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Income Taxes | 12 Months Ended
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Jan. 03, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Note 18—Income Taxes The provision for income taxes for the periods presented included the following:
|  | Year Ended
(in millions) |  | January 3, 2025 |  | December 29, 2023 |  | December 30, 2022
Current: |  |  |  |  |  |
Federal |  | $ | 381 |  |  | $ | 212 |  |  | $ | 290 |
State |  | 84 |  |  | 68 |  |  | 80 |
Foreign |  | 22 |  |  | 23 |  |  | 33 |
Deferred: |  |  |  |  |  |
Federal |  | (77) |  |  | (75) |  |  | (169) |
State |  | (13) |  |  | (20) |  |  | (36) |
Foreign |  | (9) |  |  | (13) |  |  | (5) |
Total |  | $ | 388 |  |  | $ | 195 |  |  | $ | 193 |
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to income before income taxes for the periods presented was as follows:
|  | Year Ended
(in millions) |  | January 3, 2025 |  | December 29, 2023 |  | December 30, 2022
Amount computed at the statutory federal income tax rate |  | $ | 344 |  |  | $ | 85 |  |  | $ | 186 |
State income taxes, net of federal tax benefit |  | 28 |  |  | 26 |  |  | 36 |
Goodwill |  | — |  |  | 104 |  |  | — |
Research and development credits |  | (25) |  |  | (19) |  |  | (31) |
Excess tax benefits from stock-based compensation |  | (15) |  |  | (2) |  |  | (13) |
Change in valuation allowance for deferred tax assets |  | 4 |  |  | 3 |  |  | 3 |
Impact of foreign operations |  | (5) |  |  | (13) |  |  | 2 |
Dividends paid to employee stock ownership plan |  | (2) |  |  | (2) |  |  | (2) |
Change in accruals for uncertain tax positions |  | 39 |  |  | 14 |  |  | (1) |
Other |  | 20 |  |  | (1) |  |  | 13 |
Total |  | $ | 388 |  |  | $ | 195 |  |  | $ | 193 |
Effective income tax rate |  | 23.7 | % |  | 48.4 | % |  | 21.8 | %
The effective tax rate for fiscal 2024 was favorably impacted primarily by federal research tax credits and lower state income taxes, partially offset by an increase in unrecognized tax benefits. The effective tax rate for fiscal 2023 was unfavorably impacted primarily by non tax deductible goodwill impairments and fiscal 2022 was favorably impacted primarily by federal research tax credits and excess tax benefits related to employee stock-based payment transactions. Deferred income taxes are recorded for differences in the basis of assets and liabilities for financial reporting purposes and tax reporting purposes. Deferred tax assets (liabilities) were comprised of the following:
(in millions) |  | January 3, 2025 |  | December 29, 2023
Capitalized research and development |  | $ | 370 |  |  | $ | 290 |
Operating lease liabilities |  | 179 |  |  | 156 |
Accrued vacation and bonuses |  | 85 |  |  | 95 |
Reserves |  | 39 |  |  | 33 |
Deferred compensation |  | 42 |  |  | 39 |
Credits and net operating losses carryovers |  | 46 |  |  | 36 |
Vesting stock awards |  | 30 |  |  | 29 |
Deferred revenue |  | 9 |  |  | — |
Accumulated other comprehensive loss |  | 6 |  |  | — |
Other |  | 30 |  |  | 18 |
Total deferred tax assets |  | 836 |  |  | 696 |
Valuation allowance |  | (31) |  |  | (27) |
Deferred tax assets, net of valuation allowance |  | $ | 805 |  |  | $ | 669 |
Purchased intangible assets |  | $ | (361) |  |  | $ | (347) |
Operating lease right-of-use assets |  | (138) |  |  | (126) |
Property, plant and equipment |  | (98) |  |  | (90) |
Deferred revenue |  | — |  |  | (3) |
Other |  | (7) |  |  | (4) |
Total deferred tax liabilities |  | (604) |  |  | (570) |
Net deferred tax assets |  | $ | 201 |  |  | $ | 99 |
At January 3, 2025, we had state net operating losses of $70 million, which we expect to utilize. The losses will begin to expire in fiscal 2029. We had foreign tax credits of $24 million that will begin to expire in fiscal 2030. We expect to utilize $4 million of the foreign tax credits. We also had foreign net operating losses of $57 million, which do not expire. We expect to utilize $30 million of the foreign net operating losses. Income tax balance sheet items are included in the accompanying consolidated balance sheets as follows:
(in millions) |  | January 3, 2025 |  | December 29, 2023
Other current assets: |  |  |  |
Prepaid income taxes and tax refunds receivable |  | $ | 86 |  |  | $ | 40 |
Other long-term assets: |  |  |  |
Deferred tax assets |  | $ | 203 |  |  | $ | 102 |
Accounts payable and accrued liabilities: |  |  |  |
Income taxes payable |  | $ | 21 |  |  | $ | 3 |
Other long-term liabilities: |  |  |  |
Deferred tax liabilities |  | $ | 2 |  |  | $ | 3 |
Unrecognized tax benefits |  | $ | 162 |  |  | $ | 114 |
Unrecognized tax benefits are primarily related to certain recurring deductions customary for our industry. The changes in the unrecognized tax benefits were as follows:
|  | Year Ended
(in millions) |  | January 3, 2025 |  | December 29, 2023 |  | December 30, 2022
Unrecognized tax benefits at beginning of year |  | $ | 110 |  |  | $ | 92 |  |  | $ | 2 |
Additions for tax positions related to current year |  | 81 |  |  | 58 |  |  | 91 |
Additions for tax positions related to prior years |  | 46 |  |  | 15 |  |  | — |
Reductions for tax positions related to current year |  | (1) |  |  | (1) |  |  | — |
Reductions for tax positions related to prior years |  | (59) |  |  | (54) |  |  | — |
Settlements with taxing authorities |  | (3) |  |  | — |  |  | — |
Lapse of statute of limitations |  | (1) |  |  | — |  |  | (1) |
Unrecognized tax benefits at end of year |  | $ | 173 |  |  | $ | 110 |  |  | $ | 92 |
Unrecognized tax benefits that, if recognized, would affect the effective income tax rate |  | $ | 57 |  |  | $ | 15 |  |  | $ | — |
At January 3, 2025, December 29, 2023, and December 30, 2022, the balance of unrecognized tax benefits included liabilities for uncertain tax positions of $173 million, $110 million and $92 million, respectively. At January 3, 2025, $17 million of the balance of unrecognized tax benefits was classified as accounts payable and accrued liabilities, and $156 million was classified as other long-term liabilities on the consolidated balance sheets. At December 29, 2023, and December 30, 2022, the balance of the unrecognized tax benefits were classified as other long-term liabilities on the consolidated balance sheets. For fiscal 2024, unrecognized tax benefits decreased $16 million for tax positions related to prior years, primarily as a result of resolving uncertainty regarding capitalized research and development costs with the IRS for the tax year ended December 30, 2022, partially offset by an increase in uncertain state tax positions. In addition, unrecognized tax benefits increased $80 million for tax positions related to the current year, primarily as a result of capitalized research and development costs. At January 3, 2025, and December 29, 2023, accrued interest and penalties totaled $7 million and $4 million, respectively. At December 30, 2022, accrued interest and penalties were immaterial. For fiscal 2024 and 2023, $7 million and $4 million respectively, of interest and penalties were recognized in the Company’s consolidated statements of operations. We file income tax returns in the United States and various state and foreign jurisdictions. For the years ended December 30, 2022, December 29, 2023, and January 3, 2025, we are participating in the Internal Revenue Service (“IRS”) Compliance Assurance Process (“CAP”), a real-time audit of our consolidated federal corporate income tax returns. The IRS has completed their examination of our consolidated federal income tax returns through the year ended December 31, 2021. For the years ended January 1, 2021, and December 31, 2021, we were selected to participate in the phase of CAP reserved for taxpayers whose risk of noncompliance does not warrant use of IRS resources. We believe that participation in CAP should reduce tax-related uncertainties, if any. Additionally, with a few exceptions, as of January 3, 2025, we were no longer subject to state, local, or foreign examinations by the tax authorities for fiscal years ended on or before January 1, 2021. During the next 12 months, we expect our balance of unrecognized tax benefits to decrease by $73 million primarily related to capitalized research and development costs. While we believe we have adequate accruals for uncertain tax positions, the tax authorities may determine that we owe taxes in excess of recorded accruals or the recorded accruals may be in excess of the final settlement amounts agreed to by tax authorities.

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