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Income Taxes | 12 Months Ended
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Aug. 29, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the United States enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"), which imposed a one-time transition tax in 2018 (the "Repatriation Tax") and, beginning in 2019, created a new minimum tax on certain foreign earnings (the "Foreign Minimum Tax"). 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") allowed the use of provisional amounts (reasonable estimates) if the analyses of the impacts of the Tax Act had not been completed when financial statements were issued. During 2019, we finalized the computations of the income tax effects of the Tax Act. As such, in accordance with SAB 118, our accounting for the effects of the Tax Act is complete. Our income tax (provision) benefit consisted of the following:
For the year ended |  | 2019 |  | 2018 |  | 2017
Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees |  |  |  |  |  |
U.S. |  | $ | (67 | ) |  | $ | 141 |  |  | $ | (56 | )
Foreign |  | 7,115 |  |  | 14,166 |  |  | 5,252 |
|  | $ | 7,048 |  |  | $ | 14,307 |  |  | $ | 5,196 |
Income tax (provision) benefit |  |  |  |  |  |
Current |  |  |  |  |  |
U.S. federal |  | $ | (36 | ) |  | $ | (54 | ) |  | $ | — |
State |  | (2 | ) |  | 1 |  |  | (1 | )
Foreign |  | (319 | ) |  | (374 | ) |  | (152 | )
|  | (357 | ) |  | (427 | ) |  | (153 | )
Deferred |  |  |  |  |  |
U.S. federal |  | (146 | ) |  | 232 |  |  | — |
State |  | 91 |  |  | 101 |  |  | — |
Foreign |  | (281 | ) |  | (74 | ) |  | 39 |
|  | (336 | ) |  | $ | 259 |  |  | 39 |
Income tax (provision) benefit |  | $ | (693 | ) |  | $ | (168 | ) |  | $ | (114 | )
The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate to our effective rate:
For the year ended |  | 2019 |  | 2018 |  | 2017
U.S. federal income tax (provision) benefit at statutory rate |  | $ | (1,480 | ) |  | 21.0 | % |  | $ | (3,677 | ) |  | 25.7 | % |  | $ | (1,819 | ) |  | 35.0 | %
Foreign tax rate differential |  | 993 |  |  | (14.1 | )% |  | 2,606 |  |  | (18.2 | )% |  | 1,600 |  |  | (30.8 | )%
U.S. tax on foreign operations |  | (327 | ) |  | 4.6 | % |  | (20 | ) |  | 0.1 | % |  | (37 | ) |  | 0.7 | %
Repatriation Tax related to the Tax Act |  | (10 | ) |  | 0.1 | % |  | (1,049 | ) |  | 7.3 | % |  | — |  |  | — | %
Remeasurement of deferred tax assets and liabilities related to the Tax Act |  | — |  |  | — | % |  | (179 | ) |  | 1.3 | % |  | — |  |  | — | %
Change in valuation allowance |  | (40 | ) |  | 0.6 | % |  | 2,079 |  |  | (14.5 | )% |  | 64 |  |  | (1.2 | )%
State taxes, net of federal benefit |  | 102 |  |  | (1.4 | )% |  | (84 | ) |  | 0.6 | % |  | — |  |  | — | %
Research and development tax credits |  | 118 |  |  | (1.7 | )% |  | 90 |  |  | (0.6 | )% |  | 66 |  |  | (1.3 | )%
Other |  | (49 | ) |  | 0.7 | % |  | 66 |  |  | (0.5 | )% |  | 12 |  |  | (0.2 | )%
Income tax (provision) benefit |  | $ | (693 | ) |  | 9.8 | % |  | $ | (168 | ) |  | 1.2 | % |  | $ | (114 | ) |  | 2.2 | %
Measurement period adjustments in 2019 included $47 million of benefit for the Repatriation Tax, net of adjustments related to uncertain tax positions. 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 jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements, which expire in whole or in part at various dates through 2034, that are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $756 million (benefiting our diluted earnings per share by $0.66) for 2019, by $1.96 billion ($1.59 per diluted share) for 2018, and by $742 million ($0.64 per diluted share) for 2017. A 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 be subject to additional foreign withholding or state income tax. As of August 29, 2019, we had a deferred tax liability of $10 million associated with our undistributed earnings. Certain non-U.S. subsidiaries had cumulative undistributed earnings of $2.84 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 |  | 2019 |  | 2018
Deferred tax assets |  |  |  |
Net operating loss and tax credit carryforwards |  | $ | 1,045 |  |  | $ | 1,417 |
Accrued salaries, wages, and benefits |  | 122 |  |  | 163 |
Property, plant, and equipment |  | 80 |  |  | — |
Other |  | 110 |  |  | 115 |
Gross deferred tax assets |  | 1,357 |  |  | 1,695 |
Less valuation allowance |  | (277 | ) |  | (228 | )
Deferred tax assets, net of valuation allowance |  | 1,080 |  |  | 1,467 |
Deferred tax liabilities |  |  |  |
Product and process technology |  | (138 | ) |  | (62 | )
Property, plant, and equipment |  | — |  |  | (173 | )
Other |  | (109 | ) |  | (213 | )
Deferred tax liabilities |  | (247 | ) |  | (448 | )
Net deferred tax assets |  | $ | 833 |  |  | $ | 1,019 |
Reported as |  |  |  |
Deferred tax assets |  | $ | 837 |  |  | $ | 1,022 |
Deferred tax liabilities (included in other noncurrent liabilities) |  | (4 | ) |  | (3 | )
Net deferred tax assets |  | $ | 833 |  |  | $ | 1,019 |
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 29, 2019, and August 30, 2018, we had a valuation allowance of $277 million and $228 million, respectively, against our net deferred tax assets, primarily related to net operating loss carryforwards in Japan. Changes in 2019 in the valuation allowance were due to adjustments based on management's assessment of tax credits and net operating losses that are more likely than not to be realized. As of August 29, 2019, 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
2020 - 2024 |  | $ | — |  |  | $ | 48 |  |  | $ | 969 |  |  | $ | 309 |  |  | $ | 4 |  |  | $ | 1,330 |
2025 - 2029 |  | — |  |  | 404 |  |  | 524 |  |  | 4 |  |  | 12 |  |  | 944 |
2030 - 2034 |  | — |  |  | 296 |  |  | — |  |  | — |  |  | — |  |  | 296 |
2035 - 2039 |  | 5 |  |  | 72 |  |  | — |  |  | — |  |  | — |  |  | 77 |
Indefinite |  | — |  |  | 1 |  |  | — |  |  | 241 |  |  | 8 |  |  | 250 |
|  | $ | 5 |  |  | $ | 821 |  |  | $ | 1,493 |  |  | $ | 554 |  |  | $ | 24 |  |  | $ | 2,897 |
As of August 29, 2019, 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
2020 - 2024 |  | $ | — |  |  | $ | 55 |  |  | $ | 55 |
2025 - 2029 |  | — |  |  | 58 |  |  | 58 |
2030 - 2034 |  | 3 |  |  | 113 |  |  | 116 |
2035 - 2039 |  | 350 |  |  | 4 |  |  | 354 |
Indefinite |  | — |  |  | 75 |  |  | 75 |
|  | $ | 353 |  |  | $ | 305 |  |  | $ | 658 |
Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:
For the year ended |  | 2019 |  | 2018 |  | 2017
Beginning unrecognized tax benefits |  | $ | 261 |  |  | $ | 327 |  |  | $ | 304 |
Increases related to tax positions from prior years |  | 124 |  |  | — |  |  | — |
Increases related to tax positions taken in current year |  | 44 |  |  | 68 |  |  | 15 |
Decreases related to tax positions from prior years |  | (46 | ) |  | (126 | ) |  | — |
Settlements with tax authorities |  | — |  |  | (8 | ) |  | (47 | )
Increases due to the Inotera Acquisition |  | — |  |  | — |  |  | 54 |
Other |  | — |  |  | — |  |  | 1 |
Ending unrecognized tax benefits |  | $ | 383 |  |  | $ | 261 |  |  | $ | 327 |
As of August 29, 2019, gross unrecognized tax benefits were $383 million, substantially all of which would affect our effective tax rate in the future, if recognized. 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 2015 through 2019. In addition, tax returns that remain open to examination in Japan range from the years 2013 to 2019 and in Singapore and Taiwan from 2014 to 2019. 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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