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Income Taxes | 9 Months Ended
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Jan. 26, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes Our effective tax rates for the periods presented were as follows:
|  | Nine Months Ended |
|  | January 26, 2018 |  |  | January 27, 2017 |
Effective tax rates |  |  | 122.6 | % |  |  | 23.5 | %
Our effective tax rates reflect the impact of a significant amount of our earnings, primarily income from our European operations which are headquartered in the Netherlands, being taxed in foreign jurisdictions at rates below the United States (U.S.) statutory tax rate. The differences in effective tax rates for the nine months ended January 26, 2018 and January 27, 2017 were primarily related to the impacts of recent U.S. tax reform and the sale of certain buildings and land in Sunnyvale, California. On December 22, 2017, the 2017 Tax Reform Reconciliation Act, originally referred to as the Tax Cuts and Jobs Act (“TCJA”) was enacted into law and is effective for the third quarter of our fiscal 2018. The TCJA made significant changes to the U.S. corporate income tax system including a reduction of the U.S. federal corporate income tax rate, the imposition of a one-time transition tax on deferred foreign earnings, and a shift to a modified territorial tax regime. ASC 740, Income Taxes, requires that the impact on income taxes due to a change in legislation be recognized in the period of enactment. Given the timing and pace of regulatory guidance, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin 118, which allows for the recording of provisional amounts related to U.S. tax reform and subsequent related adjustments during a measurement period. As of January 26, 2018, we have not fully completed the accounting for the tax impacts of the TCJA and have recorded provisional tax charges based on reasonable estimates for the transition tax on our total post-1986 foreign earnings and profits (“E&P”), and for the remeasurement of deferred tax assets and liabilities based on the new corporate tax rate. The TCJA also includes provisions for a global minimum tax on intangible low-taxed income (“GMT”) of foreign subsidiaries, a base erosion anti-abuse tax on certain intercompany payments, and beneficial tax treatment for foreign derived intangible income. These provisions will be effective for us beginning in our fiscal 2019. We will continue to refine provisional balances and make adjustments during the measurement period based on the issuance of further regulatory guidance, changes in interpretations, and the collection and analysis of additional information; these adjustments could be material to our financial statements. The provisional amounts recorded during the current quarter are explained below. The TJCA decreased the U.S. federal corporate tax rate from 35% to 21% as of January 1, 2018. For fiscal 2018, this decrease results in a blended statutory tax rate of 30.5%. As a result of the tax rate change, we remeasured our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future periods and recorded a $117 million discrete tax expense for the quarter. The final remeasurement impact could vary from the provisional amount if actual future activities impacting deferred tax balances differ from our estimates. The TCJA imposes a mandatory, one-time transition tax on accumulated foreign E&P not previously subject to U.S. income tax at a rate of 15.5% on earnings to the extent of foreign cash and other liquid assets, and 8% on the remaining earnings. During the quarter, we recorded a $739 million discrete tax expense for the estimated U.S. federal and state income tax impacts of the transition tax. Our estimates may change with further guidance from U.S. federal and state tax authorities or other regulatory bodies, our fourth quarter activities, and additional analyses that we expect to complete during the measurement period, with respect to various components of the computations. We intend to make the election to pay the one-time transition tax over a period of eight years. Under the TCJA, the GMT provision taxes foreign income in excess of a deemed return on tangible assets of foreign corporations. Under U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GMT as a component of tax expense in the period in which a company is subject to the rules (the “period cost method”), or (ii) account for GMT in a company’s measurement of deferred taxes (the “deferred method”). Because of the complexity of the new tax rules, we are continuing to evaluate this provision and the application of ASC 740 and have not yet made an accounting policy election. As a part of the provisional estimates recorded during the quarter, we considered the impacts of the TCJA and reviewed our projected global cash requirements, and have determined that certain historical and future foreign earnings will no longer be indefinitely reinvested. During the quarter ended January 26, 2018, we also recorded a $72 million discrete tax expense related to the sale of certain buildings and land in Sunnyvale, California. The expense partially relates to gains triggered by the termination of a fiscal 2016 sale-leaseback arrangement. The remainder of the expense relates to the sale of buildings and land in the current quarter. As of January 26, 2018, we had $338 million of gross unrecognized tax benefits, and $303 million has been recorded in other long-term liabilities inclusive of penalties, interest and indirect benefits. Unrecognized tax benefits of $284 million, including penalties, interest and indirect benefits, would affect our provision for income taxes if recognized. As result of the U.S. tax reform, we recorded $113 million of gross unrecognized tax benefits. We are currently undergoing federal income tax audits in the 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 commenced the examination of our federal income tax returns for our fiscal years 2012 and 2013 in August 2016. 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 Court of Justice of the European Union where it was heard before the court in October 2017. We expect the court to issue their opinion and judgment by the end of fiscal 2018. 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.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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