
For the year ended	2020		2019		2018

Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees
U.S.	$	308	$	(67)	$	141
Foreign	2,675		7,115		14,166
	$	2,983	$	7,048	$	14,307

Income tax (provision) benefit
Current
U.S. federal	$	(20)	$	(36)	$	(54)
State	(2)		(2)		1
Foreign	(148)		(319)		(374)
	(170)		(357)		(427)
Deferred
U.S. federal	39		(146)		232
State	23		91		101
Foreign	(172)		(281)		(74)
	(110)		$	(336)	259

Income tax (provision) benefit	$	(280)	$	(693)	$	(168)

On December 22, 2017, the United States enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), which imposed a one-time transition tax in 2018 (the “Repatriation Tax”) and, beginning in 2019, created a new minimum tax on certain foreign earnings (the “Foreign Minimum Tax”). We recognize the Foreign Minimum Tax in the period the tax is incurred.

Pursuant to SEC Staff Accounting Bulletin No. 118, measurement period adjustments in 2019 included $47 million of benefit for the Repatriation Tax, net of adjustments related to uncertain tax positions. Provisional estimates in 2018 included $1.34 billion of benefit for the release of the valuation allowance on the net deferred tax assets of our U.S. operations and $1.03 billion of provision for the Repatriation Tax, net of adjustments related to uncertain tax positions.


For the year ended	2020						2019						2018

U.S. federal income tax (provision) benefit at statutory rate	$	(626)	21.0	%	$	(1,480)	21.0	%	$	(3,677)	25.7	%
Change in unrecognized tax benefits	(33)		1.1	%	(59)		0.8	%	60		(0.4)	%
Change in valuation allowance	(20)		0.7	%	(40)		0.6	%	2,079		(14.5)	%
U.S. tax on foreign operations	(14)		0.5	%	(327)		4.6	%	(20)		0.1	%
Foreign tax rate differential	253		(8.5)	%	993		(14.1)	%	2,606		(18.2)	%
Foreign derived intangible income deduction	67		(2.2)	%	—		—	%	—		—	%
Research and development tax credits	62		(2.1)	%	92		(1.3)	%	67		(0.5)	%
State taxes, net of federal benefit	23		(0.8)	%	102		(1.4)	%	(84)		0.6	%
Repatriation Tax related to the Tax Act	—		—	%	(10)		0.1	%	(1,049)		7.3	%
Remeasurement of deferred tax assets and liabilities related to the Tax Act	—		—	%	—		—	%	(179)		1.3	%
Other	8		(0.3)	%	36		(0.5)	%	29		(0.2)	%
Income tax (provision) benefit	$	(280)	9.4	%	$	(693)	9.8	%	$	(168)	1.2	%

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These arrangements expire in whole or in part at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $215 million (benefiting our diluted earnings per share by $0.19) for 2020, by $756 million ($0.66 per diluted share) for 2019, and by $1.96 billion ($1.59 per diluted share) for 2018.

As of September 3, 2020, certain non-U.S. subsidiaries had cumulative undistributed earnings of $2.70 billion that were deemed to be indefinitely reinvested. A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.

Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following:


As of	2020		2019

Deferred tax assets
Net operating loss and tax credit carryforwards	$	912	$	1,045
Accrued salaries, wages, and benefits	176		122
Operating lease liabilities	114		—
Property, plant, and equipment	—		80
Other	91		110
Gross deferred tax assets	1,293		1,357
Less valuation allowance	(294)		(277)
Deferred tax assets, net of valuation allowance	999		1,080

Deferred tax liabilities
Right-of-use assets	(95)		—
Product and process technology	(57)		(138)
Property, plant, and equipment	(50)		—
Other	(99)		(109)
Deferred tax liabilities	(301)		(247)

Net deferred tax assets	$	698	$	833

Reported as
Deferred tax assets	$	707	$	837
Deferred tax liabilities (included in other noncurrent liabilities)	(9)		(4)
Net deferred tax assets	$	698	$	833

We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of September 3, 2020, and August 29, 2019, we had a valuation allowance of $294 million and $277 million, respectively, against our net deferred tax assets, primarily related to net operating loss carryforwards in Japan. Changes in 2020 in the valuation allowance were due to adjustments based on management’s assessment of tax credits and net operating losses that are more likely than not to be realized.


Year of Expiration	State		Japan		Singapore		Other		Total

2021 - 2025	$	49	$	1,224	$	—	$	20	$	1,293
2026 - 2030	313		84		—		10		407
2031 - 2035	337		—		—		1		338
2036 - 2040	30		—		—		—		30
Indefinite	1		—		621		119		741
	$	730	$	1,308	$	621	$	150	$	2,809


Year of Tax Credit Expiration	U.S. Federal		State		Total

2021 - 2025	$	—	$	43	$	43
2026 - 2030	—		71		71
2031 - 2035	—		131		131
2036 - 2040	321		4		325
Indefinite	—		81		81
	$	321	$	330	$	651


For the year ended	2020		2019		2018

Beginning unrecognized tax benefits	$	383	$	261	$	327
Increases related to tax positions from prior years	14		124		—
Increases related to tax positions taken in current year	27		44		68
Decreases related to tax positions from prior years	(13)		(46)		(126)
Settlements with tax authorities	—		—		(8)
Ending unrecognized tax benefits	$	411	$	383	$	261

As of September 3, 2020, gross unrecognized tax benefits were $411 million, substantially all of which would affect our effective tax rate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions were not material for any period presented. The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be material.

We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 2016 through 2020. In addition, tax returns that remain open to examination in Japan range from the years 2014 to 2020 and in Singapore and Taiwan from 2015 to 2020. We believe that adequate amounts of taxes and related interest and penalties have been provided, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition.