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Income Taxes (Tables) | 12 Months Ended
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May 31, 2023
Income Tax Disclosure [Abstract] |
Schedule of Income before Income Tax, Domestic and Foreign | Income before income taxes is as follows:
| YEAR ENDED MAY 31,
(Dollars in millions) | 2023 | 2022 | 2021
Income before income taxes: |  |  |
United States | $ | 4,663 |  | $ | 6,020 |  | $ | 5,723 |
Foreign | 1,538 |  | 631 |  | 938 |
TOTAL INCOME BEFORE INCOME TAXES | $ | 6,201 |  | $ | 6,651 |  | $ | 6,661 |
Schedule of Components of Income Tax Expense (Benefit) | The provision for income taxes is as follows:
| YEAR ENDED MAY 31,
(Dollars in millions) | 2023 | 2022 | 2021
Current: |  |  |
United States |  |  |
Federal | $ | 430 |  | $ | 231 |  | $ | 328 |
State | 184 |  | 98 |  | 134 |
Foreign | 634 |  | 926 |  | 857 |
Total Current | 1,248 |  | 1,255 |  | 1,319 |
Deferred: |  |  |
United States |  |  |
Federal | (162) |  | (522) |  | (371) |
State | (25) |  | (16) |  | (34) |
Foreign | 70 |  | (112) |  | 20 |
Total Deferred | (117) |  | (650) |  | (385) |
TOTAL INCOME TAX EXPENSE | $ | 1,131 |  | $ | 605 |  | $ | 934 |
Schedule of Effective Income Tax Rate Reconciliation | A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
| YEAR ENDED MAY 31,
| 2023 | 2022 | 2021
Federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | %
State taxes, net of federal benefit | 1.5 | % | 1.4 | % | 1.3 | %
Foreign earnings | 1.7 | % | -1.8 | % | 0.2 | %
Subpart F deferred tax benefit | 0.0 | % | -4.7 | % | 0.0 | %
Foreign-derived intangible income benefit | -6.1 | % | -4.1 | % | -3.7 | %
Excess tax benefits from stock-based compensation | -1.1 | % | -4.9 | % | -4.5 | %
Income tax audits and contingency reserves | 1.0 | % | 1.5 | % | 1.5 | %
U.S. research and development tax credit | -1.2 | % | -1.0 | % | -0.9 | %
Other, net | 1.4 | % | 1.7 | % | -0.9 | %
EFFECTIVE INCOME TAX RATE | 18.2 | % | 9.1 | % | 14.0 | %
Schedule of Deferred Tax Assets and Liabilities | Deferred tax assets and liabilities comprise the following as of:
| MAY 31,
(Dollars in millions) | 2023 | 2022
Deferred tax assets: |  |
Inventories(1) | $ | 79 |  | $ | 136 |
Sales return reserves(1) | 89 |  | 109 |
Deferred compensation(1) | 321 |  | 313 |
Stock-based compensation | 261 |  | 195 |
Reserves and accrued liabilities(1) | 144 |  | 145 |
Operating lease liabilities | 511 |  | 508 |
Intangibles | 255 |  | 275 |
Capitalized research and development expenditures | 548 |  | 353 |
Net operating loss carry-forwards | 15 |  | 8 |
Subpart F deferred tax | 374 |  | 313 |
Foreign tax credit carry-forward | — |  | 103 |
Other(1) | 183 |  | 148 |
Total deferred tax assets | 2,780 |  | 2,606 |
Valuation allowance | (22) |  | (19) |
Total deferred tax assets after valuation allowance | 2,758 |  | 2,587 |
Deferred tax liabilities: |  |
Foreign withholding tax on undistributed earnings of foreign subsidiaries | (186) |  | (146) |
Property, plant and equipment(1) | (276) |  | (247) |
Right-of-use assets | (441) |  | (437) |
Other(1) | (56) |  | (92) |
Total deferred tax liabilities | (959) |  | (922) |
NET DEFERRED TAX ASSET (2) | $ | 1,799 |  | $ | 1,665 |
(1)The above amounts exclude deferred taxes held-for-sale as of May 31, 2022. See Note 18 — Acquisitions and Divestitures for additional information. (2)Of the total $1,799 million net deferred tax asset for the period ended May 31, 2023, $2,026 million was included within Deferred income taxes and other assets and $(227) million was included within Deferred income taxes and other liabilities on the Consolidated Balance Sheets. Of the total $1,665 million net deferred tax asset for the period ended May 31, 2022, $1,891 million was included within Deferred income taxes and other assets and $(226) million was included within Deferred income taxes and other liabilities on the Consolidated Balance Sheets.
Unrecognized Tax Benefits Reconciliation | The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits as of:
| MAY 31,
(Dollars in millions) | 2023 | 2022 | 2021
Unrecognized tax benefits, beginning of the period | $ | 848 |  | $ | 896 |  | $ | 771 |
Gross increases related to prior period tax positions | 95 |  | 71 |  | 77 |
Gross decreases related to prior period tax positions | (17) |  | (145) |  | (22) |
Gross increases related to current period tax positions | 50 |  | 62 |  | 59 |
Settlements | (18) |  | (17) |  | (5) |
Lapse of statute of limitations | (7) |  | (10) |  | (6) |
Changes due to currency translation | (15) |  | (9) |  | 22 |
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD | $ | 936 |  | $ | 848 |  | $ | 896 |

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- Definition Tabular disclosure for tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities and other income tax contingencies. Includes, but is not limited to, interest and penalties, reconciliation of unrecognized tax benefits, unrecognized tax benefits that would affect the effective tax rate, tax years that remain subject to examination by tax jurisdictions, and information about positions for which it is reasonably possible that amounts unrecognized will significantly change within 12 months. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15A -URI https://asc.fasb.org/extlink&oid=121826272&loc=SL6600010-109319 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32718-109319 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 19 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32840-109319 + Details
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