

	Year Ended
(In millions)	April 3, 2020			March 29, 2019			March 30, 2018
Current:
Federal	$	208		$	58		$	1,102
State	33			4			14
International	3			(14		)	(148		)
Total	244			48			968
Deferred:
Federal	(23		)	(35		)	(1,551		)
State	3			(3		)	(136		)
International	17			(7		)	(1		)
Total	(3		)	(45		)	(1,688		)
Income tax expense (benefit)	$	241		$	3		$	(720	)



	Year Ended
(In millions)	April 3, 2020			March 29, 2019			March 30, 2018
Federal statutory tax expense (benefit)	$	172		$	(23	)	$	77
State taxes, net of federal benefit	22			(11		)	(14		)
Foreign earnings taxed at other than the federal rate	4			(25		)	(154		)
Transition tax	—			(2		)	893
Federal research and development credit	(2		)	(4		)	(6		)
Valuation allowance increase (decrease)	(57		)	26			7
Change in uncertain tax positions	60			44			(3		)
Stock-based compensation	5			8			(23		)
Nondeductible goodwill	18			—			59
Effect of tax rate change on deferred taxes	—			—			(131		)
Re-assessment of deferred taxes on foreign earnings	—			—			(1,420		)
Return to provision adjustment	2			(16		)	—
Other, net	17			6			(5		)
Income tax expense (benefit)	$	241		$	3		$	(720	)



	As of
(In millions)	April 3, 2020			March 29, 2019
Deferred tax assets:
Tax credit carryforwards	$	6		$	54
Net operating loss carryforwards of acquired companies	21			51
Other accruals and reserves not currently tax deductible	46			64
Operating lease liabilities	12			—
Deferred revenue	2			54
Property and equipment	10			—
Intangible assets	117			384
Loss on investments not currently tax deductible	1			35
Stock-based compensation	21			87
Other	44			25
Gross deferred tax assets	280			754
Valuation allowance	(9		)	(105		)
Deferred tax assets, net of valuation allowance	$	271		$	649
Deferred tax liabilities:
Property and equipment	$	—		$	(17	)
Goodwill	—			(13		)
Operating lease assets	(10		)	—
Unremitted earnings of foreign subsidiaries	(17		)	(316		)
Prepaids and deferred expenses	(2		)	(43		)
Discount on convertible debt	(4		)	(7		)
Deferred tax liabilities	(33		)	(396		)
Net deferred tax assets (liabilities)	$	238		$	253

The valuation allowance provided against our deferred tax assets as of April 3, 2020 decreased primarily due to a corresponding decrease in capital losses from equity investments and the release of valuation allowance related to certain acquired net operating loss and tax credit carryforwards. The ending valuation allowance of $9 million is provided primarily against certain foreign tax credits and unrealized capital losses that are not expected to be realized.

As of April 3, 2020, we have U.S. federal net operating losses attributable to various acquired companies of approximately $128 million, which, if not used, will expire between fiscal 2021 and 2039. $34 million of the net operating loss carryforwards are subject to limitations which currently prevent their use, and therefore these attributes are not expected to be realized. The remaining net operating loss carryforwards are subject to an annual limitation under U.S. federal tax regulations but are expected to be fully realized. Furthermore, we have U.S. state net operating loss carryforwards attributable to various acquired companies of approximately $23 million. If not used, our U.S. state net operating losses will expire between fiscal 2021 and 2038. In addition, we have foreign net operating loss carryforwards attributable to various foreign companies of approximately $89 million, that can be carried forward indefinitely under current applicable foreign tax law. We have $6 million of foreign tax credits which, if not used, will expire beginning in fiscal 2030.

In assessing the ability to realize our deferred tax assets, we considered whether it is more likely than not that some portion or all the deferred tax assets will not be realized. We considered the following: we have historical cumulative book income, as measured by the current and prior two years; we have strong, consistent taxpaying history; we have substantial U.S. federal income tax carryback potential; and we have substantial amounts of scheduled future reversals of taxable temporary differences from our deferred tax liabilities. We have concluded that this positive evidence outweighs the negative evidence and, thus, that the deferred tax assets as of April 3, 2020 are realizable on a “more likely than not” basis.



	Year Ended
(In millions)	April 3, 2020			March 29, 2019			March 30, 2018
Balance at beginning of year	$	446		$	378		$	248
Settlements with tax authorities	(5		)	(3		)	(4		)
Lapse of statute of limitations	(15		)	(17		)	(3		)
Increase related to prior period tax positions	77			16			35
Decrease related to prior period tax positions	(11		)	(11		)	—
Increase related to current year tax positions	232			75			98
Increase due to acquisition	—			8			4
Balance at end of year	$	724		$	446		$	378

There was a change of $278 million in gross unrecognized tax benefits during the year ended April 3, 2020 as disclosed above. This gross liability does not include offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, interest deductions, and state income taxes.

We recognize interest and/or penalties related to uncertain tax positions in income tax expense. At April 3, 2020, before any tax benefits, we had $77 million of accrued interest and penalties on unrecognized tax benefits. Interest included in our provision for income taxes was an expense of approximately $43 million for fiscal 2020. If the accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced in the period that such determination is made and reflected as a reduction of the overall income tax provision.

On July 27, 2015, the United States Tax Court (Tax Court) issued its opinion in Altera v. Commissioner and concluded that related parties in a cost sharing arrangement are not required to share expenses related to stock-based compensation. The Commissioner of the Internal Revenue Service appealed the Tax Court decision to the Ninth Circuit. In June 2019, the U.S. Court of Appeals for the Ninth Circuit reversed the July 2015 decision of the U.S. Tax Court. As a result of this decision, we recorded a cumulative income tax expense of $62 million in the first quarter of fiscal 2020. On July 22, 2019, the taxpayer requested a rehearing before the full Ninth Circuit, but such request was denied on November 12, 2019. In February 2020, Altera requested a hearing before the Supreme Court of the United States. The final outcome of the case remains uncertain. If the Altera Ninth Circuit Opinion is reversed, we would anticipate recording an income tax benefit at that time.

We file income tax returns in the U.S. on a federal basis and in many U.S. state and foreign jurisdictions. Our most significant tax jurisdictions are the U.S., Ireland, and Singapore. Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. Our fiscal years 2014 through 2020 remain subject to examination by the IRS for U.S. federal tax purposes. Our fiscal years prior to 2014 have been settled and closed with the IRS. Our 2016 through 2020 fiscal years remain subject to examination by the appropriate governmental agencies for Irish tax purposes, and our 2016 through 2020 fiscal years remain subject to examination by the appropriate governmental agencies for Singapore tax purposes.

The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although

potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could decrease (whether by payment, release, or a combination of both) in the next 12 months by $31 million. Depending on the nature of the settlement or expiration of statutes of limitations, we estimate $31 million could affect our income tax provision and therefore benefit the resulting effective tax rate.

In April 2020, we became aware of a new interpretation of a country specific withholding tax regulation that could be interpreted to apply to certain of our intra-group transactions. We are evaluating this new information and the effect, if any, on our tax positions. If it is determined that it does impact our previous transaction, this activity would be recorded in the financial statements in fiscal 2021. The amount of the potential impact, if any, on our Consolidated Financial Statements is not yet estimable given, in part, the level of information available at this time.