v3.25.3
Income Taxes
 12 Months Ended
Sep. 27, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
European Commission State Aid Decision
On August 30, 2016, the Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (“State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward.
The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (“General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the Commission appealed the General Court’s decision to the European Court of Justice (“ECJ”). On September 10, 2024, the ECJ announced that it had set aside the 2020 judgment of the General Court and confirmed the Commission’s 2016 State Aid Decision. As a result, during the fourth quarter of 2024 the Company recorded a one-time income tax charge of $10.2 billion, net, which represented $15.8 billion payable to Ireland via release of amounts held in escrow, partially offset by a U.S. foreign tax credit of $4.8 billion and a decrease in unrecognized tax benefits of $823 million.
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2025, 2024 and 2023, consisted of the following (in millions):
202520242023
Federal:
Current$11,487 $5,571 $9,445 
Deferred(1,804)(3,080)(3,644)
Total9,683 2,491 5,801 
State:
Current1,680 1,726 1,570 
Deferred(139)(298)(49)
Total1,541 1,428 1,521 
Foreign:
Current8,891 25,483 8,750 
Deferred604 347 669 
Total9,495 25,830 9,419 
Provision for income taxes$20,719 $29,749 $16,741 
Foreign pretax earnings were $82.0 billion, $77.3 billion and $72.9 billion in 2025, 2024 and 2023, respectively.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2025, 2024 and 2023) to income before provision for income taxes for 2025, 2024 and 2023 is as follows (dollars in millions):
202520242023
Computed expected tax$27,873 $25,932 $23,885 
Earnings of foreign subsidiaries(8,120)(5,311)(5,744)
Change in valuation allowance
2,091 — — 
Research and development credit, net(1,049)(1,397)(1,212)
Impact of the State Aid Decision
(486)10,246 — 
Other410 279 (188)
Provision for income taxes$20,719 $29,749 $16,741 
Effective tax rate15.6%24.1%14.7%
Deferred Tax Assets and Liabilities
As of September 27, 2025 and September 28, 2024, the significant components of the Company’s deferred tax assets and liabilities were as follows (in millions):
20252024
Deferred tax assets:
Capitalized research and development$15,041 $10,739 
Tax credit carryforwards8,643 8,856 
Accrued liabilities and other reserves6,154 6,114 
Deferred revenue2,953 3,413 
Lease liabilities2,577 2,410 
Other3,049 3,341 
Total deferred tax assets38,417 34,873 
Less: Valuation allowance(10,966)(8,866)
Total deferred tax assets, net27,451 26,007 
Deferred tax liabilities:
Depreciation3,276 2,551 
Right-of-use assets2,300 2,125 
Minimum tax on foreign earnings1,217 1,674 
Other678 455 
Total deferred tax liabilities7,471 6,805 
Net deferred tax assets$19,980 $19,202 
As of September 27, 2025, the Company had $4.7 billion in foreign tax credit carryforwards in Ireland and $4.0 billion in California R&D credit carryforwards, both of which can be carried forward indefinitely. A valuation allowance has been recorded for the credit carryforwards and a portion of other temporary differences.
Uncertain Tax Positions
As of September 27, 2025, the total amount of gross unrecognized tax benefits was $23.2 billion, of which $10.6 billion, if recognized, would impact the Company’s effective tax rate. As of September 28, 2024, the total amount of gross unrecognized tax benefits was $22.0 billion, of which $10.8 billion, if recognized, would have impacted the Company’s effective tax rate.
The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2025, 2024 and 2023 is as follows (in millions):
202520242023
Beginning balances$22,038 $19,454 $16,758 
Increases related to tax positions taken during a prior year1,971 1,727 2,044 
Decreases related to tax positions taken during a prior year(71)(386)(1,463)
Increases related to tax positions taken during the current year3,795 2,542 2,628 
Decreases related to settlements with taxing authorities(2,939)(1,070)(19)
Decreases related to expiration of the statute of limitations(1,552)(229)(494)
Ending balances$23,242 $22,038 $19,454 
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. Tax years 2018 and after 2021 for the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination. Although the timing of resolution or closure of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease as much as $6 billion in the next 12 months.