Income Taxes

9 Months Ended

Jun. 02, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our income tax (provision) benefit consisted of the following:

	Quarter ended						Nine months ended
	June 2, 2022			June 3, 2021			June 2, 2022			June 3, 2021
Income before taxes	$	2,988		$	1,806		$	8,018		$	3,282
Income tax (provision) benefit	(358)			(65)			(832)			(164)
Effective tax rate	12.0		%	3.6		%	10.4		%	5.0		%

On March 16, 2022, the Idaho governor signed a new law that changed the way corporations calculate Idaho taxable income. This new law is expected to reduce our Idaho taxable income, and consequently, we do not expect to utilize our tax credits in Idaho for the foreseeable future. As a result, we recorded a discrete valuation allowance against our Idaho deferred tax assets and an increase to tax expense of $189 million in the third quarter of 2022.

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These incentives 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 $361 million (benefiting our diluted earnings per share by $0.32) and $955 million ($0.85 per diluted share) for the third quarter and first nine months of 2022, respectively, and by $276 million ($0.24 per diluted share) and $377 million ($0.33 per diluted share) for the third quarter and first nine months of 2021, respectively.

As of June 2, 2022, gross unrecognized tax benefits were $730 million, which would have an impact of approximately $560 million on our effective tax rate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions were not significant for any period presented. We are currently under audit by the U.S. Internal Revenue Service for our 2018 and 2019 tax years. We believe that adequate amounts of taxes and related interest and penalties have been provided.