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Income Taxes | 12 Months Ended
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Sep. 29, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of the income tax provision from continuing operations were as follows (in millions):
| 2024 |  | 2023 |  | 2022
Current provision: |  |  |  |  |
Federal | $ | 1,306 |  |  | $ | 1,229 |  |  | $ | 1,114 |
State | 3 |  |  | 10 |  |  | 1 |
Foreign (1) | 805 |  |  | 491 |  |  | 906 |
| 2,114 |  |  | 1,730 |  |  | 2,021 |
Deferred (benefit) provision: |  |  |  |  |
Federal | (1,553) |  |  | (1,475) |  |  | (34) |
State | (4) |  |  | (8) |  |  | 15 |
Foreign (1) | (331) |  |  | (143) |  |  | 10 |
| (1,888) |  |  | (1,626) |  |  | (9) |
| $ | 226 |  |  | $ | 104 |  |  | $ | 2,012 |
(1) The foreign component of the income tax provision included foreign withholding taxes on royalty revenues included in U.S. earnings. The components of income from continuing operations before income taxes by U.S. and foreign jurisdictions were as follows (in millions):
| 2024 |  | 2023 |  | 2022
United States | $ | 9,169 |  |  | $ | 6,400 |  |  | $ | 12,537 |
Foreign | 1,167 |  |  | 1,043 |  |  | 2,461 |
| $ | 10,336 |  |  | $ | 7,443 |  |  | $ | 14,998 |
The following is a reconciliation of the expected statutory federal income tax provision to our actual income tax provision from continuing operations (in millions, except percentages). A significant portion of our U.S. income qualifies for preferential treatment as FDII at a 13% effective tax rate.
| 2024 |  | 2023 |  | 2022
Expected income tax provision at federal statutory tax rate | $ | 2,171 |  |  | $ | 1,563 |  | $ | 3,150 |
Benefit from FDII deduction, excluding the impact of capitalizing research and development expenditures | (596) |  |  | (447) |  |  | (753) |
Benefit from FDII deduction related to capitalizing research and development expenditures | (585) |  |  | (598) |  |  | — |
Benefit related to the transfer of intellectual property between foreign subsidiaries | (317) |  |  | — |  |  | — |
Benefit related to research and development tax credits | (259) |  |  | (235) |  |  | (224) |
Excess tax (benefit) deficiency associated with share-based awards | (176) |  |  | 3 |  |  | (257) |
Foreign currency (gains) losses related to Korean withholding tax receivable | (21) |  |  | (66) |  |  | 243 |
Benefit from fiscal 2021 and 2022 FDII deductions related to a change in sourcing of research and development expenditures | — |  |  | (126) |  |  | — |
Benefit from releasing valuation allowance on unutilized foreign loss carryforwards | — |  |  | (114) |  |  | — |
Nontaxable reversal of 2018 EC fine | — |  |  | — |  |  | (224) |
Other | 9 |  |  | 124 |  |  | 77 |
| $ | 226 |  |  | $ | 104 |  |  | $ | 2,012 |
Effective tax rate | 2 | % |  | 1 | % |  | 13 | %
Beginning in fiscal 2023, for federal income tax purposes, we are required to capitalize and amortize domestic research and development expenditures over five years and foreign research and development expenditures over fifteen years (such expenditures were previously deducted as incurred). Our cash flows from operations are adversely affected due to significantly higher cash tax payments. However, since the resulting deferred tax asset is established at the statutory rate of 21% (rather than the current effective tax rate of 13% to 16% after considering the FDII deduction), capitalization favorably affects our total provision for income taxes and results of operations. The adverse cash flow impact and favorable tax provision impact will diminish in future years as capitalized research and development expenditures continue to amortize. In the fourth quarter of fiscal 2024, we completed an intra-group transfer of intellectual property to better align certain intellectual property ownership within our QCT business, which resulted in the recognition of a tax benefit of $317 million during the fourth quarter of fiscal 2024 from the establishment of a deferred tax asset. Such tax benefit was based on the value of the intellectual property transferred, which was measured using an income approach based on significant unobservable inputs. Beginning in fiscal 2019, as a result of certain court rulings in Korea, among other factors, we decided to apply for a partial refund claim for taxes previously withheld from licensees in Korea on payments due under their license agreements to which we have claimed a foreign tax credit in the United States. As a result, $2.2 billion and $2.0 billion was recorded as a noncurrent income taxes receivable (recorded in other assets) at September 29, 2024 and September 24, 2023, respectively, and $2.5 billion and $2.3 billion was recorded as a noncurrent liability for uncertain tax benefits (recorded in other liabilities) at September 29, 2024 and September 24, 2023, respectively. At September 29, 2024, our remaining future payments were $1.0 billion for a one-time repatriation tax accrued in fiscal 2018, after application of certain tax credits, which is payable in installments over the next two years. At September 29, 2024, $530 million was recorded in other current liabilities, reflecting the next installment due in January 2025, with the remaining noncurrent portion presented in other liabilities on our balance sheet. We had deferred tax assets and deferred tax liabilities as follows (in millions):
| September 29, 2024 |  | September 24, 2023
Capitalized research and development expenditures | $ | 3,015 |  |  | $ | 1,490 |
Unused tax credits | 2,172 |  |  | 1,819 |
Customer incentives | 769 |  |  | 659 |
Unused net operating losses | 719 |  |  | 364 |
Accrued liabilities and reserves | 397 |  |  | 401 |
Operating lease liabilities | 282 |  |  | 216 |
Share-based compensation | 152 |  |  | 285 |
Unrealized losses on other investments and marketable securities | 146 |  |  | 159 |
Other | 459 |  |  | 409 |
Total gross deferred tax assets | 8,111 |  |  | 5,802 |
Valuation allowance | (2,061) |  |  | (1,803) |
Total net deferred tax assets | 6,050 |  |  | 3,999 |
Intangible assets | (388) |  |  | (335) |
Operating lease assets | (248) |  |  | (194) |
Unrealized gains on other investments and marketable securities | (169) |  |  | (101) |
Other | (197) |  |  | (170) |
Total deferred tax liabilities | (1,002) |  |  | (800) |
Net deferred tax assets | $ | 5,048 |  |  | $ | 3,199 |
Reported as: |  |  |
Non-current deferred tax assets | $ | 5,162 |  |  | $ | 3,310 |
Non-current deferred tax liabilities (1) | (114) |  |  | (111) |
| $ | 5,048 |  |  | $ | 3,199 |
(1) Non-current deferred tax liabilities were included in other liabilities in the consolidated balance sheets. At September 29, 2024, we had unused foreign net operating loss carryforwards of $2.6 billion, of which substantially all may be carried forward indefinitely, unused state net operating loss carryforwards of $817 million expiring from 2025 through 2037 and unused federal net operating loss carryforwards of $150 million, of which $102 million expire from 2025 through 2037 and $48 million may be carried forward indefinitely. At September 29, 2024, we had unused state tax credits of $1.9 billion, of which substantially all may be carried forward indefinitely, unused federal tax credits of $219 million expiring from 2028 through 2041 and unused tax credits of $92 million in foreign jurisdictions expiring from 2031 through 2044. We do not expect our federal net operating loss carryforwards to expire unused. At September 29, 2024, we have provided a valuation allowance on certain state tax credits, foreign deferred tax assets and state net operating losses of $1.9 billion, $121 million and $41 million respectively. The valuation allowance reflects the uncertainties surrounding our ability to generate sufficient future taxable income in certain tax jurisdictions to utilize our net deferred tax assets. We believe, more likely than not, that we will have sufficient taxable income to utilize our remaining deferred tax assets. A summary of the changes in the amount of unrecognized tax benefits for fiscal 2024, 2023 and 2022 follows (in millions):
| 2024 |  | 2023 |  | 2022
Beginning balance of unrecognized tax benefits | $ | 2,296 |  |  | $ | 2,191 |  |  | $ | 2,136 |
Additions based on prior year tax positions | 2 |  |  | 10 |  |  | 58 |
Reductions for prior year tax positions and lapse in statute of limitations | (1) |  |  | (63) |  |  | (136) |
Additions for current year tax positions | 153 |  |  | 158 |  |  | 184 |
Settlements with taxing authorities | — |  |  | — |  |  | (51) |
Ending balance of unrecognized tax benefits | $ | 2,450 |  |  | $ | 2,296 |  |  | $ | 2,191 |
Of the $2.5 billion of unrecognized tax benefits, $2.3 billion has been recorded to other liabilities. We believe that it is reasonably possible that certain unrecognized tax benefits recorded at September 29, 2024 may result in a cash payment in fiscal 2025. Unrecognized tax benefits at September 29, 2024 included $91 million for tax positions that, if recognized, would impact the effective tax rate. The unrecognized tax benefits differ from the amount that would affect our effective tax rate primarily because the unrecognized tax benefits were included on a gross basis and did not reflect related receivables or secondary impacts, such as the federal deduction for state taxes, adjustments to deferred tax assets and the valuation allowance that might be required if our tax positions are sustained. The increase in unrecognized tax benefits for all periods presented was primarily due to expected refunds of Korean withholding tax previously paid (which such increase had an insignificant impact to our income tax provision). If successful, the refund will result in a corresponding reduction in U.S. foreign tax credits. We believe that it is likely that the total amount of unrecognized tax benefits at September 29, 2024 will increase in fiscal 2025 as licensees in Korea continue to withhold taxes on future payments due under their licensing agreements at a rate higher than we believe is owed; such increase is not expected to have a significant impact on our income tax provision. At September 29, 2024, total interest and penalties related to unrecognized tax benefits accrued in other current liabilities and other liabilities was $250 million, with a corresponding noncurrent income taxes receivable of $181 million recorded in other assets for expected refunds of certain tax benefits. We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years prior to fiscal 2018. We are also subject to examination in other taxing jurisdictions in the U.S. and numerous foreign jurisdictions. These examinations are at various stages with respect to assessments, claims, deficiencies and refunds, many of which are open for periods after fiscal 2001. Cash amounts paid for income taxes, net of refunds received, were $3.3 billion, $1.4 billion and $2.1 billion for fiscal 2024, 2023 and 2022, respectively.

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