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Income Taxes | 12 Months Ended
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Apr. 30, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes Income before income taxes is as follows (in millions):
|  | Year Ended |
|  | April 30, 2021 |  |  | April 24, 2020 |  |  | April 26, 2019 |
Domestic |  | $ | 433 |  |  | $ | 379 |  |  | $ | 678 |
Foreign |  |  | 529 |  |  |  | 565 |  |  |  | 590 |
Total |  | $ | 962 |  |  | $ | 944 |  |  | $ | 1,268 |
The provision for income taxes consists of the following (in millions):
|  | Year Ended |
|  | April 30, 2021 |  |  | April 24, 2020 |  |  | April 26, 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 82 |  |  | $ | 83 |  |  | $ | 26 |
State |  |  | 22 |  |  |  | 9 |  |  |  | 27 |
Foreign |  |  | 134 |  |  |  | 50 |  |  |  | 49 |
Total current |  |  | 238 |  |  |  | 142 |  |  |  | 102 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 6 |  |  |  | (26 | ) |  |  | 35 |
State |  |  | 2 |  |  |  | (6 | ) |  |  | (6 | )
Foreign |  |  | (14 | ) |  |  | 15 |  |  |  | (32 | )
Total deferred |  |  | (6 | ) |  |  | (17 | ) |  |  | (3 | )
Provision for income taxes |  | $ | 232 |  |  | $ | 125 |  |  | $ | 99 |
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 30, 2021 |  |  | April 24, 2020 |  |  | April 26, 2019 |
Tax computed at federal statutory rate |  | $ | 202 |  |  | $ | 198 |  |  | $ | 266 |
State income taxes, net of federal benefit |  |  | 23 |  |  |  | 10 |  |  |  | 16 |
Foreign earnings in lower tax jurisdictions |  |  | (26 | ) |  |  | (40 | ) |  |  | (84 | )
Stock-based compensation |  |  | 6 |  |  |  | (4 | ) |  |  | (19 | )
Research and development credits |  |  | (13 | ) |  |  | (16 | ) |  |  | (17 | )
Global minimum tax on intangible income |  |  | 19 |  |  |  | 32 |  |  |  | 22 |
Transition tax and related reserves |  |  | 1 |  |  |  | 15 |  |  |  | (5 | )
Tax charge from integration of acquired companies |  |  | 35 |  |  |  | — |  |  |  | — |
Resolution of income tax matters (1) |  |  | (6 | ) |  |  | (61 | ) |  |  | (48 | )
Non-taxable gain on joint venture formation |  |  | — |  |  |  | — |  |  |  | (14 | )
Domestic production activities deduction |  |  | — |  |  |  | — |  |  |  | (13 | )
Other |  |  | (9 | ) |  |  | (9 | ) |  |  | (5 | )
Provision for income taxes |  | $ | 232 |  |  | $ | 125 |  |  | $ | 99 |
| (1) | During fiscal 2021, we recognized a tax benefit related to the lapse of statutes of limitations for certain issues on our fiscal 2016 and 2017 federal income tax returns. During fiscal 2020, we recognized a tax benefit related to the lapse of statutes of limitations on our fiscal 2014 and 2015 federal income tax returns. During fiscal 2019, the Internal Revenue Service completed the examination of our fiscal 2012 to fiscal 2013 federal income tax returns, and we recognized a tax benefit attributable to the effective settlement and the release of related tax reserves.
The components of our deferred tax assets and liabilities are as follows (in millions):
|  | April 30, 2021 |  |  | April 24, 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Reserves and accruals |  | $ | 65 |  |  | $ | 72 |
Net operating loss and credit carryforwards |  |  | 115 |  |  |  | 113 |
Stock-based compensation |  |  | 18 |  |  |  | 15 |
Deferred revenue |  |  | 226 |  |  |  | 242 |
Other |  |  | 20 |  |  |  | 14 |
Gross deferred tax assets |  |  | 444 |  |  |  | 456 |
Valuation allowance |  |  | (107 | ) |  |  | (104 | )
Deferred tax assets, net of valuation allowance |  |  | 337 |  |  |  | 352 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaids and accruals |  |  | 51 |  |  |  | 49 |
Acquired intangibles |  |  | 28 |  |  |  | 40 |
Property and equipment |  |  | 31 |  |  |  | 33 |
Other |  |  | 24 |  |  |  | 20 |
Total deferred tax liabilities |  |  | 134 |  |  |  | 142 |
Deferred tax assets, net of valuation allowance and deferred tax liabilities |  | $ | 203 |  |  | $ | 210 |
The valuation allowance increased by $3 million in fiscal 2021. The increase is mainly attributable to corresponding changes in deferred tax assets, primarily certain state tax credit carryforwards. As of April 30, 2021, we have federal net operating loss and tax credit carryforwards of approximately $6 million and $1 million, respectively. In addition, we have gross state net operating loss and tax credit carryforwards of $23 million and $130 million, respectively. The majority of the state credit carryforwards are California research credits which are offset by a valuation allowance as we believe it is more likely than not that these credits will not be utilized. We also have $1 million of foreign net operating losses, and $28 million of foreign tax credit carryforwards where the majority is generated by our Dutch subsidiary which are fully offset by a valuation allowance. 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, state, and foreign net operating loss carryforwards and credits will expire in various years from fiscal 2022 through 2035. The federal NOLs, California research credit and Dutch foreign tax credit carryforwards do not expire. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
|  | Year Ended |
|  | April 30, 2021 |  |  | April 24, 2020 |  |  | April 26, 2019 |
Balance at beginning of period |  | $ | 211 |  |  | $ | 296 |  |  | $ | 348 |
Additions based on tax positions related to the current year |  |  | 7 |  |  |  | 5 |  |  |  | 11 |
Additions for tax positions of prior years |  |  | 11 |  |  |  | 1 |  |  |  | 26 |
Decreases for tax positions of prior years |  |  | — |  |  |  | (10 | ) |  |  | (35 | )
Settlements |  |  | (8 | ) |  |  | (81 | ) |  |  | (54 | )
Balance at end of period |  | $ | 221 |  |  | $ | 211 |  |  | $ | 296 |
As of April 30, 2021, we had $221 million of gross unrecognized tax benefits, of which $127 million has been recorded in other long-term liabilities. Unrecognized tax benefits of $126 million, including penalties, interest and indirect benefits, would affect our provision for income taxes if recognized. We recognized expense for increases to accrued interest and penalties related to unrecognized tax benefits in the income tax provision of approximately $1 million in fiscal 2021, a benefit of $8 million in fiscal 2020 and a benefit of $4 million in fiscal 2019. Accrued interest and penalties of $11 million and $10 million were recorded in the consolidated balance sheets as of April 30, 2021 and April 24, 2020, respectively. 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 30, 2021
2016 — 2021 |  | United States — federal income tax
2012 — 2021 |  | United States — state and local income tax
2014 — 2021 |  | Australia
2015 — 2021 |  | Germany
2007 — 2021 |  | India
2014 — 2021 |  | Japan
2017 — 2021 |  | The Netherlands
2016 — 2021 |  | United Kingdom
2016 — 2021 |  | Canada
We are currently undergoing various income tax audits in the U.S. and several foreign tax jurisdictions. Transfer pricing calculations are key topics under these audits and are often subject to dispute and appeals. 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 September 2010, the Danish Tax Authorities issued a decision concluding that distributions declared in 2005 and 2006 by our Danish subsidiary were subject to Danish at-source dividend withholding tax. We do not believe that our Danish subsidiary is liable for such withholding tax and filed an appeal with the Danish Tax Tribunal. In December 2011, the Danish Tax Tribunal issued a ruling in favor of NetApp. The Danish tax examination agency appealed this decision at the Danish High Court (DHC) in March 2012. In February 2016, the DHC requested a preliminary ruling from the Court of Justice of the European Union (CJEU). In March 2018, the Advocate General issued an opinion which was largely in favor of NetApp. The CJEU was not bound by the opinion of the Advocate General and issued its preliminary ruling in February 2019. The CJEU ruling did not preclude the Danish Tax Authorities from imposing withholding tax on distributions based on the benefits of certain European Union directives. On May 3, 2021, the DHC reached a decision resulting in NetApp prevailing on the predominate distribution made in 2005. The smaller distribution made in 2006 was ruled in favor of the Danish Tax Authorities. On May 28, 2021, the Danish Tax Authorities appealed the DHC decision to the Danish Supreme Court. We believe it is more likely than not that our distributions were not subject to withholding tax and we will continue to support our position in the appeals process with the Danish Supreme Court. 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. As a result of uncertainties regarding tax audits and their possible outcomes, an estimate of the range of possible impacts to unrecognized tax benefits in the next twelve months cannot be made at this time. As of April 30, 2021, we continue to record a deferred tax liability related to state taxes on unremitted earnings of certain foreign entities. We estimate the unrecognized deferred tax liability related to the earnings we expect to be indefinitely reinvested to be immaterial. We will continue to monitor our plans to indefinitely reinvest undistributed earnings of foreign subsidiaries and will assess the related unrecognized deferred tax liability considering our ongoing projected global cash requirements, tax consequences associated with repatriation and any U.S. or foreign government programs designed to influence remittances.

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