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Income Taxes | 12 Months Ended
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Jul. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes (a)Provision for Income Taxes The provision for income taxes consists of the following (in millions):
Years Ended | July 31, 2021 |  | July 25, 2020 |  | July 27, 2019
Federal: |  |  |  |  |
Current | $ | 1,959 |  |  | $ | 1,101 |  |  | $ | 1,760 |
Deferred | (203) |  |  | (374) |  |  | (84) |
| 1,756 |  |  | 727 |  |  | 1,676 |
State: |  |  |  |  |
Current | 513 |  |  | 264 |  |  | 302 |
Deferred | (46) |  |  | 287 |  |  | (2) |
| 467 |  |  | 551 |  |  | 300 |
Foreign: |  |  |  |  |
Current | 583 |  |  | 1,429 |  |  | 1,238 |
Deferred | (135) |  |  | 49 |  |  | (264) |
| 448 |  |  | 1,478 |  |  | 974 |
Total | $ | 2,671 |  |  | $ | 2,756 |  |  | $ | 2,950 |
Income before provision for income taxes consists of the following (in millions):
Years Ended | July 31, 2021 |  | July 25, 2020 |  | July 27, 2019
United States | $ | 12,335 |  |  | $ | 7,534 |  |  | $ | 7,611 |
International | 927 |  |  | 6,436 |  |  | 6,960 |
Total | $ | 13,262 |  |  | $ | 13,970 |  |  | $ | 14,571 |
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following:
Years Ended | July 31, 2021 |  | July 25, 2020 |  | July 27, 2019
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Effect of: |  |  |  |  |
State taxes, net of federal tax benefit | 2.7 |  |  | 3.5 |  |  | 2.0 |
Foreign income at other than U.S. rates | 1.5 |  |  | (1.5) |  |  | (4.5) |
Tax credits | (1.4) |  |  | (0.9) |  |  | (1.7) |
Foreign-derived intangible income deduction | (4.2) |  |  | (2.6) |  |  | (1.3) |
Stock-based compensation | 0.6 |  |  | (0.1) |  |  | (0.6) |
Impact of the Tax Act | — |  |  | — |  |  | 6.1 |
Other, net | (0.1) |  |  | 0.3 |  |  | (0.8) |
Total | 20.1 | % |  | 19.7 | % |  | 20.2 | %
During fiscal 2019, we recorded an $872 million charge related to the Tax Act. This charge was the reversal of the previously recorded benefit associated with the U.S. taxation of deemed foreign dividends recorded in fiscal 2018 because of a retroactive final U.S. Treasury regulation issued during fiscal 2019. During fiscal 2020, the Internal Revenue Service (IRS) and Cisco settled all outstanding items related to the audit of our federal income tax returns for the fiscal year ended July 30, 2011 through July 27, 2013. As a result of the settlement, we recognized a net benefit to the provision for income taxes of $102 million, net of a reduction in interest expense of $4 million. Foreign taxes associated with the repatriation of earnings of foreign subsidiaries were not provided on a cumulative total of $6.5 billion of undistributed earnings for certain foreign subsidiaries as of the end of fiscal 2021. We intend to reinvest these earnings indefinitely in such foreign subsidiaries. If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we could be subject to additional income and withholding taxes. The amount of potential unrecognized deferred income tax liability related to these earnings is approximately $681 million. As a result of certain employment and capital investment actions, our income in certain foreign countries was subject to reduced tax rates. The tax incentives expired at the end of fiscal 2019. As of the end of fiscal 2019, the gross income tax benefits attributable to tax incentives were estimated to be $0.3 billion ($0.08 per diluted share). The gross income tax benefits were partially offset by accruals of U.S. income taxes on foreign earnings. Unrecognized Tax Benefits The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Years Ended | July 31, 2021 |  | July 25, 2020 |  | July 27, 2019
Beginning balance | $ | 2,518 |  |  | $ | 1,925 |  |  | $ | 2,000 |
Additions based on tax positions related to the current year | 224 |  |  | 188 |  |  | 185 |
Additions for tax positions of prior years | 618 |  |  | 554 |  |  | 84 |
Reductions for tax positions of prior years | (122) |  |  | (136) |  |  | (283) |
Settlements | (93) |  |  | (4) |  |  | (38) |
Lapse of statute of limitations | (39) |  |  | (9) |  |  | (23) |
Ending balance | $ | 3,106 |  |  | $ | 2,518 |  |  | $ | 1,925 |
As of July 31, 2021, $2.3 billion of the unrecognized tax benefits would affect the effective tax rate if realized. During fiscal 2021, we recognized $74 million of net interest expense and increased our unrecognized tax benefits for prior year tax positions by $618 million to reflect expected settlement positions in on-going U.S. federal, state, and foreign income tax return examinations. We recognized net interest expense of $104 million during fiscal 2020 and $30 million during fiscal 2019. Our net penalty expense for fiscal 2021, 2020, and 2019 was not material. Our total accrual for interest and penalties was $444 million, $340 million, and $220 million as of the end of fiscal 2021, 2020, and 2019, respectively. We are no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2013. We are no longer subject to foreign or state income tax audits for returns covering tax years through fiscal 2003 and fiscal 2008, respectively. We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters. We estimate that the unrecognized tax benefits at July 31, 2021 could be reduced by $800 million in the next 12 months. (b)Deferred Tax Assets and Liabilities The following table presents the breakdown for net deferred tax assets (in millions):
| July 31, 2021 |  | July 25, 2020
Deferred tax assets | $ | 4,360 |  |  | $ | 3,990 |
Deferred tax liabilities | (134) |  |  | (81) |
Total net deferred tax assets | $ | 4,226 |  |  | $ | 3,909 |
The following table presents the components of the deferred tax assets and liabilities (in millions):
| July 31, 2021 |  | July 25, 2020
ASSETS |  |  |
Allowance for accounts receivable and returns | $ | 68 |  |  | $ | 110 |
Sales-type and direct-financing leases | 157 |  |  | 179 |
Inventory write-downs and capitalization | 392 |  |  | 350 |
Deferred foreign income | 164 |  |  | 253 |
IPR&D and purchased intangible assets | 1,195 |  |  | 1,289 |
Deferred revenue | 1,526 |  |  | 1,182 |
Credits and net operating loss carryforwards | 1,264 |  |  | 1,105 |
Share-based compensation expense | 123 |  |  | 135 |
Accrued compensation | 333 |  |  | 353 |
Lease liabilities | 277 |  |  | 240 |
Capitalized research expenditures | 303 |  |  | 223 |
Other | 454 |  |  | 348 |
Gross deferred tax assets | 6,256 |  |  | 5,767 |
Valuation allowance | (771) |  |  | (700) |
Total deferred tax assets | 5,485 |  |  | 5,067 |
LIABILITIES |  |  |
Goodwill and purchased intangible assets | (686) |  |  | (577) |
Depreciation | (164) |  |  | (179) |
Unrealized gains on investments | (112) |  |  | (119) |
ROU lease assets | (260) |  |  | (222) |
Other | (37) |  |  | (61) |
Total deferred tax liabilities | (1,259) |  |  | (1,158) |
Total net deferred tax assets | $ | 4,226 |  |  | $ | 3,909 |
As of July 31, 2021, our federal, state, and foreign net operating loss carryforwards for income tax purposes were $540 million, $1.1 billion, and $617 million, respectively. A significant amount of the net operating loss carryforwards relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not utilized, the federal, state, and foreign net operating loss carryforwards will begin to expire in fiscal 2022. We have provided a valuation allowance of $104 million for deferred tax assets related to foreign net operating losses that are not expected to be realized. As of July 31, 2021, our federal, state, and foreign tax credit carryforwards for income tax purposes were approximately $31 million, $1.4 billion, and $7 million, respectively. The federal tax credit carryforwards will begin to expire in fiscal 2023. The majority of state and foreign tax credits can be carried forward indefinitely. We have provided a valuation allowance of $595 million for deferred tax assets related to state and foreign tax credits carryforwards that are not expected to be realized.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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