

	Twelve Months Ended July 31,
(In millions)	2020			2019			2018
Current:
Federal	$	372		$	271		$	197
State	79			67			38
Foreign	21			14			14
Total current	472			352			249
Deferred:
Federal	(47		)	(23		)	(14		)
State	(47		)	(4		)	2
Foreign	(6		)	(1		)	—
Total deferred	(100		)	(28		)	(12		)
Total provision for income taxes	$	372		$	324		$	237

We recognized excess tax benefits on share-based compensation of $90 million, $120 million, and $100 million in the provision for income taxes for the twelve months ended July 31, 2020, 2019, and 2018, respectively.



	Twelve Months Ended July 31,
(In millions)	2020			2019		2018
United States	$	2,206		$	1,826	$	1,528
Foreign	(8		)	55		38
Total	$	2,198		$	1,881	$	1,566

Differences between income taxes calculated using the federal statutory income tax rate and the provision for income taxes were as follows for the periods indicated:



	Twelve Months Ended July 31,
(In millions)	2020			2019			2018
Income before income taxes	$	2,198		$	1,881		$	1,566

U.S. federal statutory rate	21		%	21		%	26.9		%

Statutory federal income tax	$	462		$	395		$	420
State income tax, net of federal benefit	25			50			29
Federal research and experimentation credits	(54		)	(48		)	(38		)
Domestic production activities deduction	—			—			(28		)
Share-based compensation	22			15			11
Federal excess tax benefits related to share-based compensation	(79		)	(106		)	(94		)
2017 Tax Act - Deferred tax re-measurement	—			—			(29		)
Capital loss on subsidiary reorganization	—			—			(35		)
Effects of non-U.S. operations	13			13			1
Other, net	(17		)	5			—
Total provision for income taxes	$	372		$	324		$	237

The CARES Act was signed into law on March 27, 2020. We have evaluated the provisions of this act and determined that it did not result in a significant impact on our tax provision for the period.

The Tax Cuts and Jobs Act (2017 Tax Act) was enacted on December 22, 2017 and reduced the U.S. statutory federal corporate tax rate from 35% to 21%. The effective date of the tax rate change was January 1, 2018. The change resulted in a blended lower U.S. statutory federal rate of 26.9% for fiscal year 2018. In fiscal 2019, we fully benefited from the enacted lower tax rate of 21%.

During fiscal year 2018, we completed a reorganization which resulted in a taxable liquidation of a subsidiary. The transaction gave rise to a capital loss which is available for carryback to prior years to offset capital gain income previously recognized. As a result, we recognized a tax benefit of $35 million during the fourth quarter of fiscal 2018.

The state income tax line in the table above includes excess tax benefits related to share-based compensation of $11 million, $14 million and $6 million for the twelve months ended July 31, 2020, 2019 and 2018, respectively.



	July 31,
(In millions)	2020			2019
Deferred tax assets:
Accruals and reserves not currently deductible	$	23		$	13
Operating lease liabilities	64			—
Accrued and deferred compensation	112			48
Loss and tax credit carryforwards	114			117
Intangible assets	26			—
Share-based compensation	44			47
Other, net	13			11
Total gross deferred tax assets	396			236
Valuation allowance	(132		)	(107		)
Total deferred tax assets	264			129
Deferred tax liabilities:
Deferred revenue	68			66
Operating lease right-of-use assets	55			—
Intangibles	45			71
Property and equipment	22			20
Other, net	11			8
Total deferred tax liabilities	201			165
Net deferred tax assets (liabilities)	$	63		$	(36	)

The components of total net deferred tax liabilities, net of valuation allowances, as shown on our consolidated balance sheets were as follows at the dates indicated:



	July 31,
(In millions)	2020			2019
Long-term deferred income taxes	$	65		$	1
Long-term deferred income tax liabilities	(2		)	(37		)
Net deferred tax assets (liabilities)	$	63		$	(36	)

We have provided a valuation allowance related to state research and experimentation tax credit carryforwards, foreign loss carryforwards, foreign intangible deferred tax assets and state operating and capital loss carryforwards that we believe are unlikely to be realized. Changes in the valuation allowance during the twelve months ended July 31, 2020 were primarily related to foreign intangible deferred tax assets, foreign loss carryforwards and state research and experimentation tax credit carryforwards. Changes in the valuation allowance during the twelve months ended July 31, 2019 were primarily related to an increase in the valuation allowance for state research and experimentation tax credit carryforwards.

At July 31, 2020, we had total federal net operating loss carryforwards of approximately $34 million that will start to expire in fiscal 2032. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization.

At July 31, 2020, we had total state net operating loss carryforwards of approximately $83 million for which we have recorded a deferred tax asset of $6 million and a valuation allowance of $4 million. The state net operating losses will start to expire in fiscal 2022. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization.

At July 31, 2020, we had Singapore operating loss carryforwards of approximately $61 million, Brazil operating loss carryforwards of approximately $51 million and United Kingdom operating loss carryforwards of approximately $57 million which have an indefinite carryforward period. We maintain a full valuation allowance with respect to operating losses in these jurisdictions, as there is not sufficient evidence of future sources of taxable income required to utilize such carryforwards.

At July 31, 2020, we had California research and experimentation credit carryforwards of approximately $110 million. We recorded a full valuation on the related deferred tax asset, as we believe it is more likely than not that these credits will not be utilized.



	Twelve Months Ended July 31,
(In millions)	2020			2019			2018
Gross unrecognized tax benefits, beginning balance	$	120		$	90		$	61
Increases related to tax positions from prior fiscal years, including acquisitions	2			13			10
Decreases related to tax positions from prior fiscal years	(35		)	—			(3		)
Increases related to tax positions taken during current fiscal year	21			23			23
Settlements with tax authorities	(1		)	(1		)	(1		)
Lapse of statute of limitations	(6		)	(5		)	—
Gross unrecognized tax benefits, ending balance	$	101		$	120		$	90

The total amount of our unrecognized tax benefits at July 31, 2020 was $101 million. Net of related deferred tax assets, unrecognized tax benefits were $61 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $61 million. We do not believe that it is reasonably possible that there will be a significant increase or decrease in unrecognized tax benefits over the next 12 months.

We file U.S. federal, U.S. state, and foreign tax returns. Our major tax jurisdictions are the U.S. federal jurisdiction and California. For U.S. federal and California state tax returns, we are no longer subject to tax examinations for years prior to fiscal 2016.

We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes. Amounts accrued at July 31, 2020 and July 31, 2019 for the payment of interest and penalties were not significant. The amounts of interest and penalties that we recognized during the twelve months ended July 31, 2020, 2019 and 2018 were also not significant.

We have offset a $59 million long-term income tax receivable against our long-term liability for uncertain tax positions at July 31, 2020. The long-term income tax receivable is primarily related to the government’s approval of a method of accounting change request for fiscal 2018.