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Income Taxes
 12 Months Ended
Dec. 02, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income before income taxes for fiscal 2022, 2021 and 2020 consisted of the following:
 (in millions)202220212020
Domestic$1,958 $1,736 $1,090 
Foreign4,050 3,969 3,086 
Income before income taxes$6,008 $5,705 $4,176 
The provision for (benefit from) income taxes for fiscal 2022, 2021 and 2020 consisted of the following:
 (in millions)202220212020
Current:   
United States federal$465 $391 $119 
Foreign329 197 222 
State and local132 103 79 
Total current926 691 420 
Deferred:   
United States federal(45)(148)(123)
Foreign360 359 (1,313)
State and local11 (19)(68)
Total deferred326 192 (1,504)
Provision for (benefit from) income taxes$1,252 $883 $(1,084)
Intra-Entity Transfers of Certain Intellectual Property Rights (“IP rights”)
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 totaling $1.35 billion, based on the fair value of the IP rights transferred. 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 is recognized over the period of economic benefit.
Reconciliation of Provision for (Benefit from) Income Taxes
Total income tax expense differed from the income tax expense computed at the U.S. federal statutory rate of 21% as a result of the following:
 (in millions)202220212020
Tax expense computed at U.S. federal statutory rate$1,262 $1,198 $877 
Tax credits(116)(149)(101)
Tax settlements(14)(58)(23)
Effects of non-U.S. operations(7)(23)(337)
State tax expense, net of federal benefit113 66 10 
Other14 6 4 
Stock-based compensation— (157)(154)
Impacts of intra-entity IP transfers— — (1,360)
Provision for (benefit from) income taxes$1,252 $883 $(1,084)
Deferred Tax Assets and Liabilities
The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and liabilities as of December 2, 2022 and December 3, 2021 were as follows:
 (in millions)20222021
Deferred tax assets:  
Intangible assets$653 $997 
Capitalized expenses298 355 
Credit carryforwards333 287 
Operating lease liabilities104 122 
Net operating loss carryforwards of acquired companies88 131 
Stock-based compensation108 91 
Reserves and accruals98 89 
Benefits relating to tax positions56 39 
Other41 34 
Total gross deferred tax assets1,779 2,145 
Valuation allowance(402)(335)
Total deferred tax assets1,377 1,810 
Deferred tax liabilities:
Acquired intangible assets354 447 
Operating lease right-of-use assets97 111 
Prepaid expenses110 123 
Depreciation and amortization67 49 
Total deferred tax liabilities628 730 
Net deferred tax assets$749 $1,080 
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 loss and tax credit carryforwards.
As of December 2, 2022, we had federal and state net operating loss carryforwards of approximately $202 million and $467 million, respectively. We also had federal and state tax credit carryforwards of approximately $39 million and $362 million, respectively. The majority of the federal net operating loss and state tax credit carryforwards can be carried forward indefinitely, and the remaining will expire in various years from fiscal 2023 through 2040. Certain net operating loss and tax credit carryforwards are subject to an annual limitation and/or are reduced by a valuation allowance. The net carrying amount of such assets is expected to be fully realized.
In assessing the realizability of deferred tax assets, management determined that it is more likely than not that we will not fully realize certain available tax attributes and other tax assets in domestic and foreign jurisdictions. 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. As of December 2, 2022, we continue to maintain a valuation allowance of $402 million primarily related to certain state credits. For fiscal 2022, the increase in the valuation allowance was $67 million.
As we repatriate foreign earnings for use in the United States, the distributions will generally be exempt from federal income taxes. As of December 2, 2022, the cumulative amount of foreign earnings considered permanently reinvested upon which taxes have not been provided, and the corresponding unrecognized deferred tax liability, was not material.
Accounting for Uncertainty in Income Taxes
During fiscal 2022 and 2021, the aggregate changes in our total gross amount of unrecognized tax benefits were as follows:
 (in millions)20222021
Beginning balance$289 $201 
Gross increases in unrecognized tax benefits – prior year tax positions20 30 
Gross decreases in unrecognized tax benefits – prior year tax positions(18)— 
Gross increases in unrecognized tax benefits – current year tax positions53 86 
Lapse of statute of limitations(4)(21)
Tax settlements(18)(4)
Foreign exchange gains and losses(1)(3)
Ending balance$321 $289 
Our policy is to record interest and penalties related to uncertain tax positions within the provision for (benefit from) income taxes. The combined amount of accrued interest and penalties included in long-term income taxes payable related to tax positions taken on our tax returns were approximately $17 million and $22 million for fiscal 2022 and 2021, respectively.
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 examination of our income tax returns by various domestic and foreign tax authorities with 2018 being the earliest fiscal year open for examination in all of our major tax jurisdictions. 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 our tax 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 financial position and results of operations.
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. Although the timing of resolution, settlement and closing of audits is not certain, it is reasonably possible that the underlying unrecognized tax benefits may decrease by up to $25 million over the next 12 months.