Income Taxes (Tables)

12 Months Ended

Sep. 27, 2014

The provision for income taxes for 2014, 2013 and 2012, consisted of the following (in millions):


	2014			2013			2012
Federal:
Current	$	8,624		$	9,334		$	7,240
Deferred		3,183			1,878			5,018

		11,807			11,212			12,258

State:
Current		855			1,084			1,182
Deferred		(178	)		(311	)		(123	)

		677			773			1,059

Foreign:
Current		2,147			1,559			1,203
Deferred		(658	)		(426	)		(490	)

		1,489			1,133			713

Provision for income taxes	$	13,973		$	13,118		$	14,030

Reconciliation of Provision for Income Taxes

A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2014, 2013 and 2012) to income before provision for income taxes for 2014, 2013 and 2012, is as follows (dollars in millions):


	2014			2013			2012
Computed expected tax	$	18,719		$	17,554		$	19,517
State taxes, net of federal effect		469			508			677
Indefinitely invested earnings of foreign subsidiaries		(4,744	)		(4,614	)		(5,895	)
Research and development credit, net		(88	)		(287	)		(103	)
Domestic production activities deduction		(495	)		(308	)		(328	)
Other		112			265			162

Provision for income taxes	$	13,973		$	13,118		$	14,030

Effective tax rate		26.1%			26.2%			25.2%

Significant Components of Deferred Tax Assets and Liabilities

As of September 27, 2014 and September 28, 2013, the significant components of the Company’s deferred tax assets and liabilities were (in millions):


	2014			2013
Deferred tax assets:
Accrued liabilities and other reserves	$	2,761		$	1,892
Deferred revenue		1,787			1,475
Basis of capital assets and investments		898			1,020
Share-based compensation		454			458
Other		644			1,029

Total deferred tax assets		6,544			5,874
Less valuation allowance		0			0

Deferred tax assets, net of valuation allowance		6,544			5,874

Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries		21,544			18,044
Other		120			112

Total deferred tax liabilities		21,664			18,156

Net deferred tax liabilities	$	(15,120	)	$	(12,282	)

Aggregate Changes in Gross Unrecognized Tax Benefits Excluding Interest and Penalties

The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2014, 2013 and 2012, is as follows (in millions):


	2014			2013			2012
Beginning Balance	$	2,714		$	2,062		$	1,375
Increases related to tax positions taken during a prior year		1,295			745			340
Decreases related to tax positions taken during a prior year		(280	)		(118	)		(107	)
Increases related to tax positions taken during the current year		882			626			467
Decreases related to settlements with taxing authorities		(574	)		(592	)		(3	)
Decreases related to expiration of statute of limitations		(4	)		(9	)		(10	)

Ending Balance	$	4,033		$	2,714		$	2,062