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Income Taxes
 12 Months Ended
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)
202320222021
Domestic$3,465 $1,958 $1,736 
Foreign3,334 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)
202320222021
Current:   
United States federal$1,198 $465 $391 
Foreign335 329 197 
State and local260 132 103 
Total current1,793 926 691 
Deferred:   
United States federal(556)(45)(148)
Foreign227 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)
202320222021
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 benefit132 113 66 
Stock-based compensation29 — (157)
Other42 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)
20232022
Deferred tax assets:  
Capitalized expenses$984 $298 
Intangible assets320 653 
Credit carryforwards366 333 
Reserves and accruals125 98 
Operating lease liabilities97 104 
Stock-based compensation65 108 
Net operating loss carryforwards of acquired companies44 88 
Benefits relating to tax positions68 56 
Other48 41 
Total gross deferred tax assets2,117 1,779 
Valuation allowance(405)(402)
Total deferred tax assets1,712 1,377 
Deferred tax liabilities:
Acquired intangible assets263 354 
Prepaid expenses107 110 
Operating lease right-of-use assets89 97 
Depreciation and amortization77 67 
Total deferred tax liabilities536 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)
20232022
Beginning balance$321 $289 
Gross increases in unrecognized tax benefits – prior year tax positions103 20 
Gross decreases in unrecognized tax benefits – prior year tax positions(9)(18)
Gross increases in unrecognized tax benefits – current year tax positions108 53 
Lapse of statute of limitations(14)(4)
Tax settlements(13)(18)
Foreign exchange gains and losses5 (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.