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Income Taxes | 12 Months Ended
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Jul. 29, 2023
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 29, 2023 |  | July 30, 2022 |  | July 31, 2021
Federal: |  |  |  |  |
Current | $ | 3,754 |  |  | $ | 2,203 |  |  | $ | 1,959 |
Deferred | (1,955) |  |  | (176) |  |  | (203) |
| 1,799 |  |  | 2,027 |  |  | 1,756 |
State: |  |  |  |  |
Current | 623 |  |  | 458 |  |  | 513 |
Deferred | (175) |  |  | (156) |  |  | (46) |
| 448 |  |  | 302 |  |  | 467 |
Foreign: |  |  |  |  |
Current | 412 |  |  | 313 |  |  | 583 |
Deferred | 46 |  |  | 23 |  |  | (135) |
| 458 |  |  | 336 |  |  | 448 |
Total | $ | 2,705 |  |  | $ | 2,665 |  |  | $ | 2,671 |
Income before provision for income taxes consists of the following (in millions):
Years Ended | July 29, 2023 |  | July 30, 2022 |  | July 31, 2021
United States | $ | 14,074 |  |  | $ | 13,550 |  |  | $ | 12,335 |
International | 1,244 |  |  | 927 |  |  | 927 |
Total | $ | 15,318 |  |  | $ | 14,477 |  |  | $ | 13,262 |
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 29, 2023 |  | July 30, 2022 |  | July 31, 2021
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Effect of: |  |  |  |  |
State taxes, net of federal tax benefit | 2.4 |  |  | 1.7 |  |  | 2.7 |
Foreign income at other than U.S. rates | (0.1) |  |  | 0.8 |  |  | 1.5 |
Tax credits | (0.3) |  |  | (1.6) |  |  | (1.4) |
Foreign-derived intangible income deduction | (5.8) |  |  | (3.9) |  |  | (4.2) |
Stock-based compensation | 1.1 |  |  | 0.3 |  |  | 0.6 |
Other, net | (0.6) |  |  | 0.1 |  |  | (0.1) |
Total | 17.7 | % |  | 18.4 | % |  | 20.1 | %
During fiscal 2023, we resolved certain items with the Internal Revenue Service (IRS) related to the audit of our federal income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016. As a result of the resolution, we recognized a net benefit to the provision for income taxes of $145 million, which included a reduction of interest expense of $53 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 2023. 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. Unrecognized Tax Benefits The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Years Ended | July 29, 2023 |  | July 30, 2022 |  | July 31, 2021
Beginning balance | $ | 3,101 |  |  | $ | 3,106 |  |  | $ | 2,518 |
Additions based on tax positions related to the current year | 159 |  |  | 157 |  |  | 224 |
Additions for tax positions of prior years | 261 |  |  | 74 |  |  | 618 |
Reductions for tax positions of prior years | (265) |  |  | (81) |  |  | (122) |
Settlements | (1,063) |  |  | (69) |  |  | (93) |
Lapse of statute of limitations | (56) |  |  | (86) |  |  | (39) |
Ending balance | $ | 2,137 |  |  | $ | 3,101 |  |  | $ | 3,106 |
As a result of resolving certain items related to the IRS audit of our federal tax income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016, the amount of gross unrecognized tax benefits in fiscal 2023 was reduced by approximately $1.1 billion. We also reduced the amount of accrued interest by $69 million. As of July 29, 2023, $1.7 billion of the unrecognized tax benefits would affect the effective tax rate if realized. We recognized net interest expense of $27 million, $33 million and $74 million during fiscal 2023, 2022, and 2021, respectively. Our net penalty expense for fiscal 2023, 2022, and 2021 was not material. Our total accrual for interest and penalties was $523 million, $486 million, and $444 million as of the end of fiscal 2023, 2022, and 2021, 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 29, 2023 could be reduced by $350 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 29, 2023 |  | July 30, 2022
Deferred tax assets | $ | 6,576 |  |  | $ | 4,449 |
Deferred tax liabilities | (62) |  |  | (55) |
Total net deferred tax assets | $ | 6,514 |  |  | $ | 4,394 |
The following table presents the components of the deferred tax assets and liabilities (in millions):
| July 29, 2023 |  | July 30, 2022
ASSETS |  |  |
Allowance for accounts receivable and returns | $ | 81 |  |  | $ | 90 |
Sales-type and direct-financing leases | 22 |  |  | 29 |
Inventory write-downs and capitalization | 452 |  |  | 430 |
Deferred foreign income | 218 |  |  | 210 |
IPR&D and purchased intangible assets | 1,082 |  |  | 1,184 |
Depreciation | 16 |  |  | 10 |
Deferred revenue | 1,801 |  |  | 1,744 |
Credits and net operating loss carryforwards | 1,218 |  |  | 1,336 |
Share-based compensation expense | 198 |  |  | 138 |
Accrued compensation | 328 |  |  | 333 |
Lease liabilities | 246 |  |  | 248 |
Capitalized research expenditures | 2,042 |  |  | 149 |
Other | 484 |  |  | 439 |
Gross deferred tax assets | 8,188 |  |  | 6,340 |
Valuation allowance | (754) |  |  | (834) |
Total deferred tax assets | 7,434 |  |  | 5,506 |
LIABILITIES |  |  |
Goodwill and purchased intangible assets | (602) |  |  | (767) |
Unrealized gains on investments | — |  |  | (26) |
ROU lease assets | (234) |  |  | (237) |
Other | (84) |  |  | (82) |
Total deferred tax liabilities | (920) |  |  | (1,112) |
Total net deferred tax assets | $ | 6,514 |  |  | $ | 4,394 |
The changes in the valuation allowance for deferred tax assets are summarized as follows (in millions):
|  | July 29, 2023 |  | July 30, 2022 |  | July 31, 2021
Balance at beginning of fiscal year |  | $ | 834 |  |  | $ | 771 |  |  | $ | 700 |
Additions |  | 35 |  |  | 84 |  |  | 91 |
Deductions |  | (18) |  |  | (10) |  |  | (5) |
Write-offs |  | (93) |  |  | (12) |  |  | (16) |
Foreign exchange and other |  | (4) |  |  | 1 |  |  | 1 |
Balance at end of fiscal year |  | $ | 754 |  |  | $ | 834 |  |  | $ | 771 |
As of July 29, 2023, our federal, state, and foreign net operating loss carryforwards before valuation allowance for income tax purposes were $320 million, $879 million, and $524 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 2024. We have provided a valuation allowance of $82 million and $10 million for deferred tax assets related to foreign and state net operating losses respectively that are not expected to be realized. As of July 29, 2023, our federal, state, and foreign tax credit carryforwards for income tax purposes before valuation allowance were approximately $5 million, $1.6 billion, and $2 million, respectively. The federal tax credit carryforwards will begin to expire in fiscal 2026. The majority of state and foreign tax credits can be carried forward indefinitely. We have provided a valuation allowance of $594 million for deferred tax assets related to state and foreign tax credits carryforwards that are not expected to be realized.

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