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Income Taxes | 12 Months Ended
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Sep. 28, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes European Commission State Aid Decision On August 30, 2016, the 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. From time to time, the Company requested approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries. As of September 28, 2024, the adjusted recovery amount of €12.7 billion plus interest of €1.2 billion was held in escrow and restricted from general use. The total balance of the escrow, including net unrealized investment gains, was €14.2 billion or $15.8 billion as of September 28, 2024, of which $2.6 billion was classified as cash and cash equivalents and $13.2 billion was classified as current marketable securities in the Consolidated Balance Sheet. Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 4, “Financial Instruments” for more information. 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 Commission appealed the General Court’s decision to the European Court of Justice (the “ECJ”) and a hearing was held on May 23, 2023. On September 10, 2024, the ECJ announced that it had set aside the 2020 judgment of the General Court and confirmed the Commission’s 2016 State Aid Decision. As a result, during the fourth quarter of 2024 the Company recorded a one-time income tax charge of $10.2 billion, net, which represents $15.8 billion payable to Ireland via release of the escrow, partially offset by a U.S. foreign tax credit of $4.8 billion and a decrease in unrecognized tax benefits of $823 million. Provision for Income Taxes and Effective Tax Rate The provision for income taxes for 2024, 2023 and 2022, consisted of the following (in millions):
| 2024 |  | 2023 |  | 2022
Federal: |  |  |  |  |
Current | $ | 5,571 |  |  | $ | 9,445 |  |  | $ | 7,890 |
Deferred | (3,080) |  |  | (3,644) |  |  | (2,265) |
Total | 2,491 |  |  | 5,801 |  |  | 5,625 |
State: |  |  |  |  |
Current | 1,726 |  |  | 1,570 |  |  | 1,519 |
Deferred | (298) |  |  | (49) |  |  | 84 |
Total | 1,428 |  |  | 1,521 |  |  | 1,603 |
Foreign: |  |  |  |  |
Current | 25,483 |  |  | 8,750 |  |  | 8,996 |
Deferred | 347 |  |  | 669 |  |  | 3,076 |
Total | 25,830 |  |  | 9,419 |  |  | 12,072 |
Provision for income taxes | $ | 29,749 |  |  | $ | 16,741 |  |  | $ | 19,300 |
Foreign pretax earnings were $77.3 billion, $72.9 billion and $71.3 billion in 2024, 2023 and 2022, respectively. A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2024, 2023 and 2022) to income before provision for income taxes for 2024, 2023 and 2022, is as follows (dollars in millions):
| 2024 |  | 2023 |  | 2022
Computed expected tax | $ | 25,932 |  |  | $ | 23,885 |  |  | $ | 25,012 |
State taxes, net of federal effect | 1,162 |  |  | 1,124 |  |  | 1,518 |
Impact of the State Aid Decision | 10,246 |  |  | — |  |  | — |
Earnings of foreign subsidiaries | (5,311) |  |  | (5,744) |  |  | (4,366) |
Research and development credit, net | (1,397) |  |  | (1,212) |  |  | (1,153) |
Excess tax benefits from equity awards | (893) |  |  | (1,120) |  |  | (1,871) |
Other | 10 |  |  | (192) |  |  | 160 |
Provision for income taxes | $ | 29,749 |  |  | $ | 16,741 |  |  | $ | 19,300 |
Effective tax rate | 24.1 | % |  | 14.7 | % |  | 16.2 | %
Deferred Tax Assets and Liabilities As of September 28, 2024 and September 30, 2023, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
| 2024 |  | 2023
Deferred tax assets: |  |  |
Capitalized research and development | $ | 10,739 |  |  | $ | 6,294 |
Tax credit carryforwards | 8,856 |  |  | 8,302 |
Accrued liabilities and other reserves | 6,114 |  |  | 6,365 |
Deferred revenue | 3,413 |  |  | 4,571 |
Lease liabilities | 2,410 |  |  | 2,421 |
Unrealized losses | 1,173 |  |  | 2,447 |
Other | 2,168 |  |  | 2,343 |
Total deferred tax assets | 34,873 |  |  | 32,743 |
Less: Valuation allowance | (8,866) |  |  | (8,374) |
Total deferred tax assets, net | 26,007 |  |  | 24,369 |
Deferred tax liabilities: |  |  |
Depreciation | 2,551 |  |  | 1,998 |
Right-of-use assets | 2,125 |  |  | 2,179 |
Minimum tax on foreign earnings | 1,674 |  |  | 1,940 |
Unrealized gains | — |  |  | 511 |
Other | 455 |  |  | 490 |
Total deferred tax liabilities | 6,805 |  |  | 7,118 |
Net deferred tax assets | $ | 19,202 |  |  | $ | 17,251 |
As of September 28, 2024, the Company had $5.1 billion in foreign tax credit carryforwards in Ireland and $3.6 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 28, 2024, the total amount of gross unrecognized tax benefits was $22.0 billion, of which $10.8 billion, if recognized, would impact the Company’s effective tax rate. 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 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 2024, 2023 and 2022, is as follows (in millions):
| 2024 |  | 2023 |  | 2022
Beginning balances | $ | 19,454 |  |  | $ | 16,758 |  |  | $ | 15,477 |
Increases related to tax positions taken during a prior year | 1,727 |  |  | 2,044 |  |  | 2,284 |
Decreases related to tax positions taken during a prior year | (386) |  |  | (1,463) |  |  | (1,982) |
Increases related to tax positions taken during the current year | 2,542 |  |  | 2,628 |  |  | 1,936 |
Decreases related to settlements with taxing authorities | (1,070) |  |  | (19) |  |  | (28) |
Decreases related to expiration of the statute of limitations | (229) |  |  | (494) |  |  | (929) |
Ending balances | $ | 22,038 |  |  | $ | 19,454 |  |  | $ | 16,758 |
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 between approximately $5 billion and $13 billion in the next 12 months, primarily related to intercompany transfer pricing and deemed repatriation tax.

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