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Income Taxes | 12 Months Ended
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Sep. 30, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Provision for Income Taxes and Effective Tax Rate The provision for income taxes for 2023, 2022 and 2021, consisted of the following (in millions):
| 2023 |  | 2022 |  | 2021
Federal: |  |  |  |  |
Current | $ | 9,445 |  |  | $ | 7,890 |  |  | $ | 8,257 |
Deferred | (3,644) |  |  | (2,265) |  |  | (7,176) |
Total | 5,801 |  |  | 5,625 |  |  | 1,081 |
State: |  |  |  |  |
Current | 1,570 |  |  | 1,519 |  |  | 1,620 |
Deferred | (49) |  |  | 84 |  |  | (338) |
Total | 1,521 |  |  | 1,603 |  |  | 1,282 |
Foreign: |  |  |  |  |
Current | 8,750 |  |  | 8,996 |  |  | 9,424 |
Deferred | 669 |  |  | 3,076 |  |  | 2,740 |
Total | 9,419 |  |  | 12,072 |  |  | 12,164 |
Provision for income taxes | $ | 16,741 |  |  | $ | 19,300 |  |  | $ | 14,527 |
The foreign provision for income taxes is based on foreign pretax earnings of $72.9 billion, $71.3 billion and $68.7 billion in 2023, 2022 and 2021, respectively. A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2023, 2022 and 2021) to income before provision for income taxes for 2023, 2022 and 2021, is as follows (dollars in millions):
| 2023 |  | 2022 |  | 2021
Computed expected tax | $ | 23,885 |  |  | $ | 25,012 |  |  | $ | 22,933 |
State taxes, net of federal effect | 1,124 |  |  | 1,518 |  |  | 1,151 |
Earnings of foreign subsidiaries | (5,744) |  |  | (4,366) |  |  | (4,715) |
Research and development credit, net | (1,212) |  |  | (1,153) |  |  | (1,033) |
Excess tax benefits from equity awards | (1,120) |  |  | (1,871) |  |  | (2,137) |
Foreign-derived intangible income deduction | — |  |  | (296) |  |  | (1,372) |
Other | (192) |  |  | 456 |  |  | (300) |
Provision for income taxes | $ | 16,741 |  |  | $ | 19,300 |  |  | $ | 14,527 |
Effective tax rate | 14.7 | % |  | 16.2 | % |  | 13.3 | %
Deferred Tax Assets and Liabilities As of September 30, 2023 and September 24, 2022, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
| 2023 |  | 2022
Deferred tax assets: |  |  |
Tax credit carryforwards | $ | 8,302 |  |  | $ | 6,962 |
Accrued liabilities and other reserves | 6,365 |  |  | 6,515 |
Capitalized research and development | 6,294 |  |  | 1,267 |
Deferred revenue | 4,571 |  |  | 5,742 |
Unrealized losses | 2,447 |  |  | 2,913 |
Lease liabilities | 2,421 |  |  | 2,400 |
Other | 2,343 |  |  | 3,407 |
Total deferred tax assets | 32,743 |  |  | 29,206 |
Less: Valuation allowance | (8,374) |  |  | (7,530) |
Total deferred tax assets, net | 24,369 |  |  | 21,676 |
Deferred tax liabilities: |  |  |
Right-of-use assets | 2,179 |  |  | 2,163 |
Depreciation | 1,998 |  |  | 1,582 |
Minimum tax on foreign earnings | 1,940 |  |  | 1,983 |
Unrealized gains | 511 |  |  | 942 |
Other | 490 |  |  | 469 |
Total deferred tax liabilities | 7,118 |  |  | 7,139 |
Net deferred tax assets | $ | 17,251 |  |  | $ | 14,537 |
As of September 30, 2023, the Company had $5.2 billion in foreign tax credit carryforwards in Ireland and $3.0 billion in California R&D credit carryforwards, both of which can be carried forward indefinitely. A valuation allowance has been recorded for the credit carryforwards and a portion of other temporary differences. Uncertain Tax Positions As of September 30, 2023, the total amount of gross unrecognized tax benefits was $19.5 billion, of which $9.5 billion, if recognized, would impact the Company’s effective tax rate. As of September 24, 2022, the total amount of gross unrecognized tax benefits was $16.8 billion, of which $8.0 billion, if recognized, would have impacted the Company’s effective tax rate. The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2023, 2022 and 2021, is as follows (in millions):
| 2023 |  | 2022 |  | 2021
Beginning balances | $ | 16,758 |  |  | $ | 15,477 |  |  | $ | 16,475 |
Increases related to tax positions taken during a prior year | 2,044 |  |  | 2,284 |  |  | 816 |
Decreases related to tax positions taken during a prior year | (1,463) |  |  | (1,982) |  |  | (1,402) |
Increases related to tax positions taken during the current year | 2,628 |  |  | 1,936 |  |  | 1,607 |
Decreases related to settlements with taxing authorities | (19) |  |  | (28) |  |  | (1,838) |
Decreases related to expiration of the statute of limitations | (494) |  |  | (929) |  |  | (181) |
Ending balances | $ | 19,454 |  |  | $ | 16,758 |  |  | $ | 15,477 |
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisd ictions. Tax years after 2017 for the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination. Altho ugh the timing of resolution or closure of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by as much as $4.5 billion. European Commission State Aid Decision On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward. The recovery amount was calculated to be €13.1 billion, plus interest of €1.2 billion. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice (the “ECJ”) and a hearing was held on May 23, 2023. A decision from the ECJ is expected in calendar year 2024. The Company believes it would be eligible to claim a U.S. foreign tax credit for a portion of any incremental Irish corporate income taxes potentially due related to the State Aid Decision. On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries. As of September 30, 2023, the adjusted recovery amount was €12.7 billion, excluding interest. The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings. Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 4, “Financial Instruments” for more information.

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