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Income Taxes | 12 Months Ended
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Dec. 01, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes for fiscal 2023, 2022 and 2021 consisted of the following:
(in millions) |  | 2023 |  | 2022 |  | 2021
Domestic |  | $ | 3,465 |  |  | $ | 1,958 |  |  | $ | 1,736 |
Foreign |  | 3,334 |  |  | 4,050 |  |  | 3,969 |
Income before income taxes |  | $ | 6,799 |  |  | $ | 6,008 |  |  | $ | 5,705 |
The provision for income taxes for fiscal 2023, 2022 and 2021 consisted of the following:
(in millions) |  | 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |  |
United States federal |  | $ | 1,198 |  |  | $ | 465 |  |  | $ | 391 |
Foreign |  | 335 |  |  | 329 |  |  | 197 |
State and local |  | 260 |  |  | 132 |  |  | 103 |
Total current |  | 1,793 |  |  | 926 |  |  | 691 |
Deferred: |  |  |  |  |  |
United States federal |  | (556) |  |  | (45) |  |  | (148) |
Foreign |  | 227 |  |  | 360 |  |  | 359 |
State and local |  | (93) |  |  | 11 |  |  | (19) |
Total deferred |  | (422) |  |  | 326 |  |  | 192 |
Provision for income taxes |  | $ | 1,371 |  |  | $ | 1,252 |  |  | $ | 883 |
Reconciliation of Provision for Income Taxes Total income tax expense differed from the income tax expense computed at the U.S. federal statutory rate of 21% as a result of the following:
(in millions) |  | 2023 |  | 2022 |  | 2021
Tax expense computed at U.S. federal statutory rate |  | $ | 1,428 |  |  | $ | 1,262 |  |  | $ | 1,198 |
Tax credits |  | (130) |  |  | (116) |  |  | (149) |
Effects of non-U.S. operations |  | (116) |  |  | (7) |  |  | (23) |
Tax settlements |  | (14) |  |  | (14) |  |  | (58) |
State tax expense, net of federal benefit |  | 132 |  |  | 113 |  |  | 66 |
Stock-based compensation |  | 29 |  |  | — |  |  | (157) |
Other |  | 42 |  |  | 14 |  |  | 6 |
Provision for income taxes |  | $ | 1,371 |  |  | $ | 1,252 |  |  | $ | 883 |
Deferred Tax Assets and Liabilities The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and liabilities as of December 1, 2023 and December 2, 2022 were as follows:
(in millions) |  | 2023 |  | 2022
Deferred tax assets: |  |  |  |
Capitalized expenses |  | $ | 984 |  |  | $ | 298 |
Intangible assets |  | 320 |  |  | 653 |
Credit carryforwards |  | 366 |  |  | 333 |
Reserves and accruals |  | 125 |  |  | 98 |
Operating lease liabilities |  | 97 |  |  | 104 |
Stock-based compensation |  | 65 |  |  | 108 |
Net operating loss carryforwards of acquired companies |  | 44 |  |  | 88 |
Benefits relating to tax positions |  | 68 |  |  | 56 |
Other |  | 48 |  |  | 41 |
Total gross deferred tax assets |  | 2,117 |  |  | 1,779 |
Valuation allowance |  | (405) |  |  | (402) |
Total deferred tax assets |  | 1,712 |  |  | 1,377 |
Deferred tax liabilities: |  |  |  |
Acquired intangible assets |  | 263 |  |  | 354 |
Prepaid expenses |  | 107 |  |  | 110 |
Operating lease right-of-use assets |  | 89 |  |  | 97 |
Depreciation and amortization |  | 77 |  |  | 67 |
Total deferred tax liabilities |  | 536 |  |  | 628 |
Net deferred tax assets |  | $ | 1,176 |  |  | $ | 749 |
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. As of December 1, 2023, we had state net operating loss and tax credit carryforwards of approximately $446 million and $352 million, respectively. We also had federal tax credit carryforwards of approximately $80 million. The majority of the state tax credits can be carried forward indefinitely, and the remaining net operating loss and tax credit carryforwards will expire in various years from fiscal 2024 through 2040. Certain net operating loss and tax credit carryforwards are subject to an annual limitation and/or are reduced by a valuation allowance. The net carrying amount of such assets is expected to be fully realized. In assessing the realizability of deferred tax assets, management determined that it is more likely than not that we will not fully realize certain available tax assets in domestic and foreign jurisdictions. Deferred tax assets are offset by a valuation allowance to the extent it is more likely than not that they are not expected to be realized. As of December 1, 2023, we continue to maintain a valuation allowance of $405 million primarily related to certain state credits. For fiscal 2023, the increase in the valuation allowance was $3 million. As we repatriate foreign earnings for use in the United States, the distributions will generally be exempt from federal income taxes. As of December 1, 2023, the cumulative amount of foreign earnings considered permanently reinvested upon which taxes have not been provided, and the corresponding unrecognized deferred tax liability, was not material. Accounting for Uncertainty in Income Taxes During fiscal 2023 and 2022, the aggregate changes in our total gross amount of unrecognized tax benefits were as follows:
(in millions) |  | 2023 |  | 2022
Beginning balance |  | $ | 321 |  |  | $ | 289 |
Gross increases in unrecognized tax benefits – prior year tax positions |  | 103 |  |  | 20 |
Gross decreases in unrecognized tax benefits – prior year tax positions |  | (9) |  |  | (18) |
Gross increases in unrecognized tax benefits – current year tax positions |  | 108 |  |  | 53 |
Lapse of statute of limitations |  | (14) |  |  | (4) |
Tax settlements |  | (13) |  |  | (18) |
Foreign exchange gains and losses |  | 5 |  |  | (1) |
Ending balance |  | $ | 501 |  |  | $ | 321 |
Our policy is to record interest and penalties related to uncertain tax positions within the provision for income taxes. As of December 1, 2023 and December 2, 2022, the combined amounts of accrued interest and penalties included in long-term income taxes payable related to tax positions taken on our tax returns were not material. While we file federal, state and local income tax returns globally, our major tax jurisdictions are Ireland, California and the United States. We are subject to the examination of our income tax returns by various domestic and foreign tax authorities with 2019 being the earliest fiscal year open for examination in all of our major tax jurisdictions. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. While we believe our tax estimates are reasonable, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our financial position and results of operations. The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Although the timing of resolution, settlement and closing of audits is not certain, it is reasonably possible that the underlying unrecognized tax benefits may decrease by up to $60 million over the next 12 months.

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