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Income Taxes
 12 Months Ended
Oct. 29, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
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 2022, fiscal 2021 and fiscal 2020 is as follows:
202220212020
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
Income tax provision reconciliation:   
Tax at statutory rate$650,737 $279,030 $275,439 
Net foreign income subject to lower tax rate(358,725)(227,470)(225,937)
State income taxes, net of federal benefit(15,615)(28,052)(23,537)
Valuation allowance29,737 13,263 13,655 
Federal research and development tax credits(58,625)(37,902)(31,055)
Change in uncertain tax positions19,394 (1,061)(13,304)
Amortization of purchased intangibles142,375 146,094 101,906 
Acquisition and integration costs— 11,367 1,714 
U.S. effects of international operations(47,665)(24,624)11,903 
Windfalls (under ASU 2016-09)(16,717)(26,365)(16,240)
Intra-entity transfer of intangible assets— (188,804)— 
Other, net5,292 22,816 (3,688)
Total income tax provision (benefit)$350,188 $(61,708)$90,856 
Income before income taxes for fiscal 2022, fiscal 2021 and fiscal 2020 includes the following components:
Income before income taxes (1)202220212020
Domestic$958,465 $508,100 $355,442 
Foreign2,140,284 820,614 956,175 
Income before income taxes$3,098,749 $1,328,714 $1,311,617 
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(1)Income before income taxes reflects deemed intercompany royalties in all periods presented.
The components of the provision for (benefit from) income taxes for fiscal 2022, fiscal 2021 and fiscal 2020 are as follows:
202220212020
Current:   
Federal tax$304,556 $134,652 $64,876 
State13,214 7,772 4,882 
Foreign359,173 202,790 135,046 
Total current$676,943 $345,214 $204,804 
Deferred:   
Federal$(341,777)$515,541 $(159,229)
State(612)(12,444)(12,684)
Foreign15,634 (910,019)57,965 
Total deferred$(326,755)$(406,922)$(113,948)
Provision for (benefit from) income tax$350,188 $(61,708)$90,856 
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 29, 2022, 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 significant components of the Company’s deferred tax assets and liabilities for fiscal 2022 and fiscal 2021 are as follows:
20222021
Deferred tax assets:  
Inventory reserves$16,584 $— 
Reserves for compensation and benefits60,871 64,274 
Tax credit carryovers327,671 295,345 
Stock-based compensation25,059 26,541 
Net operating losses43,696 62,876 
Intangible assets1,975,096 2,002,041 
Lease liability76,709 60,954 
Other248,796 248,075 
Total gross deferred tax assets2,774,482 2,760,106 
Valuation allowance(339,105)(315,434)
Total deferred tax assets2,435,377 2,444,672 
Deferred tax liabilities:  
Inventory reserves— (18,570)
Depreciation(96,660)(91,846)
Deferred GILTI tax liabilities(2,824,332)(3,059,919)
Right of use asset(55,858)(53,686)
Acquisition-related intangibles(816,177)(892,212)
Total gross deferred tax liabilities(3,793,027)(4,116,233)
Net deferred tax liabilities$(1,357,650)$(1,671,561)
The valuation allowances of $339.1 million and $315.4 million as of October 29, 2022 and October 30, 2021, respectively, are primarily for the Company’s state R&D credit carryforwards, foreign net operating loss and international 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 $142.4 million will begin to expire in fiscal 2023 while foreign net operating loss carryovers of $144.8 million have no expiration date. There are also $312.7 million of state credit carryovers and $15.0 million of foreign investment tax credit carryovers that begin to expire in the fiscal year ending November 1, 2025.
As of October 29, 2022 and October 30, 2021, the Company had unrealized tax benefits, net of indirect tax benefits, of $165.3 million and $132.5 million, respectively, which if settled in the Company's favor, would lower the Company's effective tax rate in the period recorded. Liabilities for unrealized tax benefits are primarily classified as non-current because the Company believes that the ultimate payment or settlement of these liabilities will not occur within the next twelve months. As of October 29, 2022 and October 30, 2021, the Company had liabilities of approximately $45.5 million and $38.0 million, respectively, for interest and penalties, which is included within the provision for (benefit from) income taxes in the Consolidated Statements of Income.
The following table summarizes the changes in the total amounts of unrealized tax benefits for fiscal 2020 through fiscal 2022:
Unrealized Tax Benefits
Balance, November 2, 2019
$34,343 
Additions for tax positions related to current year3,270 
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 year4,713 
Additions for tax positions related to prior years19,790 
Additions for tax positions related to the Acquisition91,179 
Reductions due to lapse of applicable statute of limitations(4,452)
Balance, October 30, 2021
$132,521 
Additions for tax positions related to the Acquisition15,267 
Additions for tax positions related to current year11,800 
Additions for tax positions related to prior years9,704 
Reductions due to lapse of applicable statute of limitations(3,965)
Balance, October 29, 2022
$165,327 
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.
In fiscal 2022, the Company continued to engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of unrealized tax benefits, including accrued interest and penalties, could decrease by up to $127.0 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $127.0 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 for Maxim's fiscal years ended June 27, 2015 through August 26, 2021, and 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 applicable Maxim pre-Acquisition fiscal years noted above.