Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 28, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes consists of the following:
Year Ended
December 28, 2024 December 30, 2023 December 31, 2022
  (In millions)
U.S. $ 2,369  $ 454  $ 2,093 
Non-U.S. (347) 54  (895)
Total pre-tax income including equity income in investee $ 2,022  $ 508  $ 1,198 
The income tax provision (benefit) consists of:
Year Ended
December 28, 2024 December 30, 2023 December 31, 2022
  (In millions)
Current:
U.S. federal $ 1,338  $ 496  $ 1,191 
U.S. state and local 64  27  31 
Non-U.S. 142  150  161 
Total 1,544  673  1,383 
Deferred:
U.S. federal (311) (860) (1,365)
U.S. state and local 6  (29) (26)
Non-U.S. (858) (130) (114)
Total (1,163) (1,019) (1,505)
Income tax provision (benefit) $ 381  $ (346) $ (122)
The table below displays the reconciliation between statutory federal income taxes and the total income tax provision (benefit).
Year Ended
December 28, 2024 December 30, 2023 December 31, 2022
  (In millions)
Statutory federal income tax expense at 21% $ 425  $ 107  $ 252 
Tax effect from intercompany integration transaction 373  —  — 
Foreign rate detriment (benefit)
 153  (11) 195 
Interest and penalty
 136  53  33 
State income taxes, net of federal benefit
 22  (2) (3)
Foreign-Derived Intangible Income (FDII) deduction (275) (185) (261)
Research credits (232) (169) (241)
GILTI and other foreign inclusion (133) (138) (96)
Stock-based and non-deductible compensation (101) (17) (6)
Other 13  16  5 
Income tax provision (benefit) $ 381  $ (346) $ (122)

The Company recorded an income tax provision of $381 million and an income tax benefit of $346 million in 2024 and 2023, respectively, representing effective tax rates of 19% and (68)%, respectively. The increase in income tax provision in 2024 was primarily due to higher pre-tax income and a $373 million tax effect from an intercompany integration transaction.
Beginning in 2022, provisions in the U.S. Tax Cuts and Jobs Act of 2017 require the Company to capitalize and amortize R&D expenditures rather than deducting the costs as incurred. The capitalization resulted in an increase in 2024 and 2023 taxable income which also increased the income eligible for the FDII tax benefit.

As a part of the Xilinx acquisition and as a result of certain employment and operational commitments the Company has made in Singapore, the Company has been granted a Development and Expansion Incentive (DEI) that is effective through 2031. The DEI reduces the local tax on Singapore income from a statutory rate of 17% to 5% through 2031. Due to the current year pre-tax loss in Singapore, the Company did not receive any income tax or earnings per share benefit.

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 28, 2024 and December 30, 2023 were as follows:
December 28,
2024		 December 30,
2023
  (In millions)
Deferred tax assets:
Capitalized R&D $ 2,892  $ 1,753 
Net operating loss carryovers 962  992 
Accruals and reserves not currently deductible 829  574 
Federal and state tax credit carryovers 679  660 
Foreign R&D and investment tax credits 579  597 
Employee benefits not currently deductible 334  302 
Lease liability 182  181 
Foreign tax credits
 77  71 
Other 111  96 
Total deferred tax assets 6,645  5,226 
Less: valuation allowance (2,136) (2,124)
Total deferred tax assets, net of valuation allowance 4,509  3,102 
Deferred tax liabilities:
Acquired intangibles (3,614) (3,104)
GILTI (222) (524)
Right-of-use assets (182) (175)
Other (152) (135)
Total deferred tax liabilities (4,170) (3,938)
Net deferred tax assets (liabilities) $ 339  $ (836)

During 2024, the Company executed an intercompany integration transaction and remeasured associated deferred taxes, resulting in increases to the deferred tax liability for acquisition-related intangibles and the deferred tax asset for Capitalized R&D, partially offset by a decrease in the deferred tax liability for GILTI.
The movement in the deferred tax valuation allowance was as follows:
December 28, 2024 December 30, 2023 December 31, 2022
  (In millions)
Balance at beginning of year $ 2,124  $ 2,078  $ 1,735 
Charges to income tax expense and other accounts
 9  41  112 
Acquisition-related 3  5  231 
Balance at end of year $ 2,136  $ 2,124  $ 2,078 
Through the end of fiscal year 2024, the Company continued to maintain a valuation allowance of approximately $2.1 billion for certain federal, state, and foreign tax attributes. The federal valuation allowance maintained is due to limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. Certain state and foreign valuation allowance maintained is due to lack of sufficient sources of future taxable income.
The Company’s U.S. federal and state net operating losses (NOLs) carryforwards as of December 28, 2024, were $134 million and $362 million, respectively. NOLs may be subject to limitations by the Internal Revenue Code and similar provisions. $27 million of U.S. federal NOLs will expire between 2025 and 2037, and $107 million of federal NOLs have no expiration date. State NOLs will expire at various dates through 2043. The difference between the amount of federal NOLs which are recorded on the Company’s Consolidated Balance Sheets as deferred tax assets and their related valuation allowance, and the amounts reported on the Company’s tax returns are the result of uncertain tax positions the Company has taken for which an income tax reserve has been recorded. The federal tax credits of $12 million will expire at various dates between 2037 and 2042. The state tax return credits of $804 million will expire at various dates between 2025 and 2039, except for the California R&D credit, which does not expire. The Company also has $620 million of credit carryforward in Canada that will expire between 2028 and 2044.
A reconciliation of the Company's gross unrecognized tax benefits was as follows:
December 28, 2024 December 30, 2023 December 31, 2022
  (In millions)
Balance at beginning of year $ 1,463  $ 1,361  $ 275 
Increases for tax positions taken in the current year 57  53  748 
Increases for tax positions taken in prior years 24  57  104 
Decreases for tax positions taken in prior years (18) (8) (12)
Increases to tax positions taken in prior years through acquisitions —  —  252 
Decreases for settlements with taxing authorities and statute of limitation lapses (28) —  (6)
Balance at end of year $ 1,498  $ 1,463  $ 1,361 
The amount of unrecognized tax benefits that would impact the effective tax rate if recognized was $1.3 billion, $1.3 billion and $1.2 billion as of December 28, 2024, December 30, 2023 and December 31, 2022, respectively. The Company had $298 million, $142 million and $81 million of accrued penalties and interest related to unrecognized tax benefits as of December 28, 2024, December 30, 2023 and December 31, 2022, respectively. As of December 28, 2024 and December 30, 2023, the Company had long-term income tax liabilities related to unrecognized tax benefits of $1.4 billion, recorded under Other long-term liabilities in the Company’s Consolidated Balance Sheets.
The Company is subject to taxation in the U.S. and foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax. The material jurisdiction in which the Company is subject to potential examination by the taxing authority is the United States, where tax years from 2008 are open for audit. Pre-acquisition Xilinx U.S. tax returns for fiscal years 2018 and 2019 are currently under audit by the IRS. It is possible the Company may have tax audits close in the next 12 months that could materially change the balance of the uncertain tax benefits; however, the timing of tax audit closures and settlements are highly uncertain.
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. There were no cumulative undistributed earnings that are indefinitely reinvested that could be subject to withholding taxes as of December 28, 2024.