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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 25, 2015 July 26, 2014 July 27, 2013
Federal:
Current ............................................................... $ 1,583 $ 1,672 $ 601
Deferred .............................................................. 43 (383) 152
1,626 1,289 753
State:
Current ............................................................... 130 176 81
Deferred .............................................................. (20) (64) 48
110 112 129
Foreign:
Current ............................................................... 530 692 599
Deferred .............................................................. (46) (231) (237)
484 461 362
Total ............................................................. $ 2,220 $ 1,862 $ 1,244
Income before provision for income taxes consists of the following (in millions):
Years Ended July 25, 2015 July 26, 2014 July 27, 2013
United States .............................................................. $ 3,570 $ 2,734 $ 3,716
International .............................................................. 7,631 6,981 7,511
Total .................................................................. $ 11,201 $ 9,715 $ 11,227
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 25, 2015 July 26, 2014 July 27, 2013
Federal statutory rate ...................................................... 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal tax benefit .................................. 0.8 0.5 0.8
Foreign income at other than U.S. rates ................................ (15.2) (16.4) (16.4)
Tax credits ............................................................ (1.2) (0.7) (1.6)
Domestic manufacturing deduction .................................... (0.7) (0.9) (1.0)
Nondeductible compensation .......................................... 2.0 3.3 1.3
Tax audit settlement ................................................... —— (7.1)
Other, net ............................................................. (0.9) (1.6) 0.1
Total ............................................................. 19.8% 19.2% 11.1%
During fiscal 2015, the Tax Increase Prevention Act of 2014 reinstated the U.S. federal R&D tax credit for calendar year 2014
R&D expenses. As a result, the tax provision in fiscal 2015 included a tax benefit of $138 million related to the U.S. R&D tax
credit, of which $78 million was attributable to fiscal 2014.
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.
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