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Income Taxes
 12 Months Ended
Jul. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
11. Income Taxes
The provision for income taxes consisted of the following for the periods indicated:
 Twelve Months Ended July 31,
(In millions)202420232022
Current:   
Federal$984 $970 $253 
State202 208 93 
Foreign36 86 31 
 Total current1,222 1,264 377 
Deferred:   
Federal(523)(559)85 
State(97)(99)18 
Foreign(15)(1)(4)
Total deferred(635)(659)99 
Total provision for income taxes$587 $605 $476 
We recognized excess tax benefits on share-based compensation of $183 million, $32 million, and $134 million in the provision for income taxes for the twelve months ended July 31, 2024, 2023, and 2022, respectively.
The sources of income before the provision for income taxes consisted of the following for the periods indicated:
 Twelve Months Ended July 31,
(In millions)202420232022
United States$3,449 $2,798 $2,433 
Foreign101 191 109 
Total$3,550 $2,989 $2,542 
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)202420232022
Income before income taxes$3,550 $2,989 $2,542 
Statutory federal income tax$746 $628 $534 
State income tax, net of federal benefit83 86 87 
Federal research and experimentation credits(109)(106)(94)
Share-based compensation43 58 45 
Excess tax benefits related to share-based compensation(153)(26)(112)
Effects of non-U.S. operations— (28)4 
Other, net(23)(7)12 
Total provision for income taxes$587 $605 $476 
The state income tax line in the table above includes excess tax benefits related to share-based compensation of $30 million, $6 million, and $22 million for the twelve months ended July 31, 2024, 2023, and 2022, respectively.
In the current global tax policy environment, the U.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment.
Material deferred tax assets and liabilities were as follows at the dates indicated:
 July 31,
(In millions)20242023
Deferred tax assets:  
Accruals and reserves not currently deductible$47 $31 
Capitalized research and development
1,321 667 
Operating lease liabilities137 153 
Accrued and deferred compensation132 90 
Loss and tax credit carryforwards204 256 
Share-based compensation117 94 
Other, net20 27 
Total gross deferred tax assets1,978 1,318 
Valuation allowance(227)(235)
Total deferred tax assets1,751 1,083 
Deferred tax liabilities:  
Operating lease right-of-use assets105 128 
Intangibles864 840 
Property and equipment38 8 
Other, net49 47 
Total deferred tax liabilities1,056 1,023 
Net deferred tax assets
$695 $60 

The components of total net deferred tax assets, net of valuation allowances, as shown on our consolidated balance sheets were as follows at the dates indicated:
 July 31,
(In millions)20242023
Long-term deferred income tax assets$698 $64 
Long-term deferred income tax liabilities included in other long-term obligations
(3)(4)
Net deferred tax assets$695 $60 
We have provided a valuation allowance related to California net deferred tax assets primarily related to state research and experimentation tax credit carryforwards, foreign loss carryforwards, and state operating loss carryforwards that we believe are unlikely to be realized. We have a valuation allowance of $227 million and $235 million for the twelve months ended July 31, 2024 and July 31, 2023. The valuation allowance on our net deferred taxes decreased by $8 million for the twelve months ended July 31, 2024. The change in the valuation allowance was primarily related to a decrease in the allowance for foreign net operating loss carryforwards and state research and experimentation tax credit carryforwards, net of an increase in the allowance for California net deferred tax assets. The valuation allowance on our net deferred taxes decreased by $9 million for the twelve months ended July 31, 2023. The change in the valuation allowance was primarily related to a decrease in the allowance for foreign intangible deferred tax assets and foreign net operating loss carryforwards, net of an increase in the allowance for state research and experimentation tax credit carryforwards.
At July 31, 2024, we had federal net operating loss carryforwards of approximately $37 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, 2024, we had state net operating loss carryforwards of approximately $150 million for which we have recorded a deferred tax asset of $11 million and a valuation allowance of $6 million. The state net operating loss carryforwards will start to expire in fiscal 2028. 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, 2024, we had foreign net operating loss carryforwards of approximately $19 million which carry forward indefinitely. We maintain a full valuation allowance with respect to the foreign net operating losses as there is not sufficient evidence of future sources of taxable income required to utilize such carryforwards.
At July 31, 2024, we had California research and experimentation credit carryforwards of approximately $335 million. The California research and experimentation credit will carry forward indefinitely.
Unrecognized Tax Benefits
The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the periods indicated:
 Twelve Months Ended July 31,
(In millions)202420232022
Gross unrecognized tax benefits, beginning balance$246 $216 $190 
Increases related to tax positions from prior fiscal years, including acquisitions36 11 9 
Decreases related to tax positions from prior fiscal years(12)(16)(13)
Increases related to tax positions taken during current fiscal year95 38 31 
Settlements with tax authorities(1)(2)— 
Lapse of statute of limitations(37)(1)(1)
Gross unrecognized tax benefits, ending balance$327 $246 $216 
The total amount of our unrecognized tax benefits at July 31, 2024 was $327 million. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $210 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 jurisdiction is the U.S. federal jurisdiction. For U.S. federal tax returns, we are no longer subject to tax examinations for years prior to fiscal 2021 except for fiscal 2018 and fiscal 2016.
We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes. Amounts accrued at July 31, 2024 and July 31, 2023 for the payment of interest and penalties were not material. The amounts of interest and penalties that we recognized during the twelve months ended July 31, 2024, 2023, and 2022, were also not material.
We offset a $66 million and $85 million long-term liability for uncertain tax positions against our long-term income tax receivable at July 31, 2024 and July 31, 2023, respectively. The long-term income tax receivable at July 31, 2024 was primarily related to the government’s approval of a method of accounting change request for fiscal 2018. The long-term income tax receivable at July 31, 2023 was primarily related to the government’s approval of a method of accounting change request for fiscal 2018 and a refund claim related to Credit Karma’s alternative minimum tax credit that was recorded as part of the acquisition.