
16.	Income Taxes

The following table provides details of income taxes (in millions, except percentages):



	Three Months Ended						Six Months Ended
	January 23, 2016			January 24, 2015			January 23, 2016			January 24, 2015
Income before provision for income taxes	$	3,306		$	2,873		$	6,443		$	5,233
Provision for income taxes	$	159		$	476		$	866		$	1,008
Effective tax rate	4.8		%	16.6		%	13.4		%	19.3		%

As discussed further below, the effective tax rate for the three and six months ended January 23, 2016 reflected the Company's recognition of total benefits of approximately $523 million related to a tax settlement with the Internal Revenue Service ("IRS") and the reinstatement of the U.S. federal research and development ("R&D") tax credit on December 18, 2015.

In the second quarter of fiscal 2016, the Protecting Americans from Tax Hikes Act of 2015 reinstated the U.S. federal R&D tax credit permanently. As a result, the effective tax rate for the three and six months ended January 23, 2016 reflected a tax benefit of $72 million related to fiscal 2016 R&D expenses and a tax benefit of $84 million related to fiscal 2015 R&D expenses.

In the second quarter of fiscal 2016, the IRS and the Company settled all outstanding items related to the audit of the Company's federal income tax returns for the fiscal years ended July 26, 2008 through July 31, 2010. As a result of the settlement, the Company recognized a net benefit to the provision for income taxes of $367 million, which included a reduction in interest expense of $21 million. The Company is no longer subject to U.S. federal income tax audit through fiscal 2010.

As a result of the IRS tax settlement, the amount of gross unrecognized tax benefits was reduced in the second quarter of fiscal 2016 by approximately $563 million, of which $188 million became certain as a result of completing the audit. As of January 23, 2016, the Company had $1.6 billion of unrecognized tax benefits, of which $1.3 billion, if recognized, would favorably impact the effective tax rate. The Company regularly engages in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. The Company believes it is reasonably possible that certain foreign and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters. The Company estimates that the unrecognized tax benefits at January 23, 2016 could be reduced by approximately $200 million in the next 12 months.