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Income Taxes
 12 Months Ended
Mar. 29, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of our income (loss) before income taxes are as follows:
 Year Ended
(In millions)March 29, 2024March 31, 2023April 1, 2022
Domestic$78 $350 $791 
International381 454 251 
Income (loss) before income taxes$459 $804 $1,042 
The components of income tax expense (benefit) are as follows:
 Year Ended
(In millions)March 29, 2024March 31, 2023April 1, 2022
Current:
Federal$201 $(479)$217 
State43 (28)50 
International579 99 20 
Total823 (408)287 
Deferred:
Federal(727)(111)(42)
State(133)(10)(6)
International(120)(16)(33)
Total(980)(137)(81)
Income tax expense (benefit)$(157)$(545)$206 
The U.S. federal statutory income tax rates we have applied for fiscal 2024, 2023 and 2022 are as follows:
 Year Ended
March 29, 2024March 31, 2023April 1, 2022
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 29, 2024March 31, 2023April 1, 2022
Federal statutory tax expense (benefit)$96 $169 $219 
State taxes, net of federal benefit— 1 33 
Foreign earnings taxed at other than the federal rate(22)(11)(47)
Nondeductible expenses48 20 — 
Federal research and development credit(6)(5)(4)
Valuation allowance increase (decrease)(4)(33)2 
Change in unrecognized tax benefits338 163 (2)
Tax interest and penalties129 13 13 
Stock-based compensation17 9 7 
US tax on foreign earnings20 12 12 
Return to provision adjustment— 1 (8)
Foreign exchange loss (gain)(28)(17)(19)
Capital loss(44)(910)— 
Legal entity restructuring(719)42 — 
Other, net18 1 — 
Income tax expense (benefit)$(157)$(545)$206 
The principal components of deferred tax assets and liabilities are as follows:
(In millions)March 29, 2024March 31, 2023
Deferred tax assets:
Tax credit carryforwards$27 $24 
Net operating loss carryforwards of acquired companies60 60 
Interest63 37 
Other accruals and reserves not currently tax deductible332 95 
Goodwill517 — 
Capitalized research and experimental expenditures82 46 
Loss on investments not currently tax deductible60 68 
Other56 97 
Gross deferred tax assets1,197 427 
Valuation allowance(93)(97)
Deferred tax assets, net of valuation allowance1,104 330 
Deferred tax liabilities:
Intangible assets(127)(328)
Unremitted earnings of foreign subsidiaries(14)(15)
Other(9)(20)
Deferred tax liabilities(150)(363)
Net deferred tax assets (liabilities)$954 $(33)
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 29, 2024 of $93 million is provided primarily against state and foreign capital loss carryforwards and certain tax credits.
As of March 29, 2024, we have U.S. federal net operating losses attributable to various acquired companies of approximately $192 million, of which $28 million begins to expire in fiscal 2025 and $164 million has an indefinite life. 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 $133 million. If not used, our U.S. state net operating losses will expire between fiscal 2033 and 2038. In addition, we have foreign net operating loss carryforwards of approximately $14 million.
In assessing the realizability of our gross deferred tax assets, we consider both the positive and negative evidence of future taxable income to support utilization. We considered the following: historical cumulative book income, as measured by the current and prior two years; historical taxable income; and future reversals of taxable temporary differences. We have concluded that this positive evidence outweighs the negative evidence and, thus, that the gross deferred tax assets as of March 29, 2024, 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. The capital losses were carried back to the fiscal 2020 tax return to offset a capital gain, which resulted in a tax refund on our federal and state tax returns for the 2020 tax year. We have filed claims for all federal and state refunds for a total amount of $954 million. As of March 29, 2024, we have received $899 million in federal refunds and $2 million in state refunds related to the carryback claim. As part of this process, we had recorded a net tax receivable in an amount less than the $954 million, due to the complexity of applying evolving tax laws and uncertainties with respect to sustaining our refunds claims, the success of which we believe is more likely than not. This net amount takes into account our best estimate of the likely outcome of the refund claim given the information available to us at this time. Our 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.
In the second quarter of fiscal 2024, as part of the Avast integration plan, which geographically realigned and simplified our business, we undertook a legal entity and operational restructuring. As part of that process, we distributed certain assets within the legal entity operating structure and as a result, we recorded a net tax benefit of $285 million in fiscal 2024. Differences between the final outcome and recorded amounts will impact the provision for income taxes in the period in which such a
determination is made and could have a material impact on our Consolidated Balance Sheets and Statements of Operations in future years.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows:
Year Ended
(In millions)March 29, 2024March 31, 2023April 1, 2022
Balance at beginning of year$710 $527 $548 
Settlements with tax authorities (8)(2)— 
Lapse of statute of limitations(14)(96)(34)
Increase related to prior period tax positions47 9 16 
Decrease related to prior period tax positions(9)(15)(11)
Increase related to current year tax positions 467 259 8 
Increase due to acquisition— 28 — 
Increase (decrease) related to foreign currency exchange rates(30)— — 
Balance at end of year$1,163 $710 $527 
There was a change of $453 million in gross unrecognized tax benefits during the year ended March 29, 2024, as disclosed above, mainly on account of a legal entity and operational restructuring. 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 29, 2024, $1,007 million, if recognized, would affect our effective tax rate.
We recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. At March 29, 2024, before any tax benefits, we had $225 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 2024. 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. and in many U.S. state and foreign jurisdictions. Our most significant tax jurisdictions are U.S. federal, Ireland, and the 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. 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 currently under examination by the IRS. Our 2020 through 2022 fiscal years remain subject to examination by the appropriate governmental agencies for Irish tax purposes. Our 2016 through 2022 fiscal years remain subject to examination by the appropriate governmental agencies for Czech 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 these matters involves multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could significantly change (whether by payment, release, or a combination of both) in the next 12 months; however, an estimate of this range cannot be made. 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 29, 2024, the tax liability recorded on the undistributed earnings is approximately $14 million.