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16. Income Taxes
(a) Provision for Income Taxes
The provision for income taxes consists of the following (in millions):
Years Ended July 26, 2014 July 27, 2013 July 28, 2012
Federal:
Current ........................................ $1,672 $ 601 $1,836
Deferred ....................................... (383) 152 (270)
1,289 753 1,566
State:
Current ........................................ 176 81 119
Deferred ....................................... (64) 48 (53)
112 129 66
Foreign:
Current ........................................ 692 599 477
Deferred ....................................... (231) (237) 9
461 362 486
Total ...................................... $1,862 $1,244 $2,118
Income before provision for income taxes consists of the following (in millions):
Years Ended July 26, 2014 July 27, 2013 July 28, 2012
United States ........................................ $2,734 $ 3,716 $ 3,235
International ........................................ 6,981 7,511 6,924
Total .......................................... $9,715 $11,227 $10,159
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for
income taxes consist of the following:
Years Ended July 26, 2014 July 27, 2013 July 28, 2012
Federal statutory rate ................................. 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal tax benefit ................. 0.5 0.8 0.4
Foreign income at other than U.S. rates ............... (16.4) (16.4) (15.6)
Tax credits ..................................... (0.7) (1.6) (0.4)
Domestic manufacturing deduction .................. (0.9) (1.0) (1.1)
Nondeductible compensation ....................... 3.3 1.3 1.8
Tax audit settlement .............................. —(7.1) —
Other, net ...................................... (1.6) 0.1 0.7
Total ...................................... 19.2% 11.1% 20.8%
During fiscal 2013, the Internal Revenue Service (IRS) and the Company settled all outstanding items related to the audit of
the Company’s federal income tax returns for the fiscal years ended July 27, 2002 through July 28, 2007. As a result of the
settlement, the Company recognized a net benefit to the provision for income taxes of $794 million. In addition, the American
Taxpayer Relief Act reinstated the U.S. federal R&D credit through December 2013, retroactive to January 1, 2012. As a
result, the tax provision in fiscal 2013 included a tax benefit of $184 million related to the U.S. federal R&D tax credit, of
which $72 million was attributable to fiscal 2012.
U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not
provided for on a cumulative total of $52.7 billion of undistributed earnings for certain foreign subsidiaries as of the end of
fiscal 2014. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were
distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were
sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an adjustment for
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