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INCOME TAXES | 12 Months Ended
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Dec. 29, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES |
10. INCOME TAXES
Loss before income taxes summarized by region was as follows:
In millions | 2024 |  | 2023 |  | 2022
United States | $ | (1,834) |  |  | $ | (1,735) |  |  | $ | (4,942) |
Foreign | 655 |  |  | 618 |  |  | 606 |
Total loss before income taxes | $ | (1,179) |  |  | $ | (1,117) |  |  | $ | (4,336) |
The provision for income taxes consisted of the following:
In millions | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 6 |  |  | $ | (5) |  |  | $ | (11) |
State | 18 |  |  | 6 |  |  | 27 |
Foreign | 137 |  |  | 77 |  |  | 75 |
Total current provision | 161 |  |  | 78 |  |  | 91 |
Deferred: |  |  |  |  |
Federal | (59) |  |  | (13) |  |  | 40 |
State | (56) |  |  | (26) |  |  | (47) |
Foreign | (2) |  |  | 5 |  |  | (16) |
Total deferred benefit | (117) |  |  | (34) |  |  | (23) |
Total tax provision | $ | 44 |  |  | $ | 44 |  |  | $ | 68 |
The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to loss before income taxes as follows:
In millions | 2024 |  | 2023 |  | 2022
Tax at federal statutory rate | $ | (248) |  |  | $ | (235) |  |  | $ | (911) |
State, net of federal benefit | (38) |  |  | (16) |  |  | (9) |
Research and other credits | (32) |  |  | (42) |  |  | (46) |
Change in valuation allowance | 29 |  |  | 48 |  |  | 62 |
Impact of R&D expense capitalization | 52 |  |  | 86 |  |  | 87 |
Impact of net operating losses on GILTI, U.S. foreign tax credits, and Pillar Two global minimum top-up tax | 90 |  |  | 61 |  |  | 60 |
Impact of foreign operations | 3 |  |  | (50) |  |  | (81) |
Stock compensation | 16 |  |  | 31 |  |  | 20 |
Accrual of European Commission fine | (99) |  |  | 3 |  |  | 96 |
Goodwill impairment | 308 |  |  | 149 |  |  | 822 |
Impact of acquisition related items | (46) |  |  | 8 |  |  | (27) |
Other | 9 |  |  | 1 |  |  | (5) |
Total tax provision | $ | 44 |  |  | $ | 44 |  |  | $ | 68 |
We have elected to account for the global intangible low-taxed income (GILTI) as a period cost in our consolidated financial statements. The impact of foreign operations primarily represents the difference between the actual provision for income taxes for our legal entities that operate in jurisdictions that have statutory tax rates that differ from the U.S. federal statutory tax rate of 21%. The most significant tax benefits from foreign operations were from our earnings in Singapore, which had a statutory tax rate of 17% in 2024. The impact of foreign operations also includes the impacts of GILTI, U.S. foreign tax credits, and the Pillar Two global minimum top-up tax of non-U.S. earnings before the tax impact of net operating losses, and uncertain tax positions related to foreign items. The impact of R&D expense capitalization is primarily the income tax expense impact of capitalizing research and development expenses for tax purposes on GILTI and the utilization of the U.S. foreign tax credits. The impact of net operating losses on GILTI, U.S. foreign tax credits, and the Pillar Two global minimum top-up tax is primarily the income tax expense impact of GRAIL pre-acquisition net operating losses on GILTI, the utilization of the U.S. foreign tax credits, and the Pillar Two global minimum top-up tax. The impact of acquisition related items includes the income tax expense impact of transaction costs, acquisition related compensation, and changes to the contingent value rights associated with the GRAIL acquisition. Significant components of deferred tax assets and liabilities were as follows:
In millions | December 29, 2024 |  | December 31, 2023
Deferred tax assets: |  |  |
Net operating losses | $ | 189 |  |  | $ | 392 |
Tax credits | 252 |  |  | 211 |
Other accruals and reserves | 40 |  |  | 49 |
Stock compensation | 34 |  |  | 15 |
Capitalized U.S. R&D expenses | 181 |  |  | 158 |
Other amortization | 42 |  |  | 115 |
Operating lease liabilities | 112 |  |  | 146 |
Property and equipment | 17 |  |  | 4 |
Investments | 23 |  |  | 7 |
Other | 63 |  |  | 56 |
Total gross deferred tax assets | 953 |  |  | 1,153 |
Valuation allowance on deferred tax assets | (278) |  |  | (251) |
Total deferred tax assets | 675 |  |  | 902 |
Deferred tax liabilities: |  |  |
Purchased intangible amortization | (35) |  |  | (734) |
Operating lease right-of-use assets | (57) |  |  | (88) |
Other | (25) |  |  | (25) |
Total deferred tax liabilities | (117) |  |  | (847) |
Deferred tax assets, net | $ | 558 |  |  | $ | 55 |
A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis and includes a review of all available positive and negative evidence, including operating results and forecasted ranges of future taxable income. Based on the available evidence as of December 29, 2024, we were not able to conclude it is more likely than not certain deferred tax assets will be realized. Therefore, a valuation allowance of $278 million was recorded against certain U.S. and foreign deferred tax assets. As of December 29, 2024, we had net operating loss carryforwards for federal and state tax purposes of $74 million and $1,872 million, respectively, which will begin to expire in 2036 and 2025, respectively, unless utilized prior. We also had federal and state tax credit carryforwards of $140 million and $239 million, which will begin to expire in 2031 and 2027, respectively, unless utilized prior. Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of net operating losses and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of December 29, 2024 are net of any previous limitations due to Section 382 and 383. Our manufacturing operations in Singapore operate under various tax holidays and incentives, which will begin to expire in 2028. These tax holidays and incentives resulted in a $33 million, $75 million, and $56 million decrease to the provision for income taxes in 2024, 2023, and 2022, respectively. These tax holidays and incentives resulted in a decrease in diluted loss per share of $0.20, $0.47, and $0.35, in 2024, 2023, and 2022, respectively. As of December 29, 2024, we asserted that $1,806 million of foreign earnings would not be indefinitely reinvested, and accordingly, recorded a deferred tax liability of $24 million. The following table summarizes the gross amount of our uncertain tax positions:
In millions | December 29, 2024 |  | December 31, 2023 |  | January 1, 2023
Balance at beginning of year | $ | 210 |  |  | $ | 153 |  |  | $ | 131 |
Increases related to prior year tax positions | 2 |  |  | 27 |  |  | 12 |
Decreases related to prior year tax positions | (2) |  |  | (2) |  |  | (3) |
Increases related to current year tax positions | 23 |  |  | 42 |  |  | 42 |
Decreases related to lapse of statute of limitations | (1) |  |  | (10) |  |  | (29) |
Balance at end of year | $ | 232 |  |  | $ | 210 |  |  | $ | 153 |
Included in the balance of uncertain tax positions as of December 29, 2024 and December 31, 2023, was $202 million and $156 million, respectively, of net unrecognized tax benefits that, if recognized, would reduce the effective income tax rate in future periods. Any interest and penalties related to uncertain tax positions are reflected in the provision for income taxes. We recognized expense of $6 million and $2 million in 2024 and 2023, respectively, and income of $3 million in 2022, related to potential interest and penalties on uncertain tax positions. We recorded a liability for potential interest and penalties of $13 million and $6 million as of December 29, 2024 and December 31, 2023, respectively. Tax years 1997 to 2023 remain subject to future examination by the major tax jurisdictions in which we are subject to tax. The Internal Revenue Service completed an examination of the U.S. Corporation Income Tax Returns for tax years 2017, 2018, and 2020. Given the uncertainty of potential adjustments from examination as well as the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could change significantly over the next 12 months. Due to the number of years remaining that are subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

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