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Income Taxes | 12 Months Ended
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Jul. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes |
10. Income Taxes
The provision for income taxes consisted of the following for the periods indicated:
| Twelve Months Ended July 31,
(In millions) | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | 372 |  |  | $ | 271 |  |  | $ | 197 |
State | 79 |  |  | 67 |  |  | 38 |
Foreign | 21 |  |  | 14 |  |  | 14 |
Total current | 472 |  |  | 352 |  |  | 249 |
Deferred: |  |  |  |  |
Federal | (47 | ) |  | (23 | ) |  | (14 | )
State | (47 | ) |  | (4 | ) |  | 2 |
Foreign | (6 | ) |  | (1 | ) |  | — |
Total deferred | (100 | ) |  | (28 | ) |  | (12 | )
Total provision for income taxes | $ | 372 |  |  | $ | 324 |  |  | $ | 237 |
We recognized excess tax benefits on share-based compensation of $90 million, $120 million, and $100 million in the provision for income taxes for the twelve months ended July 31, 2020, 2019, and 2018, respectively. The sources of income before the provision for income taxes consisted of the following for the periods indicated:
| Twelve Months Ended July 31,
(In millions) | 2020 |  | 2019 |  | 2018
United States | $ | 2,206 |  |  | $ | 1,826 |  |  | $ | 1,528 |
Foreign | (8 | ) |  | 55 |  |  | 38 |
Total | $ | 2,198 |  |  | $ | 1,881 |  |  | $ | 1,566 |
Differences between income taxes calculated using the federal statutory income tax rate and the provision for income taxes were as follows for the periods indicated:
| Twelve Months Ended July 31,
(In millions) | 2020 |  | 2019 |  | 2018
Income before income taxes | $ | 2,198 |  |  | $ | 1,881 |  |  | $ | 1,566 |
U.S. federal statutory rate | 21 | % |  | 21 | % |  | 26.9 | %
Statutory federal income tax | $ | 462 |  |  | $ | 395 |  |  | $ | 420 |
State income tax, net of federal benefit | 25 |  |  | 50 |  |  | 29 |
Federal research and experimentation credits | (54 | ) |  | (48 | ) |  | (38 | )
Domestic production activities deduction | — |  |  | — |  |  | (28 | )
Share-based compensation | 22 |  |  | 15 |  |  | 11 |
Federal excess tax benefits related to share-based compensation | (79 | ) |  | (106 | ) |  | (94 | )
2017 Tax Act - Deferred tax re-measurement | — |  |  | — |  |  | (29 | )
Capital loss on subsidiary reorganization | — |  |  | — |  |  | (35 | )
Effects of non-U.S. operations | 13 |  |  | 13 |  |  | 1 |
Other, net | (17 | ) |  | 5 |  |  | — |
Total provision for income taxes | $ | 372 |  |  | $ | 324 |  |  | $ | 237 |
The CARES Act was signed into law on March 27, 2020. We have evaluated the provisions of this act and determined that it did not result in a significant impact on our tax provision for the period. The Tax Cuts and Jobs Act (2017 Tax Act) was enacted on December 22, 2017 and reduced the U.S. statutory federal corporate tax rate from 35% to 21%. The effective date of the tax rate change was January 1, 2018. The change resulted in a blended lower U.S. statutory federal rate of 26.9% for fiscal year 2018. In fiscal 2019, we fully benefited from the enacted lower tax rate of 21%. We recorded a benefit of $29 million for fiscal 2018 related to the re-measurement of deferred tax balances as a result of the 2017 Tax Act. During fiscal year 2018, we completed a reorganization which resulted in a taxable liquidation of a subsidiary. The transaction gave rise to a capital loss which is available for carryback to prior years to offset capital gain income previously recognized. As a result, we recognized a tax benefit of $35 million during the fourth quarter of fiscal 2018. The state income tax line in the table above includes excess tax benefits related to share-based compensation of $11 million, $14 million and $6 million for the twelve months ended July 31, 2020, 2019 and 2018, respectively. Significant deferred tax assets and liabilities were as follows at the dates indicated:
| July 31,
(In millions) | 2020 |  | 2019
Deferred tax assets: |  |  |
Accruals and reserves not currently deductible | $ | 23 |  |  | $ | 13 |
Operating lease liabilities | 64 |  |  | — |
Accrued and deferred compensation | 112 |  |  | 48 |
Loss and tax credit carryforwards | 114 |  |  | 117 |
Intangible assets | 26 |  |  | — |
Share-based compensation | 44 |  |  | 47 |
Other, net | 13 |  |  | 11 |
Total gross deferred tax assets | 396 |  |  | 236 |
Valuation allowance | (132 | ) |  | (107 | )
Total deferred tax assets | 264 |  |  | 129 |
Deferred tax liabilities: |  |  |
Deferred revenue | 68 |  |  | 66 |
Operating lease right-of-use assets | 55 |  |  | — |
Intangibles | 45 |  |  | 71 |
Property and equipment | 22 |  |  | 20 |
Other, net | 11 |  |  | 8 |
Total deferred tax liabilities | 201 |  |  | 165 |
Net deferred tax assets (liabilities) | $ | 63 |  |  | $ | (36 | )
The components of total net deferred tax liabilities, net of valuation allowances, as shown on our consolidated balance sheets were as follows at the dates indicated:
| July 31,
(In millions) | 2020 |  | 2019
Long-term deferred income taxes | $ | 65 |  |  | $ | 1 |
Long-term deferred income tax liabilities | (2 | ) |  | (37 | )
Net deferred tax assets (liabilities) | $ | 63 |  |  | $ | (36 | )
We have provided a valuation allowance related to state research and experimentation tax credit carryforwards, foreign loss carryforwards, foreign intangible deferred tax assets and state operating and capital loss carryforwards that we believe are unlikely to be realized. Changes in the valuation allowance during the twelve months ended July 31, 2020 were primarily related to foreign intangible deferred tax assets, foreign loss carryforwards and state research and experimentation tax credit carryforwards. Changes in the valuation allowance during the twelve months ended July 31, 2019 were primarily related to an increase in the valuation allowance for state research and experimentation tax credit carryforwards. At July 31, 2020, we had total federal net operating loss carryforwards of approximately $34 million that will start to expire in fiscal 2032. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization. At July 31, 2020, we had total state net operating loss carryforwards of approximately $83 million for which we have recorded a deferred tax asset of $6 million and a valuation allowance of $4 million. The state net operating losses will start to expire in fiscal 2022. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization. At July 31, 2020, we had Singapore operating loss carryforwards of approximately $61 million, Brazil operating loss carryforwards of approximately $51 million and United Kingdom operating loss carryforwards of approximately $57 million which have an indefinite carryforward period. We maintain a full valuation allowance with respect to operating losses in these jurisdictions, as there is not sufficient evidence of future sources of taxable income required to utilize such carryforwards. At July 31, 2020, we had California research and experimentation credit carryforwards of approximately $110 million. We recorded a full valuation on the related deferred tax asset, as we believe it is more likely than not that these credits will not be utilized.
Unrecognized Tax Benefits
The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the periods indicated:
| Twelve Months Ended July 31,
(In millions) | 2020 |  | 2019 |  | 2018
Gross unrecognized tax benefits, beginning balance | $ | 120 |  |  | $ | 90 |  |  | $ | 61 |
Increases related to tax positions from prior fiscal years, including acquisitions | 2 |  |  | 13 |  |  | 10 |
Decreases related to tax positions from prior fiscal years | (35 | ) |  | — |  |  | (3 | )
Increases related to tax positions taken during current fiscal year | 21 |  |  | 23 |  |  | 23 |
Settlements with tax authorities | (1 | ) |  | (1 | ) |  | (1 | )
Lapse of statute of limitations | (6 | ) |  | (5 | ) |  | — |
Gross unrecognized tax benefits, ending balance | $ | 101 |  |  | $ | 120 |  |  | $ | 90 |
The total amount of our unrecognized tax benefits at July 31, 2020 was $101 million. Net of related deferred tax assets, unrecognized tax benefits were $61 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $61 million. We do not believe that it is reasonably possible that there will be a significant increase or decrease in unrecognized tax benefits over the next 12 months. We file U.S. federal, U.S. state, and foreign tax returns. Our major tax jurisdictions are the U.S. federal jurisdiction and California. For U.S. federal and California state tax returns, we are no longer subject to tax examinations for years prior to fiscal 2016. We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes. Amounts accrued at July 31, 2020 and July 31, 2019 for the payment of interest and penalties were not significant. The amounts of interest and penalties that we recognized during the twelve months ended July 31, 2020, 2019 and 2018 were also not significant. We have offset a $59 million long-term income tax receivable against our long-term liability for uncertain tax positions at July 31, 2020. The long-term income tax receivable is primarily related to the government’s approval of a method of accounting change request for fiscal 2018.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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