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Income Taxes | 12 Months Ended
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Apr. 29, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes Income before income taxes is as follows (in millions):
|  | Year Ended |
|  | April 29, 2016 |  |  | April 24, 2015 |  |  | April 25, 2014 |
Domestic |  | $ | 88 |  |  | $ | 253 |  |  | $ | 121 |
Foreign |  |  | 257 |  |  |  | 460 |  |  |  | 620 |
Total |  | $ | 345 |  |  | $ | 713 |  |  | $ | 741 |
Domestic income before taxes is lower than foreign income before taxes due to significant domestic expenses related to the amortization of intangibles, stock-based compensation and restructuring expenses. The provision for income taxes consists of the following (in millions):
|  | Year Ended |
|  | April 29, 2016 |  |  | April 24, 2015 |  |  | April 25, 2014 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 180 |  |  | $ | 104 |  |  | $ | 124 |
State |  |  | 14 |  |  |  | 12 |  |  |  | 14 |
Foreign |  |  | 35 |  |  |  | 40 |  |  |  | 41 |
Total current |  |  | 229 |  |  |  | 156 |  |  |  | 179 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (91 | ) |  |  | 8 |  |  |  | (65 | )
State |  |  | (17 | ) |  |  | (3 | ) |  |  | (6 | )
Foreign |  |  | (5 | ) |  |  | (8 | ) |  |  | (5 | )
Total deferred |  |  | (113 | ) |  |  | (3 | ) |  |  | (76 | )
Provision for income taxes |  | $ | 116 |  |  | $ | 153 |  |  | $ | 103 |
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate as follows (in millions):
|  | Year Ended |
|  | April 29, 2016 |  |  | April 24, 2015 |  |  | April 25, 2014 |
Tax computed at federal statutory rate |  | $ | 121 |  |  | $ | 250 |  |  | $ | 259 |
State income taxes, net of federal benefit |  |  | (3 | ) |  |  | 5 |  |  |  | 6 |
Foreign earnings in lower tax jurisdictions |  |  | (81 | ) |  |  | (141 | ) |  |  | (163 | )
Stock-based compensation |  |  | 13 |  |  |  | 6 |  |  |  | 10 |
Research and development credits |  |  | (14 | ) |  |  | (14 | ) |  |  | (9 | )
Resolution of income tax examinations |  |  | 20 |  |  |  | 46 |  |  |  | — |
Domestic production activities deduction |  |  | (10 | ) |  |  | (5 | ) |  |  | (6 | )
Tax charge from integration of intellectual property from the SolidFire acquisition |  |  | 64 |  |  |  | — |  |  |  | — |
Other |  |  | 6 |  |  |  | 6 |  |  |  | 6 |
Provision for income taxes |  | $ | 116 |  |  | $ | 153 |  |  | $ | 103 |
We generated foreign earnings in lower tax jurisdictions primarily related to income from our European operations which are headquartered in the Netherlands. During fiscal 2016, we acquired SolidFire and recorded a tax charge of $64 million related to the integration of SolidFire intellectual property into our worldwide operations. The components of our deferred tax assets and liabilities are as follows (in millions):
|  | April 29, 2016 |  |  | April 24, 2015 |
Deferred tax assets: |  |  |  |  |  |  |  |
Reserves and accruals |  | $ | 214 |  |  | $ | 94 |
Acquired intangibles |  |  | — |  |  |  | 44 |
Net operating loss and credit carryforwards |  |  | 72 |  |  |  | 80 |
Stock-based compensation |  |  | 66 |  |  |  | 70 |
Deferred revenue |  |  | 336 |  |  |  | 298 |
Other |  |  | 39 |  |  |  | 27 |
Gross deferred tax assets |  |  | 727 |  |  |  | 613 |
Valuation allowance |  |  | (59 | ) |  |  | (58 | )
Deferred tax assets, net of valuation allowance |  |  | 668 |  |  |  | 555 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaids and accruals |  |  | 3 |  |  |  | 4 |
Acquired intangibles |  |  | 27 |  |  |  | 14 |
Property and equipment |  |  | 14 |  |  |  | 26 |
Other |  |  | 3 |  |  |  | 3 |
Total deferred tax liabilities |  |  | 47 |  |  |  | 47 |
Deferred tax assets, net of valuation allowance and deferred tax liabilities |  | $ | 621 |  |  | $ | 508 |
Net deferred tax assets consist of the following (in millions):
|  | April 29, 2016 |  |  | April 24, 2015 |
Current deferred tax assets, net |  | $ | — |  |  | $ | 252 |
Non-current deferred tax assets, net |  | $ | 621 |  |  | $ | 256 |
In the third quarter of fiscal 2016, we adopted new accounting guidance on the balance sheet classification of deferred taxes that requires that all deferred taxes be presented as non-current. We applied this guidance prospectively and, accordingly, we did not reclassify amounts reported as of April 24, 2015. The valuation allowance increased by $1 million and $8 million in fiscal 2016 and 2015, respectively. The increases are mainly attributable to corresponding changes in deferred tax assets, primarily foreign tax credit carryforwards in a foreign jurisdiction and state tax credit carryforwards in certain states. As of April 29, 2016, the federal and state net operating loss carryforwards were approximately $15 million and $31 million, respectively, before applying tax rates for the respective jurisdictions. The federal, state and foreign tax credit carryforwards were approximately $40 million, $131 million and $22 million, respectively. Certain acquired net operating loss and credit carryforwards are subject to an annual limitation under Internal Revenue Code Section 382, but are expected to be realized with the exception of those which have a valuation allowance. The federal and state net operating loss carryforwards and credits will expire in various years from fiscal 2018 through 2036. If realized, $41 million, tax effected, of net operating loss and tax credit carryovers will be recognized as additional paid-in capital. The foreign tax credit carryforward does not expire. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
|  | Year Ended |
|  | April 29, 2016 |  |  | April 24, 2015 |  |  | April 25, 2014 |
Balance at beginning of period |  | $ | 272 |  |  | $ | 236 |  |  | $ | 190 |
Additions based on tax positions related to the current year |  |  | 14 |  |  |  | 22 |  |  |  | 27 |
Additions for tax positions of prior years |  |  | 21 |  |  |  | 101 |  |  |  | 24 |
Decreases for tax positions of prior years |  |  | (39 | ) |  |  | (29 | ) |  |  | (5 | )
Settlements |  |  | (52 | ) |  |  | (58 | ) |  |  | — |
Balance at end of period |  | $ | 216 |  |  | $ | 272 |  |  | $ | 236 |
As of April 29, 2016, we had $216 million of gross unrecognized tax benefits, of which $164 million has been recorded in other long-term liabilities. Unrecognized tax benefits of $147 million, including penalties, interest and indirect benefits, would affect our provision for income taxes if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits in the income tax provision. During fiscal 2016, 2015 and 2014, we recognized accrued interest and penalties of approximately $2 million, $4 million and $2 million, respectively in the consolidated statements of operations and $11 million and $9 million, respectively, were recorded in the consolidated balance sheets as of April 29, 2016 and April 24, 2015. The tax years that remain subject to examination for our major tax jurisdictions are shown below: Fiscal Years Subject to Examination for Major Tax Jurisdictions at April 29, 2016
2012 — 2016 |  | United States — federal income tax
2008 — 2016 |  | United States — state and local income tax
2012 — 2016 |  | Australia
2013 — 2016 |  | Germany
2007 — 2016 |  | India
2010 — 2016 |  | Japan
2012 — 2016 |  | The Netherlands
2013 — 2016 |  | United Kingdom
2008 — 2016 |  | Canada
In addition, we are effectively subject to federal tax examination adjustments for tax years ended on or after fiscal 2001, in that we have carryforward attributes from these years that could be subject to adjustment in the tax years of utilization. In June 2015, the Internal Revenue Service (IRS) signed a closing agreement with respect to transfer pricing arrangements and, in October 2015, completed the examination of our fiscal 2008 to 2010 income tax returns. During fiscal 2016, we recorded a tax charge of $23 million attributable to transfer pricing and other audit settlements and the related re-measurement of uncertain tax positions for tax years subject to future audits. During fiscal 2016, the German tax authority concluded the examination of our fiscal 2009 to 2012 returns. We recorded a $2 million tax benefit for the net impact of the audit adjustments and related release of unrecognized tax benefits. In July 2014, the IRS completed the examination of our fiscal 2005 to 2007 income tax returns upon approval by the Joint Committee of Taxation. During fiscal 2015, we recorded a tax charge of $47 million attributable to the audit settlement and related re-measurements of uncertain tax positions for tax years subject to future audits. We are currently undergoing federal income tax audits in the United States (U.S.) and several foreign tax jurisdictions. Transfer pricing calculations are key issues under audits in various jurisdictions, and are often subject to dispute and appeals. The IRS has concluded the examination of our tax returns for our fiscal years through 2010. The IRS plans to commence the audit of our fiscal 2012 and 2013 returns in fiscal 2017. On September 17, 2010, the Danish Tax Authorities issued a decision concluding that distributions declared in 2005 and 2006 from our Danish subsidiary were subject to Danish at-source dividend withholding tax. We do not believe that our Danish subsidiary is liable for withholding tax and filed an appeal with the Danish Tax Tribunal to that effect. On December 19, 2011, the Danish Tax Tribunal issued a ruling that our Danish subsidiary was not liable for Danish withholding tax. The Danish tax examination agency appealed to the Danish High Court in March 2012. In February 2016, the Danish High Court referred the case to the European Court of Justice. We continue to monitor the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. We engage in continuous discussion and negotiation with taxing authorities regarding tax matters in multiple jurisdictions. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude, certain statutes of limitations will lapse, or both. Based on current information, we do not expect significant changes to our existing unrecognized tax benefits as of April 29, 2016. As of April 29, 2016, the amount of accumulated unremitted earnings from our foreign subsidiaries is approximately $4 billion. We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries because we intend to permanently reinvest such earnings outside the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability may be reduced by any foreign income taxes previously paid on these earnings as well as tax attribute carryforwards. We estimate the unrecognized deferred tax liability related to these earnings to be approximately $1 billion as of April 29, 2016. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision was issued by the Tax Court in December 2015. In February 2016, the Commissioner appealed the Tax Court decision. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. Due to the uncertainty surrounding the status of the current regulations, questions related to the scope of potential benefits, and the risk of the Tax Court’s decision being overturned upon appeal, we have not recorded any benefit as of April 29, 2016. We will continue to monitor ongoing developments and potential impacts to our financial statements.

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