Advanced Micro Devices, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income before income taxes consists of the following:


	Year Ended
	December 31, 2022		December 25, 2021		December 26, 2020
	(In millions)
U.S.	$	2,093	$	3,528	$	1,213
Non-U.S.	(895)		147		67
Total pre-tax income including equity income in investee	$	1,198	$	3,675	$	1,280

Provision (Benefit) for Income Taxes

The income tax provision (benefit) consists of:


	Year Ended
	December 31, 2022		December 25, 2021		December 26, 2020
	(In millions)
Current:
U.S. federal	$	1,191	$	112	$	—
U.S. state and local	31		11		5
Non-U.S.	161		82		8
Total	1,383		205		13
Deferred:
U.S. federal	(1,365)		320		(1,193)
U.S. state and local	(26)		(7)		(28)
Non-U.S.	(114)		(5)		(2)
Total	(1,505)		308		(1,223)
Income tax provision (benefit)	$	(122)	$	513	$	(1,210)

Schedule of Effective Income Tax Rate Reconciliation

The table below displays the reconciliation between statutory federal income taxes and the total income tax provision (benefit).


	Year Ended
	December 31, 2022		December 25, 2021		December 26, 2020
	(In millions)
Statutory federal income tax expense at 21%	$	252	$	772	$	269
State taxes (benefit)	(3)		1		(6)
Foreign rate detriment (benefit)	195		71		(3)
GILTI and other foreign inclusion	(105)		—		—
Foreign-Derived Intangible Income (FDII) deduction	(261)		(147)		—
Research credits	(241)		(78)		(57)
Stock-based and non-deductible compensation	10		(125)		(116)
Valuation allowance change	—		3		(1,301)
Other	31		16		4
Income tax provision (benefit)	$	(122)	$	513	$	(1,210)

Schedule of Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of tax carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the balances for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and December 25, 2021 were as follows:


	December 31, 2022		December 25, 2021
	(In millions)
Deferred tax assets:
Net operating loss carryovers	$	1,031	$	920
Accruals and reserves not currently deductible	835		631
Employee benefits not currently deductible	214		164
Federal and state tax credit carryovers	631		319
Foreign R&D and investment tax credits	578		547
Capitalized costs	65		121
Lease liability	161		124
Capitalized R&D	943		—
Other	85		27
Total deferred tax assets	4,543		2,853
Less: valuation allowance	(2,078)		(1,735)
Total deferred tax assets, net of valuation allowance	2,465		1,118
Deferred tax liabilities:
Acquired intangibles	(3,430)		(50)
Right-of-use assets	(151)		(110)
Undistributed foreign earnings	(35)		(24)
GILTI	(633)		—
Other	(92)		(15)
Total deferred tax liabilities	(4,341)		(199)
Net deferred tax assets (liabilities)	$	(1,876)	$	919

As a result of the acquisition of Xilinx, the Company recorded $4.3 billion of net deferred tax liabilities primarily on the excess of book basis over the tax basis of the acquired intangible assets, including $857 million of GILTI net deferred tax liability.

Additionally, as the result of the new R&D capitalization tax law effective in 2022, the capitalized amounts resulted in increased current year taxable income, but which are deductible as amortized in future periods. Therefore, the Company recorded a deferred tax asset for the capitalized R&D expenditures.

The movement in the deferred tax valuation allowance was as follows:


	December 31, 2022		December 25, 2021		December 26, 2020
	(In millions)
Balance at beginning of year	$	1,735	$	1,576	$	2,867
Charges (reductions) to income tax expense and other accounts*	112		3		(1,301)
Acquisition-related	231		—		—
Net recoveries+	—		156		10
Balance at end of year	$	2,078	$	1,735	$	1,576


*			Amounts recorded in 2020 reflect release of valuation allowances.
+			The net recoveries for all were primarily related to net originating deferred tax assets and newly generated tax credits.

Under current U.S. tax law, the impact of future distributions of undistributed earnings that are indefinitely reinvested are anticipated to be subject to withholding taxes from local jurisdictions and non-conforming U.S. state jurisdictions. The amount of cumulative undistributed earnings that are permanently reinvested that could be subject to withholding taxes are $460 million as of December 31, 2022.

Schedule of Unrecognized Tax Benefits Roll Forward

reconciliation of the Company's gross unrecognized tax benefits was as follows:


	December 31, 2022		December 25, 2021		December 26, 2020
	(In millions)
Balance at beginning of year	$	275	$	119	$	65
Increases for tax positions taken in the current year	748		156		30
Increases for tax positions taken in prior years	104		14		41
Decreases for tax positions taken in prior years	(12)		(9)		(15)
Increases to tax positions taken in prior years through acquisitions	252		—		—
Decreases for settlements with taxing authorities and statute of limitation lapses	(6)		(5)		(2)
Balance at end of year	$	1,361	$	275	$	119