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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income from continuing operations before income taxes consisted of the following (in millions):
Year Ended December 31,
 202120222023
Domestic operations$77,016 $61,307 $73,600 
Foreign operations13,718 10,021 12,117 
Total$90,734 $71,328 $85,717 
Provision for income taxes consisted of the following (in millions):
Year Ended December 31,
 202120222023
Current:
Federal and state$10,126 $17,120 $17,125 
Foreign2,692 2,434 2,526 
Total12,818 19,554 19,651 
Deferred:
Federal and state2,018 (8,052)(7,482)
Foreign(135)(146)(247)
Total1,883 (8,198)(7,729)
Provision for income taxes$14,701 $11,356 $11,922 
The reconciliation of federal statutory income tax rate to our effective income tax rate was as follows:
Year Ended December 31,
 202120222023
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
Foreign income taxed at different rates0.2 3.0 0.3 
Foreign-derived intangible income deduction(2.5)(5.4)(4.6)
Stock-based compensation expense(2.5)(1.2)(0.8)
Federal research credit(1.6)(2.2)(1.8)
Deferred tax asset valuation allowance0.6 0.9 0.6 
State and local income taxes1.0 0.8 1.0 
Effect of tax law change0.0 0.0 (1.4)
Other0.0 (1.0)(0.4)
Effective tax rate16.2 %15.9 %13.9 %
In 2022, there was an increase in the U.S. Foreign Derived Intangible Income tax deduction from the effects of capitalization and amortization of R&D expenses starting in 2022 as required by the 2017 Tax Cuts and Jobs Act.
In 2023, the IRS issued a rule change allowing taxpayers to temporarily apply the regulations in effect prior to 2022 related to U.S. federal foreign tax credits as well as a separate rule change with interim guidance on the capitalization and amortization of R&D expenses. A cumulative one-time adjustment applicable to the prior period for these tax rule changes was recorded in 2023.
Deferred Income Taxes
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows (in millions):
As of December 31,
20222023
Deferred tax assets:
Accrued employee benefits$955 $1,855 
Accruals and reserves not currently deductible1,956 2,481 
Tax credits6,002 6,609 
Net operating losses2,557 2,965 
Operating leases2,711 3,526 
Capitalized research and development(1)
10,381 17,757 
Other2,289 1,951 
Total deferred tax assets26,851 37,144 
Valuation allowance(9,553)(10,999)
Total deferred tax assets net of valuation allowance17,298 26,145 
Deferred tax liabilities:
Property and equipment, net(6,607)(8,189)
Net investment gains(2,361)(2,405)
Operating leases(2,491)(2,965)
Other(1,092)(902)
Total deferred tax liabilities(12,551)(14,461)
Net deferred tax assets (liabilities)$4,747 $11,684 
(1)As required by the 2017 Tax Cuts and Jobs Act, effective January 1, 2022, our research and development expenditures were capitalized and amortized which resulted in substantially higher cash taxes starting in 2022 with an equal amount of deferred tax benefit.
As of December 31, 2023, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $7.1 billion, $18.6 billion, and $1.8 billion respectively. If not utilized, the federal net
operating loss carryforwards will begin to expire in 2024, foreign net operating loss carryforwards will begin to expire in 2025 and the state net operating loss carryforwards will begin to expire in 2029. It is more likely than not that the majority of the net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions.
As of December 31, 2023, our Federal and California research and development credit carryforwards for income tax purposes were approximately $600 million and $6.3 billion, respectively. If not utilized, the Federal R&D credit will begin to expire in 2037 and the California R&D credit can be carried over indefinitely. We believe the majority of the federal tax credit and state tax credit is not likely to be realized.
As of December 31, 2023, our investment tax credit carryforwards for state income tax purposes were approximately $1.0 billion and will begin to expire in 2029. We use the flow-through method of accounting for investment tax credits. We believe this tax credit is not likely to be realized.
As of December 31, 2023, we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state net operating losses and tax credits, net deferred tax assets relating to Other Bet companies, and certain foreign net operating losses that we believe are not likely to be realized. We continue to reassess the remaining valuation allowance quarterly, and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly.
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefits (in millions):
Year Ended December 31,
 202120222023
Beginning gross unrecognized tax benefits$3,837 $5,158 $7,055 
Increases related to prior year tax positions529 253 740 
Decreases related to prior year tax positions(263)(437)(682)
Decreases related to settlement with tax authorities(329)(140)(21)
Increases related to current year tax positions1,384 2,221 2,346 
Ending gross unrecognized tax benefits$5,158 $7,055 $9,438 
We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. The total amount of gross unrecognized tax benefits was $5.2 billion, $7.1 billion, and $9.4 billion as of December 31, 2021, 2022, and 2023, respectively, of which $3.7 billion, $5.3 billion, and $7.4 billion, if recognized, would affect our effective tax rate, respectively.
As of December 31, 2022 and 2023, we accrued $346 million and $622 million in interest and penalties in provision for income taxes, respectively.
We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. Our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2016 through 2021 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend such claims as presented.
The tax years 2016 through 2022 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.
We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolutions occur. Although the timing of resolution, settlement, and closure of audits is not certain, it is reasonably possible that our unrecognized tax benefits from certain U.S. federal, state, and non U.S. tax positions could decrease by approximately $700 million in the next 12 months. Positions that may be resolved include various U.S. and non-U.S. matters.