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Income Taxes | 12 Months Ended
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Jul. 31, 2021
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) | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
Federal | $ | 399 |  |  | $ | 372 |  |  | $ | 271 |
State | 121 |  |  | 79 |  |  | 67 |
Foreign | 17 |  |  | 21 |  |  | 14 |
Total current | 537 |  |  | 472 |  |  | 352 |
Deferred: |  |  |  |  |
Federal | (33) |  |  | (47) |  |  | (23) |
State | (11) |  |  | (47) |  |  | (4) |
Foreign | 1 |  |  | (6) |  |  | (1) |
Total deferred | (43) |  |  | (100) |  |  | (28) |
Total provision for income taxes | $ | 494 |  |  | $ | 372 |  |  | $ | 324 |
We recognized excess tax benefits on share-based compensation of $126 million, $90 million, and $120 million in the provision for income taxes for the twelve months ended July 31, 2021, 2020, and 2019, 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) | 2021 |  | 2020 |  | 2019
United States | $ | 2,497 |  |  | $ | 2,206 |  |  | $ | 1,826 |
Foreign | 59 |  |  | (8) |  |  | 55 |
Total | $ | 2,556 |  |  | $ | 2,198 |  |  | $ | 1,881 |
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) | 2021 |  | 2020 |  | 2019
Income before income taxes | $ | 2,556 |  |  | $ | 2,198 |  |  | $ | 1,881 |
U.S. federal statutory rate | 21 | % |  | 21 | % |  | 21 | %
Statutory federal income tax | $ | 537 |  |  | $ | 462 |  |  | $ | 395 |
State income tax, net of federal benefit | 87 |  |  | 25 |  |  | 50 |
Federal research and experimentation credits | (70) |  |  | (54) |  |  | (48) |
Share-based compensation | 38 |  |  | 22 |  |  | 15 |
Federal excess tax benefits related to share-based compensation | (105) |  |  | (79) |  |  | (106) |
Effects of non-U.S. operations | 4 |  |  | 13 |  |  | 13 |
Other, net | 3 |  |  | (17) |  |  | 5 |
Total provision for income taxes | $ | 494 |  |  | $ | 372 |  |  | $ | 324 |
The state income tax line in the table above includes excess tax benefits related to share-based compensation of $21 million, $11 million and $14 million for the twelve months ended July 31, 2021, 2020 and 2019, respectively. In the current global tax policy environment, the U.S. and other domestic and foreign governments continue to consider, and in some cases enact, changes in corporate tax laws. As changes occur, we account for finalized legislation in the period of enactment. Significant deferred tax assets and liabilities were as follows at the dates indicated:
| July 31,
(In millions) | 2021 |  | 2020
Deferred tax assets: |  |  |
Accruals and reserves not currently deductible | $ | 48 |  |  | $ | 23 |
Operating lease liabilities | 113 |  |  | 64 |
Accrued and deferred compensation | 132 |  |  | 112 |
Loss and tax credit carryforwards | 282 |  |  | 114 |
Intangible assets | 33 |  |  | 26 |
Share-based compensation | 59 |  |  | 44 |
Other, net | 16 |  |  | 13 |
Total gross deferred tax assets | 683 |  |  | 396 |
Valuation allowance | (205) |  |  | (132) |
Total deferred tax assets | 478 |  |  | 264 |
Deferred tax liabilities: |  |  |
Deferred revenue | 32 |  |  | 68 |
Operating lease right-of-use assets | 96 |  |  | 55 |
Intangibles | 844 |  |  | 45 |
Property and equipment | 10 |  |  | 22 |
Other, net | 13 |  |  | 11 |
Total deferred tax liabilities | 995 |  |  | 201 |
Net deferred tax assets (liabilities) | $ | (517) |  |  | $ | 63 |
The components of total net deferred tax assets (liabilities), net of valuation allowances, as shown on our consolidated balance sheets were as follows at the dates indicated:
| July 31,
(In millions) | 2021 |  | 2020
Long-term deferred income taxes | $ | 8 |  |  | $ | 65 |
Long-term deferred income tax liabilities | (525) |  |  | (2) |
Net deferred tax assets (liabilities) | $ | (517) |  |  | $ | 63 |
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, 2021 and July 31, 2020 were primarily related to state research and experimentation tax credit carryforwards, foreign intangible deferred tax assets and foreign loss carryforwards. At July 31, 2021, we had total federal net operating loss carryforwards of approximately $216 million that will start to expire in fiscal 2033. 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, 2021, we had total state net operating loss carryforwards of approximately $304 million for which we have recorded a deferred tax asset of $17 million and a valuation allowance of $4 million. The state net operating loss carryforwards 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, 2021, we had United Kingdom operating loss carryforwards of approximately $67 million, Singapore operating loss carryforwards of approximately $63 million, Brazil operating loss carryforwards of approximately $59 million and Australia operating loss carryforwards of $2 million which have an indefinite carryforward period. We maintain a full valuation allowance with respect to operating losses in Singapore, Brazil and United Kingdom jurisdictions, as there is not sufficient evidence of future sources of taxable income required to utilize such carryforwards. At July 31, 2021, we had federal research and experimentation credit carryforwards of approximately $71 million that will start to expire in fiscal 2036. Utilization of the federal research and experimentation credit is subject to annual limitation. The annual limitation may result in the expiration of the Federal research and experimentation credit before utilization. At July 31, 2021, we had California research and experimentation credit carryforwards of approximately $227 million. The California research and experimentation credit will carryforward indefinitely. 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) | 2021 |  | 2020 |  | 2019
Gross unrecognized tax benefits, beginning balance | $ | 101 |  |  | $ | 120 |  |  | $ | 90 |
Increases related to tax positions from prior fiscal years, including acquisitions | 69 |  |  | 2 |  |  | 13 |
Decreases related to tax positions from prior fiscal years | — |  |  | (35) |  |  | — |
Increases related to tax positions taken during current fiscal year | 31 |  |  | 21 |  |  | 23 |
Settlements with tax authorities | — |  |  | (1) |  |  | (1) |
Lapse of statute of limitations | (11) |  |  | (6) |  |  | (5) |
Gross unrecognized tax benefits, ending balance | $ | 190 |  |  | $ | 101 |  |  | $ | 120 |
The total amount of our unrecognized tax benefits at July 31, 2021 was $190 million. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $109 million. The increase in the unrecognized tax benefits related to prior years includes $41 million of unrecognized tax benefits from the Credit Karma acquisition. 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 tax returns, we are no longer subject to tax examinations for fiscal 2017 and for years prior to fiscal 2016. For California tax returns, we are no longer subject to tax examination 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, 2021 and July 31, 2020 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, 2021, 2020 and 2019 were also not significant. We have offset a $75 million long-term liability for uncertain tax positions against our long-term income tax receivable at July 31, 2021. 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 at July 31, 2021 was primarily related to the government’s approval of a method of accounting change request for fiscal 2018 and a refund claim related to Credit Karma’s alternative minimum tax credit that was recorded as part of the acquisition. The long-term income tax receivable at July 31, 2020 was primarily related to the method of accounting change request.

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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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