
(in millions)	2020		2019		2018
Current:
United States federal	$	119	$	7	$	501
Foreign	222		211		140
State and local	79		31		29
Total current	420		249		670
Deferred:
United States federal	(123)		23		(466)
Foreign	(1,313)		(12)		(10)
State and local	(68)		(6)		9
Total deferred	(1,504)		5		(467)

Provision for (benefit from) income taxes	$	(1,084)	$	254	$	203

During fiscal 2020, we completed intra-entity transfers of certain IP rights to our Irish subsidiary in order to better align the ownership of these rights with how our business operates. The transfers did not result in taxable gains; however, our Irish subsidiary recognized deferred tax assets for the book and tax basis difference of the transferred IP rights. As a result of these transactions, we recorded deferred tax assets, net of valuation allowance, and related tax benefits of $224 million and $1.13 billion, based on the fair value of the IP rights transferred in April and November 2020, respectively. The determination of the fair value involves significant judgment on future revenue growth, operating margins and discount rates. The tax-deductible amortization related to the transferred IP rights will be recognized over the period of economic benefit.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (“U.S. Tax Act”) was enacted into law, which significantly changed existing U.S. tax law and included many provisions applicable to us, such as reducing the U.S. federal statutory tax rate to 21% and imposing a one-time transition tax on deferred foreign income not previously subject to U.S. income tax and certain international provisions. During fiscal 2018, we recorded tax charges for the impact of the U.S. Tax Act using the available information and technical guidance as of November 30, 2018.

Certain international provisions introduced in the U.S. Tax Act, such as a tax on global intangible low-tax income, a base erosion and anti-abuse tax and a special tax deduction for foreign-derived intangible income, took effect in fiscal 2019. As the U.S. Treasury releases regulations that impact these provisions, we account for finalized regulations in the period of enactment.

Total income tax expense differs from the expected tax expense, computed by multiplying the U.S. federal statutory rate of 21% in both fiscal 2020 and 2019 and 22.2% in fiscal 2018 by income before income taxes, as a result of the following:


(in millions)	2020		2019		2018
Computed “expected” tax expense	$	877	$	673	$	620
State tax expense, net of federal benefit	10		24		25
Impacts of intra-entity IP transfers	(1,360)		—		—
Tax credits	(101)		(100)		(111)
Effects of non-U.S. operations	(337)		(224)		(384)

Stock-based compensation, net of tax deduction	(154)		(86)		(95)
Resolution of income tax examinations	(23)		(39)		(42)
Impacts of the U.S. Tax Act	—		3		186

Other	4		3		4
Provision for (benefit from) income taxes	$	(1,084)	$	254	$	203


(in millions)	2020		2019
Deferred tax assets:
Intangible assets	$	1,368	$	5
Reserves and accruals	71		54
Stock-based compensation	92		107
Net operating loss carryforwards of acquired companies	54		137
Credit carryforwards	218		252
Capitalized expenses	292		45
Benefits relating to tax positions	44		47
Operating lease liabilities	131		—
Other	37		45
Total gross deferred tax assets	2,307		692
Valuation allowance	(276)		(245)
Total deferred tax assets	2,031		447
Deferred tax liabilities:
Depreciation and amortization	52		36
Undistributed earnings of foreign subsidiaries	51		52
Prepaid expenses	107		86
Acquired intangible assets	330		413
Operating lease right-of-use assets	131		—
Total deferred tax liabilities	671		587
Net deferred tax assets (liabilities)	$	1,360	$	(140)

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. In assessing the realizability of deferred tax assets, management determined that it is not more likely than not that we will have sufficient taxable income in certain states and foreign jurisdictions to fully utilize available tax credits and other attributes. The deferred tax assets are offset by a valuation allowance to the extent it is more likely than not that they are not expected to be realized.

We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered permanently reinvested outside the United States or are exempted from further taxation. To the extent that the foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. As of November 27, 2020, the cumulative amount of foreign earnings upon which U.S. income taxes have not been provided, and the corresponding unrecognized deferred tax liability, is not material.

As of November 27, 2020, we have net operating loss carryforwards of approximately $39 million for federal, $367 million for state and $75 million for foreign. We also have federal, state and foreign tax credit carryforwards of approximately $16 million, $236 million and $16 million, respectively. The net operating loss carryforward assets and tax credits will expire in various years from fiscal 2021 through 2038. The majority of the state tax credit carryforwards can be carried forward indefinitely. Certain net operating loss carryforward assets and tax credits are reduced by a valuation allowance and/or are subject to an annual limitation under Internal Revenue Code Section 382. The carrying amount of such assets and credits is expected to be fully realized.

As of November 27, 2020, a valuation allowance of $276 million has been established for certain deferred tax assets related to certain state and foreign assets. For fiscal 2020, the total change in the valuation allowance was $31 million.


(in millions)	2020		2019
Beginning balance	$	173	$	196
Gross increases in unrecognized tax benefits – prior year tax positions	14		15
Gross decreases in unrecognized tax benefits – prior year tax positions	—		(2)
Gross increases in unrecognized tax benefits – current year tax positions	44		18
Gross decreases in unrecognized tax benefits – current year tax positions	—		(3)
Settlements with taxing authorities	(11)		—
Lapse of statute of limitations	(23)		(50)
Foreign exchange gains and losses	4		(1)
Ending balance	$	201	$	173

The combined amount of accrued interest and penalties related to tax positions taken on our tax returns were approximately $26 million and $25 million for fiscal 2020 and 2019, respectively. These amounts were included in long-term income taxes payable in their respective years.

While we file federal, state and local income tax returns globally, our major tax jurisdictions are Ireland, California and the United States. We are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service and other domestic and foreign tax authorities. These tax examinations are expected to focus on our intercompany transfer pricing practices, application of tax rules and other matters. For Ireland, California and the United States, the earliest fiscal years open for examination are 2008, 2016 and 2017, respectively. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. We believe such estimates to be reasonable; however, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Given the uncertainties described above, we can only determine a range of estimated potential decreases in underlying unrecognized tax benefits ranging from $0 to approximately $20 million over the next 12 months.