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Income Taxes | 12 Months Ended
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Aug. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the United States enacted tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") which lowered the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxed in the United States. Our U.S. statutory federal rate was 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and will be 21% beginning in 2019. The Tax Act imposed a one-time transition tax in 2018 on accumulated foreign income (the "Repatriation Tax"); provided a U.S. federal tax exemption on foreign earnings distributed to the United States after January 1, 2018; and beginning in 2019, created a new minimum tax on certain foreign earnings in excess of a deemed return on tangible assets (the "Foreign Minimum Tax"). The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual, interest-free payments in increasing amounts beginning in December 2018. In connection with the provisions of the Tax Act, we made an accounting policy election to treat the Foreign Minimum Tax provision as a period cost in the period the tax is incurred. SEC Staff Accounting Bulletin No. 118 ("SAB 118") allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act have not been completed when our financial statements are issued. The provisional amounts below for 2018 represent reasonable estimates of the effects of the Tax Act for which our analysis is not yet complete. As we complete our analysis of the Tax Act, including collecting, preparing, and analyzing necessary information, performing and refining calculations, and obtaining additional guidance from the IRS, U.S. Treasury Department, FASB, or other standard setting and regulatory bodies on the Tax Act, we may record adjustments to the provisional amounts, which may be material. In accordance with SAB 118, our accounting for the tax effects of the Tax Act will be completed during the measurement period, which should not extend beyond one year from the enactment date. At August 30, 2018, there were no provisions for which we were unable to record a reasonable estimate of the impact. Our income tax (provision) benefit consisted of the following:
For the year ended |  | 2018 |  | 2017 |  | 2016
Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees |  |  |  |  |  |
U.S. |  | $ | 141 |  |  | $ | (56 | ) |  | $ | 72 |
Foreign |  | 14,166 |  |  | 5,252 |  |  | (353 | )
|  | $ | 14,307 |  |  | $ | 5,196 |  |  | $ | (281 | )
Income tax (provision) benefit |  |  |  |  |  |
Current |  |  |  |  |  |
U.S. federal |  | $ | (54 | ) |  | $ | — |  |  | $ | — |
State |  | 1 |  |  | (1 | ) |  | (1 | )
Foreign |  | (374 | ) |  | (152 | ) |  | (27 | )
|  | (427 | ) |  | (153 | ) |  | (28 | )
Deferred |  |  |  |  |  |
U.S. federal |  | 232 |  |  | — |  |  | 39 |
State |  | 101 |  |  | — |  |  | 2 |
Foreign |  | (74 | ) |  | 39 |  |  | (32 | )
|  | 259 |  |  | $ | 39 |  |  | 9 |
Income tax (provision) benefit |  | $ | (168 | ) |  | $ | (114 | ) |  | $ | (19 | )
The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate to our effective rate:
For the year ended |  | 2018 |  | 2017 |  | 2016
U.S. federal income tax (provision) benefit at statutory rate |  | $ | (3,677 | ) |  | 25.7 | % |  | $ | (1,819 | ) |  | 35.0 | % |  | $ | 98 |  |  | 35.0 | %
Foreign tax rate differential |  | 2,572 |  |  | (18.0 | )% |  | 1,571 |  |  | (30.2 | )% |  | (300 | ) |  | (106.8 | )%
Repatriation Tax related to the Tax Act |  | (1,049 | ) |  | 7.3 | % |  | — |  |  | — | % |  | — |  |  | — | %
Remeasurement of deferred tax assets and liabilities related to the Tax Act |  | (179 | ) |  | 1.3 | % |  | — |  |  | — | % |  | — |  |  | — | %
Change in valuation allowance |  | 2,079 |  |  | (14.5 | )% |  | 64 |  |  | (1.2 | )% |  | 63 |  |  | 22.4 | %
Change in unrecognized tax benefits |  | 60 |  |  | (0.4 | )% |  | 12 |  |  | (0.2 | )% |  | 52 |  |  | 18.5 | %
Tax credits |  | 90 |  |  | (0.6 | )% |  | 66 |  |  | (1.3 | )% |  | 48 |  |  | 17.1 | %
Other |  | (64 | ) |  | 0.4 | % |  | (8 | ) |  | 0.1 | % |  | 20 |  |  | 7.0 | %
Income tax (provision) benefit |  | $ | (168 | ) |  | 1.2 | % |  | $ | (114 | ) |  | 2.2 | % |  | $ | (19 | ) |  | (6.8 | )%
Provisional estimates for 2018 in the table above included $1.34 billion of benefit for the release of the valuation allowance on the net deferred tax assets of our U.S. operations and $1.03 billion of provision for the Repatriation Tax, net of adjustments related to uncertain tax positions. We operate in a number of tax jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements, which expire in whole or in part at various dates through 2031, that are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $1.96 billion (benefiting our diluted earnings per share by $1.59) for 2018, by $742 million ($0.64 per diluted share) for 2017, and were not material in 2016. Provision has been recognized for deferred taxes on undistributed earnings of non-U.S. subsidiaries to the extent that dividend payments from such companies are expected to result in additional tax liabilities. As a result of the Repatriation Tax, substantially all of our accumulated foreign earnings prior to December 31, 2017 were subject to U.S. federal taxation. Although these earnings have been subject to U.S. federal income tax under the Repatriation Tax, the repatriation to the United States of all or a portion of these earnings would potentially be subject to foreign withholding and state income tax. As of August 30, 2018, we had a deferred tax liability of $82 million associated with our undistributed earnings. As of August 30, 2018, certain non-U.S. subsidiaries had cumulative undistributed earnings of $2.35 billion that were deemed to be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable. Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following:
As of |  | 2018 |  | 2017
Deferred tax assets |  |  |  |
Net operating loss and tax credit carryforwards |  | $ | 1,417 |  |  | $ | 3,426 |
Accrued salaries, wages, and benefits |  | 163 |  |  | 211 |
Other accrued liabilities |  | 35 |  |  | 59 |
Other |  | 80 |  |  | 86 |
Gross deferred tax assets |  | 1,695 |  |  | 3,782 |
Less valuation allowance |  | (228 | ) |  | (2,321 | )
Deferred tax assets, net of valuation allowance |  | 1,467 |  |  | 1,461 |
Deferred tax liabilities |  |  |  |
Debt discount |  | (77 | ) |  | (145 | )
Property, plant, and equipment |  | (173 | ) |  | (300 | )
Unremitted earnings on certain subsidiaries |  | (82 | ) |  | (123 | )
Product and process technology |  | (62 | ) |  | (85 | )
Other |  | (54 | ) |  | (59 | )
Deferred tax liabilities |  | (448 | ) |  | (712 | )
Net deferred tax assets |  | $ | 1,019 |  |  | $ | 749 |
Reported as |  |  |  |
Deferred tax assets |  | $ | 1,022 |  |  | $ | 766 |
Deferred tax liabilities (included in other noncurrent liabilities) |  | (3 | ) |  | (17 | )
Net deferred tax assets |  | $ | 1,019 |  |  | $ | 749 |
We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of August 30, 2018 and August 31, 2017, we had a valuation allowance of $28 million and $1.52 billion, respectively, against U.S. net deferred tax assets, primarily related to net operating loss and tax credit carryforwards. Income taxes on U.S. operations for 2017 and 2016 were substantially offset by changes in the valuation allowance. We had valuation allowances against net deferred tax assets, primarily related to net operating loss carryforwards, for our subsidiaries in Japan and for our other foreign subsidiaries, of $192 million and $8 million, respectively, as of August 30, 2018, and $627 million and $172 million, respectively, as of August 31, 2017. Changes in 2018 in the valuation allowance were due to the provisional estimate for the release of the valuation allowance in the U.S. as a result of the Tax Act, adjustments based on management's assessment of foreign net operating losses that are more likely than not to be realized, and changes in foreign currency. As a result of internal restructuring during the year, we have concluded that the possibility of utilizing certain of our net operating loss carryovers are now remote. As such, we have removed $119 million of deferred tax assets that were previously fully reserved with a valuation allowance. As of August 30, 2018, our federal, state, and foreign net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:
Year of Expiration |  | U.S. Federal |  | State |  | Japan |  | Taiwan |  | Other Foreign |  | Total
2019 - 2023 |  | $ | — |  |  | $ | 28 |  |  | $ | 1,782 |  |  | $ | 711 |  |  | $ | 2 |  |  | $ | 2,523 |
2024 - 2028 |  | — |  |  | 136 |  |  | 536 |  |  | 3 |  |  | — |  |  | 675 |
2029 - 2033 |  | — |  |  | 407 |  |  | — |  |  | — |  |  | — |  |  | 407 |
2034 - 2038 |  | 10 |  |  | 84 |  |  | — |  |  | — |  |  | — |  |  | 94 |
Indefinite |  | — |  |  | 1 |  |  | — |  |  | 622 |  |  | 38 |  |  | 661 |
|  | $ | 10 |  |  | $ | 656 |  |  | $ | 2,318 |  |  | $ | 1,336 |  |  | $ | 40 |  |  | $ | 4,360 |
As of August 30, 2018, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:
Year of Tax Credit Expiration |  | U.S. Federal |  | State |  | Total
2019 - 2023 |  | $ | 122 |  |  | $ | 63 |  |  | $ | 185 |
2024 - 2028 |  | 44 |  |  | 46 |  |  | 90 |
2029 - 2033 |  | 69 |  |  | 90 |  |  | 159 |
2034 - 2038 |  | 275 |  |  | 3 |  |  | 278 |
Indefinite |  | — |  |  | 62 |  |  | 62 |
|  | $ | 510 |  |  | $ | 264 |  |  | $ | 774 |
Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:
For the year ended |  | 2018 |  | 2017 |  | 2016
Beginning unrecognized tax benefits |  | $ | 327 |  |  | $ | 304 |  |  | $ | 351 |
Increases due to the Inotera Acquisition |  | — |  |  | 54 |  |  | — |
Increases related to tax positions taken in current year |  | 68 |  |  | 15 |  |  | 5 |
Foreign currency translation increases (decreases) to tax positions |  | — |  |  | 2 |  |  | — |
Settlements with tax authorities |  | (8 | ) |  | (47 | ) |  | (47 | )
Expiration of statute of limitations |  | — |  |  | (1 | ) |  | (5 | )
Decreases related to tax positions from prior years |  | (126 | ) |  | — |  |  | — |
Ending unrecognized tax benefits |  | $ | 261 |  |  | $ | 327 |  |  | $ | 304 |
The changes in uncertain tax positions in 2018 are primarily related to the Tax Act and transfer pricing. In connection with the Inotera Acquisition in 2017, we assumed $54 million of uncertain tax positions. The decreases to unrecognized tax benefits in 2017 and 2016 from settlements with tax authorities were primarily related to the favorable resolution of certain tax matters. As of August 30, 2018, we had $256 million of unrecognized tax benefits that would, if recognized, affect our effective tax rate. The amount accrued for interest and penalties related to uncertain tax positions was not material for any period presented. The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be material. We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 2014 through 2018. In addition, tax returns that remain open to examination in Japan range from the years 2012 to 2018 and in Singapore and Taiwan from 2013 to 2018. We believe that adequate amounts of taxes and related interest and penalties have been provided, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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