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Income Taxes
 12 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of our income (loss) from continuing operations before income taxes are as follows:
 Year Ended
(In millions)March 31, 2023April 1, 2022April 2, 2021
Domestic$350 $791 $607 
International454 251 265 
Income (loss) before income taxes$804 $1,042 $872 
The components of income tax expense (benefit) from continuing operations are as follows:
 Year Ended
(In millions)March 31, 2023April 1, 2022April 2, 2021
Current:
Federal$(479)$217 $133 
State(28)50 36 
International99 20 (13)
Total(408)287 156 
Deferred:
Federal(111)(42)(6)
State(10)(6)(5)
International(16)(33)31 
Total(137)(81)20 
Income tax expense (benefit)$(545)$206 $176 
The U.S. federal statutory income tax rates we have applied for fiscal 2023, 2022 and 2021 are as follows:
 Year Ended
March 31, 2023April 1, 2022April 2, 2021
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
The difference between our effective income tax and the federal statutory income tax is as follows:
 Year Ended
(In millions)March 31, 2023April 1, 2022April 2, 2021
Federal statutory tax expense (benefit)$169 $219 $183 
State taxes, net of federal benefit1 33 25 
Foreign earnings taxed at other than the federal rate44 (47)(10)
Federal research and development credit(5)(4)(1)
Valuation allowance increase (decrease)(33)2 1 
Change in uncertain tax positions176 11 3 
Stock-based compensation9 7 5 
Favorable ruling on foreign withholding tax19 — (35)
US tax on foreign earnings(1)12 (15)
Return to provision adjustment1 (8)1 
Irish FX remeasurement(17)(19)17 
Capital loss(910)— — 
Other, net2 — 2 
Income tax expense (benefit)$(545)$206 $176 
The principal components of deferred tax assets and liabilities are as follows:
(In millions)March 31, 2023April 1, 2022
Deferred tax assets:
Tax credit carryforwards$24 $7 
Net operating loss carryforwards of acquired companies60 16 
Interest37 — 
Other accruals and reserves not currently tax deductible95 84 
Operating lease liabilities11 28 
Deferred revenue16 — 
Property and equipment16 13 
Intangible assets— 123 
Capitalized research and experimental expenditures46 — 
Loss on investments not currently tax deductible68 — 
Stock-based compensation15 8 
Other39 54 
Gross deferred tax assets427 333 
Valuation allowance(97)(11)
Deferred tax assets, net of valuation allowance330 322 
Deferred tax liabilities:
Operating lease assets(8)(21)
Goodwill(10)(6)
Intangible assets(328)— 
Deferred revenue— (2)
Unremitted earnings of foreign subsidiaries(15)(16)
Prepaids and deferred expenses(2)(1)
Deferred tax liabilities(363)(46)
Net deferred tax assets (liabilities)$(33)$276 
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of net operating losses and tax credit carryforwards.
The valuation allowance provided against our deferred tax assets as of March 31, 2023, increased primarily due to a valuation allowance on capital loss carryforwards and change in tax credit carryforwards. The ending valuation allowance of $97
million is provided primarily against state and foreign capital loss carryforwards and certain tax credits. During fiscal 2023, we acquired deferred tax assets through the Merger with Avast that had a valuation allowance provided against the deferred tax assets. Due to a change in facts, we released the valuation allowance provided against some of the deferred tax assets.
As of March 31, 2023, we have U.S. federal net operating losses attributable to various acquired companies of approximately $193 million, which, if not used, will expire between fiscal 2024 and 2039. The 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 $147 million. If not used, our U.S. state net operating losses will expire between fiscal 2024 and 2038. In addition, we have foreign net operating loss carryforwards attributable to various foreign companies of approximately $28 million.
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; 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 March 31, 2023, are realizable on a “more likely than not” basis.
In fiscal 2023 as part of Avast integration plan we undertook a legal entity and operational restructuring that resulted in tax capital losses. We plan to carry the entirety of the capital losses back to the fiscal 2020 tax return to offset a capital gain, which is expected to result in a tax refund on our federal and state tax returns for the 2020 tax year. The Company estimates that the tax refund will be $910 million. In order to obtain the refunds, we intend to file claims for refund shortly after filing our fiscal 2023 tax return. As part of this process, we have recorded a net tax receivable in an amount less than the $910 million, due to the complexity of applying evolving tax laws and uncertainties with respect to sustaining the Company’s refunds claims, the success of which we believe is more likely than not. This net amount takes into account the Company’ best estimate of the likely outcome of the refund claim given the information available to us at this time. The Company’s ability to recognize the financial statement benefit of the refund claim is subject to change based on a number of factors, including but not limited to, changes in facts and circumstances, changes in tax laws, correspondence with both IRS and State tax authorities, and the results of tax audits and related proceedings, which may take several years or more to resolve. We intend to vigorously defend our position if challenged by the tax authorities and will contest any proposed adjustments. If we are not able to resolve any proposed adjustments at the examination level, we plan to pursue all available administrative and, if necessary, judicial remedies. If we do not ultimately prevail on some or all of the components of our position, we would be required to pay the IRS and the states some or all of any cash tax refund, along with interest on such amount, and penalties, if assessed. As with all actual and potential tax audits and related proceedings, there can be no assurances on the final outcome. To the extent the final outcome is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our Consolidated Balance Sheets and Statements of Operations.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows:
Year Ended
(In millions)March 31, 2023April 1, 2022April 2, 2021
Balance at beginning of year$527 $548 $724 
Settlements with tax authorities (2)— (37)
Lapse of statute of limitations(96)(34)(34)
Increase related to prior period tax positions9 16 13 
Decrease related to prior period tax positions(15)(11)(129)
Increase related to current year tax positions 259 8 11 
Increase due to acquisition28 — — 
Balance at end of year$710 $527 $548 
There was a change of $183 million in gross unrecognized tax benefits during the year ended March 31, 2023, as disclosed above, mainly on account of a reserve against the tax receivable. 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.
Of the total unrecognized tax benefits at March 31, 2023, $674 million, if recognized, would affect our effective tax rate.
We recognize interest and/or penalties related to uncertain tax positions in income tax expense. At March 31, 2023, before any tax benefits, we had $100 million of accrued interest and penalties on unrecognized tax benefits. Interest included in our provision for income taxes was an expense of approximately $22 million for fiscal 2023. 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.
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 Czech Republic. 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. During the fourth quarter of fiscal 2023, we closed our fiscal years 2014 through 2017 IRS audit. Our fiscal years prior to 2018 have been settled and closed with the IRS. Our fiscal years 2018 through 2022 remain subject to examination by the IRS for U.S. federal tax purposes. Our fiscal years
2018 through 2020 are under audit. Our 2017 through 2021 fiscal years remain subject to examination by the appropriate governmental agencies for Irish 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. Depending on the nature of the settlement or expiration of statutes of limitations, it could affect our income tax provision and therefore benefit the resulting effective tax rate.
We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected tolling of the statute of limitations in various taxing jurisdictions.
We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered permanently reinvested outside the U.S. or are exempted from further taxation. As of March 31, 2023, the unrecognized deferred tax liability on the undistributed earnings is approximately $15 million.