XML 29 R16.htm IDEA: XBRL DOCUMENT v3.22.2.2
Income Taxes
 12 Months Ended
Jun. 26, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes were as follows:
Year Ended
June 26,
2022		June 27,
2021		June 28,
2020
 (in thousands)
United States$87,933 $120,161 $44,739 
Foreign5,105,181 4,250,643 2,530,239 
$5,193,114 $4,370,804 $2,574,978 

Significant components of the provision (benefit) for income taxes attributable to income before income taxes were as follows:
Year Ended
June 26,
2022		June 27,
2021		June 28,
2020
 (in thousands)
Federal:
Current$620,344 $437,525 $216,513 
Deferred(226,895)(139,531)(18,458)
393,449 297,994 198,055 
State:
Current20,759 13,560 4,724 
Deferred(19,096)(8,324)6,524 
1,663 5,236 11,248 
Foreign:
Current204,163 162,738 119,766 
Deferred(11,447)(3,622)(5,844)
192,716 159,116 113,922 
Total provision for income taxes$587,828 $462,346 $323,225 
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Significant components of the Company’s net deferred tax assets and liabilities were as follows:
June 26,
2022		June 27,
2021
 (in thousands)
Deferred tax assets:
Tax carryforwards$315,396 $281,022 
Allowances and reserves194,410 165,335 
Equity-based compensation8,845 7,322 
Inventory valuation differences52,323 28,877 
Outside basis differences of foreign subsidiaries421,056 193,734 
Operating lease liabilities50,294 37,562 
Finance lease assets35,754 35,600 
Intangible assets889 — 
Other23,955 22,575 
Gross deferred tax assets1,102,922 772,027 
Valuation allowance(308,724)(277,133)
Net deferred tax assets794,198 494,894 
Deferred tax liabilities:
Intangible assets— (3,113)
Capital assets(114,644)(81,412)
Amortization of goodwill(13,789)(13,161)
Right-of-use assets(50,294)(37,562)
Finance lease liabilities(52,379)(50,683)
Other(2,395)(1,369)
Gross deferred tax liabilities(233,501)(187,300)
Net deferred tax assets$560,697 $307,594 

The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2022 and 2021 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries and tax credits, and increases in gross deferred tax liabilities for capital assets.
The Company previously made an accounting policy election to record deferred taxes related to Global Intangible Low-Taxed Income (“GILTI”).
Realization of the Company’s net deferred tax assets is based upon the weighting of available evidence, including such factors as the recent earnings history and expected future taxable income. The Company believes it is more likely than not that such deferred tax assets will be realized with the exception of $308.7 million related to California deferred tax assets. At June 26, 2022, the Company continued to record a valuation allowance to offset the entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California.
At June 26, 2022, the Company had federal net operating loss carryforwards of $16.0 million. If not utilized, these losses will begin to expire in fiscal year 2023, and are subject to limitation on their utilization.
At June 26, 2022, the Company had state net operating loss carryforwards of $144.7 million. If not utilized, these losses will begin to expire in fiscal year 2023 and are subject to limitation on their utilization.
At June 26, 2022, the Company had state tax credit carryforwards of $467.5 million. Substantially all of these credits can be carried forward indefinitely.
A reconciliation of income tax expense provided at the federal statutory rate (21% in fiscal years 2022, 2021, and 2020) to actual income tax expense is as follows: 
Year Ended
June 26,
2022		June 27,
2021		June 28,
2020
 (in thousands)
Income tax expense computed at federal statutory rate$1,096,692 $917,869 $540,745 
State income taxes, net of federal tax benefit(35,584)(33,478)(28,046)
Foreign income taxed at different rates(407,989)(365,886)(146,023)
Settlements and reductions in uncertain tax positions(51,227)(13,613)(12,854)
Tax credits(96,440)(86,709)(88,762)
State valuation allowance, net of federal tax benefit43,502 39,477 30,923 
Equity-based compensation(13,168)(45,764)(23,248)
Other permanent differences and miscellaneous items52,042 50,450 50,490 
$587,828 $462,346 $323,225 
Effective from fiscal year 2022, the Company has a 15-year tax incentive ruling in Malaysia for one of its foreign subsidiaries. The statutory tax rate in Malaysia is 24%. The tax incentive provides exemptions on foreign income earned and is contingent upon meeting certain conditions. The Company expects to apply for renewals upon expiration. The impact of the tax incentive decreased worldwide taxes by approximately $574.7 million for fiscal year 2022. The benefit of the tax incentive on diluted earnings per share was approximately $4.09 in fiscal year 2022.
Earnings of the Company’s foreign subsidiaries included in consolidated retained earnings that are indefinitely reinvested in foreign operations aggregated to approximately $894.8 million at June 26, 2022. If these earnings were remitted to the United States, they would be subject to foreign withholding taxes of approximately $137.0 million at the current statutory rates. The potential tax expense associated with these foreign withholding taxes would be offset by $109.6 million of foreign tax credits that would be generated in the United States upon remittance.
On August 16, 2022, the Inflation Reduction Act was signed into law. In general, the provisions of the IRA will be effective beginning with the Company’s fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. The Company is in the process of evaluating the potential impacts of the IRA. The impact on income taxes due to changes in legislation is required under the authoritative guidance of ASC 740, Income Taxes, to be recognized in the period in which the law is enacted. While the Company does not currently expect the IRA to have a material impact on our effective tax rate, our analysis is ongoing and incomplete, and it is possible that the IRA could have a material adverse effect on the Company’s tax liability. The Company will continue to monitor issuance of additional guidance.
The Company’s gross uncertain tax positions were $617.4 million, $566.8 million, and $476.7 million as of June 26, 2022, June 27, 2021, and June 28, 2020, respectively. During fiscal year 2022, gross uncertain tax positions increased by $50.6 million. The amount of uncertain tax positions that, if recognized, would impact the effective tax rate was $539.6 million, $504.4 million, and $423.8 million, as of June 26, 2022, June 27, 2021, and June 28, 2020, respectively.
The aggregate changes in the balance of gross uncertain tax positions were as follows: 
(in thousands)
Balance as of June 30, 2019$420,772 
Settlements and effective settlements with tax authorities(1,836)
Lapse of statute of limitations(8,026)
Increases in balances related to tax positions taken during prior periods3,206 
Decreases in balances related to tax positions taken during prior periods(3,989)
Increases in balances related to tax positions taken during current period66,568 
Balance as of June 28, 2020476,695 
Settlements and effective settlements with tax authorities(1,443)
Lapse of statute of limitations(8,456)
Increases in balances related to tax positions taken during prior periods15,986 
Decreases in balances related to tax positions taken during prior periods(2,746)
Increases in balances related to tax positions taken during current period86,735 
Balance as of June 27, 2021566,771 
Settlements and effective settlements with tax authorities(14,440)
Lapse of statute of limitations(8,021)
Increases in balances related to tax positions taken during prior periods6,468 
Decreases in balances related to tax positions taken during prior periods(28,376)
Increases in balances related to tax positions taken during current period94,971 
Balance as of June 26, 2022$617,373 
The Company recognizes interest expense and penalties related to the above uncertain tax positions within income tax expense. The Company had accrued $61.2 million, $54.6 million, and $40.2 million cumulatively for gross interest and penalties as of June 26, 2022, June 27, 2021, and June 28, 2020, respectively.
The Company is subject to audits by state and foreign tax authorities. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the relevant taxing authorities will occur.
The Company files U.S. federal, U.S. state, and foreign income tax returns. As of June 26, 2022, tax years 2004-2022 remain subject to examination in the jurisdictions where the Company operates. The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax return for the fiscal year ended June 24, 2018. As of June 26, 2022, the IRS has proposed adjustments resulting in a tax liability increase of approximately $50.0 million. If the Company agrees to the proposed adjustments, cash settlements with respect to the increased liabilities will be made accordingly.
The Company is in various stages of examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its uncertain tax positions as a result of tax examinations or lapses of statutes of limitation. The change in uncertain tax positions may range up to $20.0 million.