change in uncertain tax positions	(1,061)			(13,304)			7,233
Amortization of purchased intangibles	146,094			101,906			111,547
Acquisition and integration costs	11,367			1,714			—
Taxes attributable to the Tax Cuts and Jobs Act of 2017	—			—			(7,500)
U.S. effects of international operations	(24,624)			11,903			19,782
Windfalls (under ASU 2016-09)	(26,365)			(16,240)			(28,677)

Intra-entity transfer of intangible assets	(188,804)			—			—
Other, net	22,816			(3,688)			(813)
Total income tax (benefit) provision	$	(61,708)		$	90,856		$	122,717

Income before income taxes for fiscal 2021, fiscal 2020 and fiscal 2019 includes the following components:


Income before income taxes (1)	2021		2020		2019

Domestic	$	508,100	$	355,442	$	484,876
Foreign	820,614		956,175		1,000,852
Income before income taxes	$	1,328,714	$	1,311,617	$	1,485,728

The components of the (benefit from) provision for income taxes for fiscal 2021, fiscal 2020 and fiscal 2019 are as follows:


	2021		2020		2019
Current:
Federal tax	$	134,652	$	64,876	$	74,049
State	7,772		4,882		2
Foreign	202,790		135,046		139,919
Total current	$	345,214	$	204,804	$	213,970
Deferred:
Federal	$	515,541	$	(159,229)	$	(158,472)
State	(12,444)		(12,684)		(3,627)
Foreign	(910,019)		57,965		70,846
Total deferred	$	(406,922)	$	(113,948)	$	(91,253)
(Benefit from) provision for income tax	$	(61,708)	$	90,856	$	122,717

U.S. Tax Legislation subjects a U.S. shareholder to tax on global intangible low-taxed income (GILTI). Under U.S. GAAP, an accounting policy election can be made to either treat taxes due on the GILTI inclusion as a current period expense or to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years. The Company elected the deferral method and recorded the corresponding GILTI deferred tax assets and liabilities on its Consolidated Balance Sheets.

The Company carries other outside basis differences in its subsidiaries, primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested. As of October 30, 2021, the Company has not recognized deferred income tax on $33.6 billion of outside basis differences because of its intent and ability to indefinitely reinvest these basis differences. These basis differences could be reversed through a sale of the subsidiaries or the receipt of dividends from the subsidiaries, as well as various other events, none of which are considered probable at this time. Determination of the amount of unrecognized deferred income tax liability related to these outside basis differences is not practicable.

The Company adopted ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16) in the first quarter of fiscal 2019 using the modified retrospective method with a cumulative-effect adjustment directly to retained earnings. The adoption of ASU 2016-16 resulted in a net cumulative-effect adjustment that resulted in an increase in retained earnings of $331.0 million, by recording new deferred tax assets from intra-entity transfers involving assets other than inventory, partially offset by a U.S. deferred tax liability related to GILTI. Adoption of the standard resulted in an increase in long-term deferred tax assets of $1.7 billion and an increase in long-term deferred tax liabilities of $1.3 billion.

The significant components of the Company’s deferred tax assets and liabilities for fiscal 2021 and fiscal 2020 are as follows:


	2021		2020
Deferred tax assets:
Inventory reserves	$	—	$	17,074

Reserves for compensation and benefits	64,274		54,428
Tax credit carryovers	295,345		163,507

Stock-based compensation	26,541		12,758


Net operating losses	62,876		8,546
Intra-entity transfer of intangible assets	2,002,041		1,479,944
Lease liability	60,954		55,250
Other	248,075		159,838
Total gross deferred tax assets	2,760,106		1,951,345
Valuation allowance	(315,434)		(154,130)
Total deferred tax assets	2,444,672		1,797,215
Deferred tax liabilities:
Inventory reserves	(18,570)		—
Depreciation	(91,846)		(7,409)
Deferred GILTI tax liabilities	(3,059,919)		(1,183,955)
Right of use asset	(53,686)		(51,055)
Acquisition-related intangible	(892,212)		(971,327)

Total gross deferred tax liabilities	(4,116,233)		(2,213,746)
Net deferred tax liabilities	$	(1,671,561)	$	(416,531)

The valuation allowances of $315.4 million and $154.1 million as of October 30, 2021 and October 31, 2020, respectively, are valuation allowances primarily for the Company’s foreign net operating loss and international credit carryforwards with additional amounts from the Acquisition for federal, state and international net operating losses and R&D credit carryforwards. The Company believes that it is more-likely-than-not that these credit carryovers will not be realized and as a result has recorded a partial valuation allowance.

The federal and state net operating losses of $137.5 million will begin to expire in fiscal 2022 while foreign net operating loss carryovers of $165.0 million have no expiration date. There are also $276.2 million of state credit carryovers and $14.2 million of foreign investment tax credit carryovers that begin to expire in the fiscal year ending November 1, 2025.

As of October 30, 2021 and October 31, 2020, the Company had gross unrealized tax benefits of $132.5 million and $21.3 million, respectively, which if settled in the Company's favor, would lower the Company's effective tax rate in the period recorded. Liabilities for uncertain tax benefits are classified as non-current because the Company believes that the ultimate payment or settlement of these liabilities may not occur within the next twelve months. As of October 30, 2021 and October 31, 2020, the Company had a liability of approximately $38.0 million and $3.4 million, respectively, for interest and penalties, which is included within the (benefit from) provision for taxes in the Consolidated Statements of Income.

The following table summarizes the changes in the total amounts of unrealized tax benefits for fiscal 2019 through fiscal 2021:


	Unrealized Tax Benefits

























Balance, November 3, 2018	$	13,256
Additions for tax positions related to current year	3,398

Additions for tax positions related to prior years	18,613
Reductions due to lapse of applicable statute of limitations	(924)
Balance, November 2, 2019	$	34,343
Additions for tax positions related to current year	3,270
Reductions for tax positions related to prior years	(16,152)
Reductions due to lapse of applicable statute of limitations	(170)
Balance, October 31, 2020	$	21,291
Additions for tax positions related to current year	4,713
Additions for tax positions related to the Acquisition	91,179
Additions for tax positions related to prior years	19,790
Reductions due to lapse of applicable statute of limitations	(4,452)
Balance, October 30, 2021	$	132,521

In fiscal 2020, the Company released reserves of $18.6 million, which included accrued interest as a result of the resolution of the amended tax return that was previously under review by the Joint Committee on Taxation, combined with other tax positions resolved by the closing of the Internal Revenue Service audit of Linear’s pre-acquisition federal income tax returns for fiscal 2015 through fiscal 2017.

In fiscal 2021, the Company acquired $125.5 million in reserves as part of the Acquisition consisting of $91.2 million in tax and $34.3 million in accrued interest. The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits, including accrued interest and penalties, could decrease up to $125.9 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $125.9 million primarily relates to matters involving federal taxation of international income and cross-border transactions.

The Company has numerous audits ongoing at any time throughout the world including: an IRS income tax audit for fiscal 2019 and fiscal 2018, a pre-acquisition IRS income tax audit related to Maxim for Maxim's fiscal years ended June 27, 2015 through June 24, 2017, various U.S. state and local tax audits and international audits. The Company’s U.S. federal tax returns prior to fiscal 2018 are no longer subject to examination, except for the Maxim pre-Acquisition fiscal years 2015 to 2017 noted above.

During the fourth quarter of fiscal 2018, the Company’s Irish tax resident subsidiary received an assessment, excluding any penalties and interest, for the fiscal year ended November 2, 2013 (fiscal 2013) of approximately €43.0 million, or approximately $51.0 million (as of October 30, 2021), from the Irish Revenue Commissioners (Irish Revenue). The assessment claimed that the Company’s Irish entity failed to conform to 2010 OECD Transfer Pricing Guidelines. During fiscal 2021, the Company settled the fiscal 2013 audit with Irish Revenue for an amount that was not material to the Company.

During fiscal 2019, Irish Revenue commenced transfer pricing audits of fiscal years ended November 1, 2014 (fiscal 2014) through the fiscal year ended November 3, 2017 (fiscal 2017). The Company settled the audits relating to fiscal 2014 through fiscal 2017 with either no assessment or for additional tax payments that were not material to the Company. The Company's Ireland tax returns prior to fiscal 2017 are no longer subject to examination.

The Company has a partial tax holiday in Malaysia whereby the local statutory rate is significantly reduced, if certain conditions are met. The tax holiday for Malaysia is effective through July 2025. The impact of the Malaysia tax holiday increased net income by approximately $5.3 million, $4.6 million and $14.9 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, resulting in increases in basic and diluted net income per common share by $0.01, $0.01 and $0.04 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.