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Income Taxes | 12 Months Ended
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Sep. 01, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our income tax (provision) benefit consisted of the following:
For the year ended | 2022 | 2021 | 2020
Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees |  |  |
U.S. | $ | 112 |  | $ | (211) |  | $ | 308 |
Foreign | 9,459 |  | 6,429 |  | 2,675 |
| $ | 9,571 |  | $ | 6,218 |  | $ | 2,983 |
Income tax (provision) benefit |  |  |
Current |  |  |
U.S. federal | $ | (65) |  | $ | (42) |  | $ | (20) |
State | (1) |  | (1) |  | (2) |
Foreign | (528) |  | (370) |  | (148) |
| (594) |  | (413) |  | (170) |
Deferred |  |  |
U.S. federal | (166) |  | (9) |  | 39 |
State | (225) |  | 28 |  | 23 |
Foreign | 97 |  | — |  | (172) |
| (294) |  | 19 |  | (110) |
Income tax (provision) benefit | $ | (888) |  | $ | (394) |  | $ | (280) |
The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate to our effective rate:
For the year ended | 2022 | 2021 | 2020
U.S. federal income tax (provision) benefit at statutory rate | $ | (2,010) |  | 21.0 | % | $ | (1,306) |  | 21.0 | % | $ | (626) |  | 21.0 | %
U.S. tax on foreign operations | (322) |  | 3.4 | % | (226) |  | 3.6 | % | (14) |  | 0.5 | %
Change in valuation allowance | (241) |  | 2.5 | % | 54 |  | (0.9) | % | (20) |  | 0.7 | %
Change in unrecognized tax benefits | (67) |  | 0.7 | % | (238) |  | 3.8 | % | (33) |  | 1.1 | %
Foreign tax rate differential | 1,601 |  | (16.7) | % | 951 |  | (15.3) | % | 253 |  | (8.5) | %
Research and development tax credits | 66 |  | (0.7) | % | 123 |  | (2.0) | % | 62 |  | (2.1) | %
Foreign derived intangible income deduction | 41 |  | (0.4) | % | 18 |  | (0.3) | % | 67 |  | (2.2) | %
State taxes, net of federal benefit | — |  | — | % | 59 |  | (0.9) | % | 23 |  | (0.8) | %
Debt premium deductions | — |  | — | % | 130 |  | (2.1) | % | — |  | — | %
Other | 44 |  | (0.5) | % | 41 |  | (0.6) | % | 8 |  | (0.3) | %
Income tax (provision) benefit | $ | (888) |  | 9.3 | % | $ | (394) |  | 6.3 | % | $ | (280) |  | 9.4 | %
We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $1.12 billion (benefiting our diluted earnings per share by $1.00) for 2022, by $758 million ($0.66 per diluted share) for 2021, and by $215 million ($0.19 per diluted share) for 2020. As of September 1, 2022, certain non-U.S. subsidiaries had cumulative undistributed earnings of $4.38 billion that were deemed to be indefinitely reinvested. A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax. 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 | 2022 | 2021
Deferred tax assets |  |
Net operating loss and tax credit carryforwards | $ | 796 |  | $ | 783 |
Accrued salaries, wages, and benefits | 157 |  | 206 |
Operating lease liabilities | 138 |  | 109 |
Inventories | 77 |  | — |
Property, plant, and equipment | 44 |  | 37 |
Other | 142 |  | 115 |
Gross deferred tax assets | 1,354 |  | 1,250 |
Less valuation allowance | (471) |  | (233) |
Deferred tax assets, net of valuation allowance | 883 |  | 1,017 |
Deferred tax liabilities |  |
Right-of-use assets | (126) |  | (90) |
Product and process technology | — |  | (12) |
Other | (68) |  | (143) |
Deferred tax liabilities | (194) |  | (245) |
Net deferred tax assets | $ | 689 |  | $ | 772 |
Reported as |  |
Deferred tax assets | $ | 702 |  | $ | 782 |
Deferred tax liabilities (included in other noncurrent liabilities) | (13) |  | (10) |
Net deferred tax assets | $ | 689 |  | $ | 772 |
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 September 1, 2022, and September 2, 2021, we had a valuation allowance of $471 million and $233 million, respectively, against our net deferred tax assets, primarily related to carryforwards in U.S. states and Malaysia. Changes in 2022 in the valuation allowance were due to adjustments based on management's assessment of the realizability of tax credits, allowances and net operating losses based on a level that is more likely than not to be realized. On March 16, 2022, the Idaho governor signed a new law that changed the way corporations calculate Idaho taxable income. This new law is expected to reduce our Idaho taxable income, and consequently, we do not expect to utilize our tax credits in Idaho for the foreseeable future. As a result, we recorded a valuation allowance against our Idaho deferred tax assets and an increase to tax expense of $189 million in 2022. As of September 1, 2022, our net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:
Year of Expiration | State | Japan | Malaysia | Other | Total
2023 - 2027 | $ | 44 |  | $ | 418 |  | $ | — |  | $ | 12 |  | $ | 474 |
2028 - 2032 | 377 |  | 234 |  | — |  | — |  | 611 |
2033 - 2037 | 249 |  | — |  | — |  | — |  | 249 |
2038 - 2042 | 197 |  | — |  | — |  | — |  | 197 |
Indefinite | 6 |  | — |  | 851 |  | 4 |  | 861 |
| $ | 873 |  | $ | 652 |  | $ | 851 |  | $ | 16 |  | $ | 2,392 |
As of September 1, 2022, 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
2023 - 2027 | $ | — |  | $ | 46 |  | $ | 46 |
2028 - 2032 | — |  | 103 |  | 103 |
2033 - 2037 | — |  | 128 |  | 128 |
2038 - 2042 | 278 |  | 5 |  | 283 |
Indefinite | — |  | 115 |  | 115 |
| $ | 278 |  | $ | 397 |  | $ | 675 |
Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:
For the year ended | 2022 | 2021 | 2020
Beginning unrecognized tax benefits | $ | 660 |  | $ | 411 |  | $ | 383 |
Increases related to tax positions from prior years | 14 |  | 2 |  | 14 |
Increases related to tax positions taken in current year | 80 |  | 260 |  | 27 |
Decreases related to tax positions from prior years | (23) |  | (13) |  | (13) |
Ending unrecognized tax benefits | $ | 731 |  | $ | 660 |  | $ | 411 |
As of September 1, 2022, gross unrecognized tax benefits were $731 million, which would have an impact of approximately $564 million on our effective tax rate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions were not significant 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 significant. 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. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 2018 through 2022. We are currently under audit by the Internal Revenue Service for our 2018 and 2019 tax years. In addition, tax returns that remain open to examination in Singapore, Taiwan and Japan range from the years 2016 to 2022. 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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