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Income Taxes | 12 Months Ended
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Aug. 29, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Note 9— Taxes Income Taxes Income before income taxes is comprised of the following:
| 2021 |  | 2020 |  | 2019
Domestic | $ | 4,931 |  |  | $ | 4,204 |  |  | $ | 3,591 |
Foreign | 1,749 |  |  | 1,163 |  |  | 1,174 |
Total | $ | 6,680 |  |  | $ | 5,367 |  |  | $ | 4,765 |
The provisions for income taxes are as follows:
| 2021 |  | 2020 |  | 2019
Federal: |  |  |  |  |
Current | $ | 718 |  |  | $ | 616 |  |  | $ | 328 |
Deferred | 84 |  |  | 77 |  |  | 222 |
Total federal | 802 |  |  | 693 |  |  | 550 |
State: |  |  |  |  |
Current | 265 |  |  | 230 |  |  | 178 |
Deferred | 11 |  |  | 8 |  |  | 26 |
Total state | 276 |  |  | 238 |  |  | 204 |
Foreign: |  |  |  |  |
Current | 557 |  |  | 372 |  |  | 405 |
Deferred | (34) |  |  | 5 |  |  | (98) |
Total foreign | 523 |  |  | 377 |  |  | 307 |
Total provision for income taxes | $ | 1,601 |  |  | $ | 1,308 |  |  | $ | 1,061 |
Except for certain provisions, the Tax Cuts and Jobs Act (2017 Tax Act) was effective for tax years beginning on or after January 1, 2018. Most provisions became effective for the Company for 2019, including limitations on the ability to claim foreign tax credits, repeal of the domestic manufacturing deduction, and limitations on certain business deductions. Provisions with significant impacts that were effective starting in the second quarter of 2018 and throughout 2019 included: a lower U.S. federal income tax rate, remeasurement of certain net deferred tax liabilities, and a transition tax on deemed repatriation of certain foreign earnings. The lower U.S. tax rate of 21.0% was effective for all of 2021, 2020, and 2019. The reconciliation between the statutory tax rate and the effective rate for 2021, 2020, and 2019 is as follows:
| 2021 |  | 2020 |  | 2019
Federal taxes at statutory rate | $ | 1,403 |  |  | 21.0 | % |  | $ | 1,127 |  |  | 21.0 | % |  | $ | 1,001 |  |  | 21.0 | %
State taxes, net | 243 |  |  | 3.6 |  |  | 190 |  |  | 3.6 |  |  | 171 |  |  | 3.6 |
Foreign taxes, net | 92 |  |  | 1.4 |  |  | 92 |  |  | 1.7 |  |  | (1) |  |  | — |
Employee stock ownership plan (ESOP) | (91) |  |  | (1.3) |  |  | (24) |  |  | (0.5) |  |  | (18) |  |  | (0.4) |
2017 Tax Act | — |  |  | — |  |  | — |  |  | — |  |  | (123) |  |  | (2.6) |
Other | (46) |  |  | (0.7) |  |  | (77) |  |  | (1.4) |  |  | 31 |  |  | 0.7 |
Total | $ | 1,601 |  |  | 24.0 | % |  | $ | 1,308 |  |  | 24.4 | % |  | $ | 1,061 |  |  | 22.3 | %
During 2019, the Company recognized net tax benefits of $123 related to the 2017 Tax Act. This benefit included $105 related to U.S. taxation of deemed foreign dividends, partially offset by losses of current year foreign tax credits. The Company recognized total net tax benefits of $163, $81 and $221 in 2021, 2020 and 2019, respectively. These include benefits of $75, $77 and $59, respectively, related to the stock-based compensation accounting standard adopted in 2018, in addition to the impacts of the 2017 Tax Act noted above. During 2021, there was a net tax benefit of $70 related to the portion of the special dividend paid through our 401(k) plan. The components of the deferred tax assets (liabilities) are as follows:
| 2021 |  | 2020
Deferred tax assets: |  |  |
Equity compensation | $ | 72 |  |  | $ | 80 |
Deferred income/membership fees | 161 |  |  | 144 |
Foreign tax credit carry forward | 146 |  |  | 101 |
Operating lease liabilities | 769 |  |  | 832 |
Accrued liabilities and reserves | 681 |  |  | 639 |
Other | 62 |  |  | — |
Total deferred tax assets | 1,891 |  |  | 1,796 |
Valuation allowance | (214) |  |  | (105) |
Total net deferred tax assets | 1,677 |  |  | 1,691 |
Deferred tax liabilities: |  |  |
Property and equipment | (935) |  |  | (800) |
Merchandise inventories | (216) |  |  | (228) |
Operating lease right-of-use assets | (744) |  |  | (801) |
Foreign branch deferreds | (92) |  |  | (81) |
Other | — |  |  | (40) |
Total deferred tax liabilities | (1,987) |  |  | (1,950) |
Net deferred tax liabilities | $ | (310) |  |  | $ | (259) |
The deferred tax accounts at the end of 2021 and 2020 include deferred income tax assets of $444 and $406, respectively, included in other long-term assets; and deferred income tax liabilities of $754 and $665, respectively, included in other long-term liabilities. In 2021 and 2020, the Company had valuation allowances of $214 and $105, respectively, primarily related to foreign tax credits that the Company believes will not be realized due to carry forward limitations. The foreign tax credit carry forwards are set to expire beginning in fiscal 2030. The Company no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries after 2017 to be indefinitely reinvested (other than China) and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S. The Company continues to consider undistributed earnings of certain non-U.S. consolidated subsidiaries, which totaled $3,070, to be indefinitely reinvested and has not provided for withholding or state taxes. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2021 and 2020 is as follows:
| 2021 |  | 2020
Gross unrecognized tax benefit at beginning of year | $ | 30 |  |  | $ | 27 |
Gross increases—current year tax positions | 2 |  |  | 1 |
Gross increases—tax positions in prior years | 2 |  |  | 8 |
Gross decreases—tax positions in prior years | — |  |  | (3) |
Lapse of statute of limitations | (1) |  |  | (3) |
Gross unrecognized tax benefit at end of year | $ | 33 |  |  | $ | 30 |
The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of such deductibility. At the end of 2021 and 2020, these amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax benefits that if recognized would favorably affect the effective income tax rate in future periods is $30 and $28 at the end of 2021 and 2020, respectively. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Accrued interest and penalties recognized during 2021 and 2020, and accrued at the end of each respective period were not material. The Company is currently under audit by several jurisdictions in the United States and abroad. Some audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months. The Company files income tax returns in the United States, various state and local jurisdictions, in Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2017. The Company is currently subject to examination in California for fiscal years 2013 to present. Other Taxes The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. In the fourth quarter of 2020, the Company reached an agreement on a product tax audit resulting in a benefit of $84. The Company recorded a charge of $123 in 2019 regarding this matter. Other possible losses or range of possible losses associated with these examinations are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year.

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