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Income Taxes | 12 Months Ended
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Sep. 26, 2015
Income Taxes | Note 5 – Income Taxes The provision for income taxes for 2015, 2014 and 2013, consisted of the following (in millions):
|  | 2015 |  |  | 2014 |  |  | 2013 |
Federal: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 11,730 |  |  | $ | 8,624 |  |  | $ | 9,334 |
Deferred |  |  | 3,408 |  |  |  | 3,183 |  |  |  | 1,878 |
|  |  | 15,138 |  |  |  | 11,807 |  |  |  | 11,212 |
State: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 1,265 |  |  |  | 855 |  |  |  | 1,084 |
Deferred |  |  | (220 | ) |  |  | (178 | ) |  |  | (311 | )
|  |  | 1,045 |  |  |  | 677 |  |  |  | 773 |
Foreign: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 4,744 |  |  |  | 2,147 |  |  |  | 1,559 |
Deferred |  |  | (1,806 | ) |  |  | (658 | ) |  |  | (426 | )
|  |  | 2,938 |  |  |  | 1,489 |  |  |  | 1,133 |
Provision for income taxes |  | $ | 19,121 |  |  | $ | 13,973 |  |  | $ | 13,118 |
The foreign provision for income taxes is based on foreign pre-tax earnings of $47.6 billion, $33.6 billion and $30.5 billion in 2015, 2014 and 2013, respectively. The Company’s consolidated financial statements provide for any related tax liability on undistributed earnings that the Company does not intend to be indefinitely reinvested outside the U.S. Substantially all of the Company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the U.S. were generated by subsidiaries organized in Ireland, which has a statutory tax rate of 12.5%. As of September 26, 2015, U.S. income taxes have not been provided on a cumulative total of $91.5 billion of such earnings. The amount of unrecognized deferred tax liability related to these temporary differences is estimated to be $30.0 billion. As of September 26, 2015 and September 27, 2014, $186.9 billion and $137.1 billion, respectively, of the Company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S. dollar-denominated holdings. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2015, 2014 and 2013) to income before provision for income taxes for 2015, 2014 and 2013, is as follows (dollars in millions):
|  | 2015 |  |  | 2014 |  |  | 2013 |
Computed expected tax |  | $ | 25,380 |  |  | $ | 18,719 |  |  | $ | 17,554 |
State taxes, net of federal effect |  |  | 680 |  |  |  | 469 |  |  |  | 508 |
Indefinitely invested earnings of foreign subsidiaries |  |  | (6,470 | ) |  |  | (4,744 | ) |  |  | (4,614 | )
Domestic production activities deduction |  |  | (426 | ) |  |  | (495 | ) |  |  | (308 | )
Research and development credit, net |  |  | (171 | ) |  |  | (88 | ) |  |  | (287 | )
Other |  |  | 128 |  |  |  | 112 |  |  |  | 265 |
Provision for income taxes |  | $ | 19,121 |  |  | $ | 13,973 |  |  | $ | 13,118 |
Effective tax rate |  |  | 26.4% |  |  |  | 26.1% |  |  |  | 26.2% |
The Company’s income taxes payable have been reduced by the tax benefits from employee stock plan awards. For stock options, the Company receives an income tax benefit calculated as the tax effect of the difference between the fair market value of the stock issued at the time of the exercise and the exercise price. For RSUs, the Company receives an income tax benefit upon the award’s vesting equal to the tax effect of the underlying stock’s fair market value. The Company had net excess tax benefits from equity awards of $748 million, $706 million and $643 million in 2015, 2014 and 2013, respectively, which were reflected as increases to common stock. As of September 26, 2015 and September 27, 2014, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
|  | 2015 |  |  | 2014 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued liabilities and other reserves |  | $ | 4,205 |  |  | $ | 3,326 |
Basis of capital assets and investments |  |  | 2,238 |  |  |  | 898 |
Deferred revenue |  |  | 1,941 |  |  |  | 1,787 |
Deferred cost sharing |  |  | 667 |  |  |  | 0 |
Share-based compensation |  |  | 575 |  |  |  | 454 |
Unrealized losses |  |  | 564 |  |  |  | 130 |
Other |  |  | 721 |  |  |  | 227 |
Total deferred tax assets, net of valuation allowance of $0 |  |  | 10,911 |  |  |  | 6,822 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Unremitted earnings of foreign subsidiaries |  |  | 26,868 |  |  |  | 21,544 |
Other |  |  | 303 |  |  |  | 398 |
Total deferred tax liabilities |  |  | 27,171 |  |  |  | 21,942 |
Net deferred tax liabilities |  | $ | (16,260 | ) |  | $ | (15,120 | )
Deferred tax assets and liabilities reflect the effects of tax losses, credits and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Uncertain Tax Positions Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets. As of September 26, 2015, the total amount of gross unrecognized tax benefits was $6.9 billion, of which $2.5 billion, if recognized, would affect the Company’s effective tax rate. As of September 27, 2014, the total amount of gross unrecognized tax benefits was $4.0 billion, of which $1.4 billion, if recognized, would affect the Company’s effective tax rate. The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2015, 2014 and 2013, is as follows (in millions):
|  | 2015 |  |  | 2014 |  |  | 2013 |
Beginning Balance |  | $ | 4,033 |  |  | $ | 2,714 |  |  | $ | 2,062 |
Increases related to tax positions taken during a prior year |  |  | 2,056 |  |  |  | 1,295 |  |  |  | 745 |
Decreases related to tax positions taken during a prior year |  |  | (345 | ) |  |  | (280 | ) |  |  | (118 | )
Increases related to tax positions taken during the current year |  |  | 1,278 |  |  |  | 882 |  |  |  | 626 |
Decreases related to settlements with taxing authorities |  |  | (109 | ) |  |  | (574 | ) |  |  | (592 | )
Decreases related to expiration of statute of limitations |  |  | (13 | ) |  |  | (4 | ) |  |  | (9 | )
Ending Balance |  | $ | 6,900 |  |  | $ | 4,033 |  |  | $ | 2,714 |
The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of September 26, 2015 and September 27, 2014, the total amount of gross interest and penalties accrued was $1.3 billion and $630 million, respectively, which is classified as non-current liabilities in the Consolidated Balance Sheets. In connection with tax matters, the Company recognized interest and penalty expense in 2015, 2014 and 2013 of $709 million, $40 million and $189 million, respectively. The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. The U.S. Internal Revenue Service (the “IRS”) is currently examining the years 2010 through 2012, and all years prior to 2010 are closed. In addition, the Company is subject to audits by state, local and foreign tax authorities. In major states and major foreign jurisdictions, the years subsequent to 2003 generally remain open and could be subject to examination by the taxing authorities. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. Although timing of the resolution and/or closure of audits is not certain, the Company does not believe it is reasonably possible that its unrecognized tax benefits would materially change in the next 12 months. On June 11, 2014, the European Commission issued an opening decision initiating a formal investigation against Ireland for alleged state aid to the Company. The opening decision concerns the allocation of profits for taxation purposes of the Irish branches of two subsidiaries of the Company. The Company believes the European Commission’s assertions are without merit. If the European Commission were to conclude against Ireland, the European Commission could require Ireland to recover from the Company past taxes covering a period of up to 10 years reflective of the disallowed state aid. While such amount could be material, as of September 26, 2015 the Company is unable to estimate the impact.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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