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Income Taxes
 12 Months Ended
Jul. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
(a)Provision for Income Taxes
The provision for income taxes consists of the following (in millions):
Years EndedJuly 30, 2022July 31, 2021July 25, 2020
Federal:
Current$2,203 $1,959 $1,101 
Deferred(176)(203)(374)
2,027 1,756 727 
State:
Current458 513 264 
Deferred(156)(46)287 
302 467 551 
Foreign:
Current313 583 1,429 
Deferred23 (135)49 
336 448 1,478 
Total$2,665 $2,671 $2,756 
Income before provision for income taxes consists of the following (in millions):
Years EndedJuly 30, 2022July 31, 2021July 25, 2020
United States$13,550 $12,335 $7,534 
International927 927 6,436 
Total$14,477 $13,262 $13,970 
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following:
Years EndedJuly 30, 2022July 31, 2021July 25, 2020
Federal statutory rate21.0 %21.0 %21.0 %
Effect of:
State taxes, net of federal tax benefit1.7 2.7 3.5 
Foreign income at other than U.S. rates0.8 1.5 (1.5)
Tax credits(1.6)(1.4)(0.9)
Foreign-derived intangible income deduction(3.9)(4.2)(2.6)
Stock-based compensation0.3 0.6 (0.1)
Other, net0.1 (0.1)0.3 
Total18.4 %20.1 %19.7 %
During fiscal 2020, the IRS and Cisco settled all outstanding items related to the audit of our federal income tax returns for the fiscal year ended July 30, 2011 through July 27, 2013. As a result of the settlement, we recognized a net benefit to the provision for income taxes of $102 million, net of a reduction in interest expense of $4 million.
Foreign taxes associated with the repatriation of earnings of foreign subsidiaries were not provided on a cumulative total of $6.5 billion of undistributed earnings for certain foreign subsidiaries as of the end of fiscal 2022. We intend to reinvest these earnings indefinitely in such foreign subsidiaries. If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we could be subject to additional income and withholding taxes. The amount of potential unrecognized deferred income tax liability related to these earnings is approximately $681 million.
Unrecognized Tax Benefits
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Years EndedJuly 30, 2022July 31, 2021July 25, 2020
Beginning balance$3,106 $2,518 $1,925 
Additions based on tax positions related to the current year157 224 188 
Additions for tax positions of prior years74 618 554 
Reductions for tax positions of prior years(81)(122)(136)
Settlements(69)(93)(4)
Lapse of statute of limitations(86)(39)(9)
Ending balance$3,101 $3,106 $2,518 
As of July 30, 2022, $2.2 billion of the unrecognized tax benefits would affect the effective tax rate if realized. We recognized net interest expense of $33 million, $74 million and $104 million during fiscal 2022, 2021, and 2020, respectively. Our net penalty expense for fiscal 2022, 2021, and 2020 was not material. Our total accrual for interest and penalties was $486 million, $444 million, and $340 million as of the end of fiscal 2022, 2021, and 2020, respectively. We are no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2013. We are no longer subject to foreign or state income tax audits for returns covering tax years through fiscal 2003 and fiscal 2008, respectively.
We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, 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. We estimate that the unrecognized tax benefits at July 30, 2022 could be reduced by $1 billion in the next 12 months.
(b)Deferred Tax Assets and Liabilities
The following table presents the breakdown for net deferred tax assets (in millions):
July 30, 2022July 31, 2021
Deferred tax assets$4,449 $4,360 
Deferred tax liabilities(55)(134)
Total net deferred tax assets$4,394 $4,226 
The following table presents the components of the deferred tax assets and liabilities (in millions):
July 30, 2022July 31, 2021
ASSETS
Allowance for accounts receivable and returns$90 $68 
Sales-type and direct-financing leases29 39 
Inventory write-downs and capitalization430 392 
Deferred foreign income210 164 
IPR&D and purchased intangible assets1,184 1,195 
Depreciation10 — 
Deferred revenue1,744 1,526 
Credits and net operating loss carryforwards1,336 1,264 
Share-based compensation expense138 123 
Accrued compensation333 333 
Lease liabilities248 277 
Capitalized research expenditures149 303 
Other439 454 
Gross deferred tax assets6,340 6,138 
Valuation allowance(834)(771)
Total deferred tax assets5,506 5,367 
LIABILITIES
Goodwill and purchased intangible assets(767)(686)
Depreciation— (46)
Unrealized gains on investments(26)(112)
ROU lease assets(237)(260)
Other(82)(37)
Total deferred tax liabilities(1,112)(1,141)
Total net deferred tax assets$4,394 $4,226 
The changes in the valuation allowance for deferred tax assets are summarized as follows (in millions):
July 30, 2022July 31, 2021July 25, 2020
Balance at beginning of fiscal year$771 $700 $457 
Additions84 91 279 
Deductions(10)(5)(29)
Write-offs(12)(16)(7)
Foreign exchange and other1 1 — 
Balance at end of fiscal year$834 $771 $700 
As of July 30, 2022, our federal, state, and foreign net operating loss carryforwards before valuation allowance for income tax purposes were $302 million, $1.1 billion, and $580 million, respectively. A significant amount of the net operating loss carryforwards relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not utilized, the federal, state, and foreign net operating loss carryforwards will begin to expire in fiscal 2023. We have provided a valuation allowance of $98 million and $10 million for deferred tax assets related to foreign and state net operating losses respectively that are not expected to be realized.
As of July 30, 2022, our federal, state, and foreign tax credit carryforwards for income tax purposes before valuation allowance were approximately $6 million, $1.6 billion, and $4 million, respectively. The federal tax credit carryforwards will begin to expire in fiscal 2024. The majority of state and foreign tax credits can be carried forward indefinitely. We have provided a valuation allowance of $648 million for deferred tax assets related to state and foreign tax credits carryforwards that are not expected to be realized.