XML 41 R23.htm IDEA: XBRL DOCUMENT
v3.24.1.1.u2

Income Taxes | 12 Months Ended
--- | ---
Apr. 26, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes Income before income taxes is as follows (in millions):
|  | Year Ended |
|  | April 26, 2024 |  |  | April 28, 2023 |  |  | April 29, 2022 |
Domestic |  | $ | 472 |  |  | $ | 420 |  |  | $ | 546 |
Foreign |  |  | 791 |  |  |  | 646 |  |  |  | 549 |
Total |  | $ | 1,263 |  |  | $ | 1,066 |  |  | $ | 1,095 |
The provision (benefit) for income taxes consists of the following (in millions):
|  | Year Ended |
|  | April 26, 2024 |  |  | April 28, 2023 |  |  | April 29, 2022 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 89 |  |  | $ | 209 |  |  | $ | 187 |
State |  |  | 25 |  |  |  | 39 |  |  |  | 55 |
Foreign |  |  | 110 |  |  |  | 150 |  |  |  | 60 |
Total current |  |  | 224 |  |  |  | 398 |  |  |  | 302 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | 24 |  |  |  | (44 | ) |  |  | (125 | )
State |  |  | 6 |  |  |  | (3 | ) |  |  | (27 | )
Foreign |  |  | 23 |  |  |  | (559 | ) |  |  | 8 |
Total deferred |  |  | 53 |  |  |  | (606 | ) |  |  | (144 | )
Provision (benefit) for income taxes |  | $ | 277 |  |  | $ | (208 | ) |  | $ | 158 |
During the second quarter of fiscal 2023, we completed an intra-entity asset transfer of certain IP to our international headquarters (the “IP Transfer”). The transaction resulted in a step-up of tax-deductible basis in the transferred assets, and accordingly, created a temporary difference where the tax basis exceeded the financial statement basis of such intangible assets, which resulted in the recognition of a discrete tax benefit and related deferred tax asset of $524 million during the second quarter of fiscal 2023. Management applied significant judgment when determining the fair value of the IP, which serves as the tax basis of the deferred tax asset. With the assistance of third-party valuation specialists, the fair value of the IP was determined principally based on the present value of projected cash flows related to the IP which reflects management’s assumptions regarding projected revenues, earnings before interest and taxes, and a discount rate. The tax-deductible amortization related to the transferred IP rights will be recognized in future periods and any amortization that is unused in a particular year can be carried forward indefinitely. The deferred tax asset and the tax benefit were measured based on the enacted tax rates expected to apply in the years the asset is expected to be realized. We expect to realize the deferred tax asset resulting from the IP Transfer and will assess the realizability of the deferred tax asset quarterly. 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 did not believe that our Danish subsidiary was liable for such withholding tax and filed an appeal with the Danish Tax Tribunal, which issued a ruling in favor of NetApp in December 2011. However, following escalations within the Danish judicial system over the course of numerous years, on January 9, 2023, the Danish Supreme Court ruled the 2005 dividend was subject to withholding tax while the smaller 2006 distribution would not be subject to withholding tax. The Danish Supreme Court ruling on the distributions declared in 2005 and 2006 is non-appealable. During fiscal 2023, we recorded $69 million of discrete tax expense, which includes $23 million of withholding tax and $46 million of interest. 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 26, 2024 |  |  | April 28, 2023 |  |  | April 29, 2022 |
Tax computed at federal statutory rate |  | $ | 265 |  |  | $ | 224 |  |  | $ | 230 |
State income taxes, net of federal benefit |  |  | 22 |  |  |  | 24 |  |  |  | 15 |
Foreign earnings in lower tax jurisdictions |  |  | (40 | ) |  |  | (43 | ) |  |  | (46 | )
Stock-based compensation |  |  | 12 |  |  |  | 25 |  |  |  | (8 | )
Research and development credits |  |  | (22 | ) |  |  | (24 | ) |  |  | (18 | )
Benefit for foreign derived intangible income |  |  | — |  |  |  | — |  |  |  | (49 | )
Global minimum tax on intangible income |  |  | 46 |  |  |  | 61 |  |  |  | 1 |
Transition tax and related reserves |  |  | — |  |  |  | — |  |  |  | 1 |
Tax charges (benefits) from integration of acquired companies |  |  | 4 |  |  |  | (27 | ) |  |  | 23 |
Tax benefit due to IP Transfer |  |  | — |  |  |  | (524 | ) |  |  | — |
Resolution of income tax matters (1) |  |  | (4 | ) |  |  | 71 |  |  |  | (3 | )
Other |  |  | (6 | ) |  |  | 5 |  |  |  | 12 |
Provision (benefit) for income taxes |  | $ | 277 |  |  | $ | (208 | ) |  | $ | 158 |
(1) During fiscal 2024, we recognized a tax benefit related to the lapse of statute of limitations for certain issues in our fiscal 2020 U.S. tax returns. During fiscal 2023, we recognized tax expense related to a Danish Supreme Court decision related to withholding tax on a 2005 distribution as well as tax expense related to the currently in progress IRS audit of our fiscal 2018 and 2019 U.S. tax returns. During fiscal 2022, we recognized a tax benefit related to the lapse of statute of limitations for certain issues in our fiscal 2012 and 2013 state income tax returns. The components of our deferred tax assets and liabilities are as follows (in millions):
|  | April 26, 2024 |  |  | April 28, 2023 |
Deferred tax assets: |  |  |  |  |  |
Reserves and accruals |  | $ | 126 |  |  | $ | 189 |
Net operating loss and credit carryforwards |  |  | 129 |  |  |  | 124 |
Stock-based compensation |  |  | 25 |  |  |  | 23 |
Deferred revenue and financed unearned services revenue |  |  | 252 |  |  |  | 264 |
Acquired intangibles |  |  | 499 |  |  |  | 523 |
Capitalized research and development (1) |  |  | 141 |  |  |  | 111 |
Other |  |  | 12 |  |  |  | 10 |
Gross deferred tax assets |  |  | 1,184 |  |  |  | 1,244 |
Valuation allowance |  |  | (121 | ) |  |  | (113 | )
Deferred tax assets, net of valuation allowance |  |  | 1,063 |  |  |  | 1,131 |
Deferred tax liabilities: |  |  |  |  |  |
Prepaids and accruals |  |  | 90 |  |  |  | 94 |
Acquired intangibles |  |  | 68 |  |  |  | 66 |
Property and equipment |  |  | 36 |  |  |  | 50 |
Other |  |  | 3 |  |  |  | 2 |
Total deferred tax liabilities |  |  | 197 |  |  |  | 212 |
Deferred tax assets, net of valuation allowance and deferred tax liabilities |  | $ | 866 |  |  | $ | 919 |
(1) As required under the Tax Cuts and Jobs Act of 2017, research and development expenditures are capitalized and amortized beginning in our fiscal 2023. The valuation allowance increased by $8 million in fiscal 2024. The increase is mainly attributable to corresponding changes in deferred tax assets, primarily certain state tax credit carryforwards. As of April 26, 2024, we have federal net operating loss carryforwards of approximately $10 million. In addition, we have gross state net operating loss and tax credit carryforwards of $9 million and $143 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 $31 million of foreign tax credit carryforwards of which the majority were generated by our Dutch subsidiary and are fully offset by a valuation allowance. Certain acquired net operating loss 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 state and foreign net operating loss carryforwards and credits will expire in various years from fiscal 2025 through 2042. The federal net operating loss carryforwards, the California research credit, and the 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 26, 2024 |  |  | April 28, 2023 |  |  | April 29, 2022 |
Balance at beginning of period |  | $ | 222 |  |  | $ | 220 |  |  | $ | 221 |
Additions based on tax positions related to the current year |  |  | 7 |  |  |  | 9 |  |  |  | 11 |
Additions for tax positions of prior years |  |  | — |  |  |  | 1 |  |  |  | — |
Decreases for tax positions of prior years |  |  | (2 | ) |  |  | (5 | ) |  |  | (2 | )
Settlements |  |  | (7 | ) |  |  | (3 | ) |  |  | (10 | )
Balance at end of period |  | $ | 220 |  |  | $ | 222 |  |  | $ | 220 |
As of April 26, 2024, we had $220 million of gross unrecognized tax benefits, of which $153 million has been recorded in other long-term liabilities. Unrecognized tax benefits of $154 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 $11 million, $7 million and $4 million, respectively, in fiscal 2024, fiscal 2023 and fiscal 2022. Accrued interest and penalties of $33 million and $22 million were recorded in the consolidated balance sheets as of April 26, 2024 and April 28, 2023, respectively. The Organisation for Economic Co-operation and Development (“OECD”) recently enacted model rules for a new global minimum tax framework known as Pillar Two. These rules have been agreed to by most OECD members. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of Pillar Two rules. On February 1, 2023, the FASB indicated that they believe taxes imposed under Pillar Two is an alternative minimum tax. Accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred. We will be subject to Pillar Two rules starting in our fiscal year 2025. We do not currently expect Pillar Two taxes to have a significant impact on our financial statements, particularly due to the safe harbor relief during the transition period, but we are still closely monitoring developments. Any OECD actions adopted internationally could impact our financial results in future periods. 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 26, 2024
2018 — 2024 |  | United States — federal income tax
2018 — 2024 |  | United States — state and local income tax
2020 — 2024 |  | Australia
2018 — 2024 |  | Germany
2007 — 2024 |  | India
2018 — 2024 |  | The Netherlands
2017 — 2024 |  | Canada
2020 — 2024 |  | Japan
2014 — 2024 |  | Hong Kong
2022 — 2024 |  | United Kingdom
2021 — 2024 |  | France
2022 — 2024 |  | Ireland
We are currently undergoing various income tax audits in the U.S. and audits in several foreign tax jurisdictions. Transfer pricing calculations are key topics under these audits and are often subject to dispute and appeals. 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 26, 2024, 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.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration